BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
AB 1265 - Ma
Amended: June 1 2009
Hearing: July 8, 2009 Tax Levy Fiscal: Yes
SUMMARY: Specifies that certain United States veterans
would be regarded as consumers, rather than
retailers, of tangible personal property that
they sell
EXISTING LAW
Imposes the sales and use tax on the gross receipts on
tangible personal property unless statutorily exempted; the
law does not contain a general exemption from the sales or
use tax for sales to or by veterans. The following chart
shows the basic sales and use tax rate for the state; in
addition, cities and counties may levy transactions and use
taxes with a vote of the people for either general or
special purposes in that city.
-----------------------------
|Rate |Jurisdiction |
|-----+-----------------------|
|5.75%|State (General Fund) |
| | |
|-----+-----------------------|
|0.25%|State (Fiscal Recovery |
| |Fund) |
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|-----+-----------------------|
|0.50%|State (Local Revenue |
| |Fund) |
|-----+-----------------------|
|0.25%|State (General Fund) |
| | |
|-----+-----------------------|
|0.50%|State (Local Public |
| |Safety Fund) |
|-----+-----------------------|
|1.00%|Local (County/City) |
| | 0.25% County |
| |transportation funds |
| | 0.75% City and |
| |county operations |
|-----+-----------------------|
|8.25%|Total Statewide Base |
| |Sales/Use Tax |
-----------------------------
Under the law, every retailer or any other person
engaged in the business of selling tangible personal
property which is taxable in this state is required to
obtain a seller's permit and report the tax on his or her
sales on a return prescribed by the Board. However,
California's Sales and Use Tax Law places a variety of
retailers making taxable sales of tangible personal
property under a "consumer" reporting status. Under a
"consumer" reporting status, a qualifying retailer making
otherwise taxable sales is not required to obtain a
seller's permit or report tax on those sales. Rather, the
qualifying retailer is only required to pay tax on his or
her cost of the taxable components of the products he or
she sells.
The "consumer" reporting status is primarily intended
to minimize reporting burdens placed on smaller businesses
and entities, while minimizing the associated revenue loss
that can accompany a complete exemption from the tax. The
law has extended this consumer reporting status to certain
sales by such entities as nonprofit youth groups, PTAs,
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nonprofit veterans' organizations, various charitable
organizations, schools and school districts, optometrists,
veterinarians, podiatrists, licensed hearing aid
dispensers, and others with respect to certain products
they sell.
THIS BILL
Specifies that a "qualified itinerant vendor" is a
consumer (not a retailer) of tangible personal property
owned by the qualified itinerant vendor, except alcoholic
beverages.
The bill would specify that a person is a "qualified
itinerant vendor" when all of the following apply:
1) The person was a member of the United States Armed
Forces who received an honorable discharge or a release
from active duty under honorable conditions from
service,
2) The person is unable to obtain a livelihood by manual
labor due to a service-connected disability.
3) For the purposes of selling tangible personal property,
the person is a sole proprietor with no employees, and
4) The person has no permanent place of business in this
state.
The bill would define "permanent place of business" as
any building or other permanently affixed structure,
including a residence that is used in whole or in part for
the purpose of making sales of, or taking orders and
arranging for shipment of, tangible personal property, and
would exclude from that term, any building or other
permanently affixed structure, including a residence, used
for any of the following:
1) The storage of tangible personal property.
2) The cleaning or the storage of equipment or other
property used in connection with the manufacture or sale
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of tangible personal property.
The bill would specify that its provisions do not
apply to either of the following:
1) A person engaged in the business of serving meals,
food, or drinks to a customer at a location owned,
rented, or otherwise supplied by the customer, or
2) A person operating a vending machine.
The bill would become operative on the first day of
the first calendar quarter commencing more than 90 days
from the bill's effective date.
FISCAL EFFECT:
The BOE estimates a total revenue loss of $24,855
associated with this bill as follows:
----------------------------------------------
| | | Rates| Dollars|
| | | | |
|---------------------+------+-------+---------|
| State | | 6.25%| $17,337|
| | | | |
|---------------------+------+-------+---------|
| General Fund | | 6.00%| $16,644|
| | | | |
|---------------------+------+-------+---------|
| Fiscal Recovery | | 0.25%| $693|
|Fund | | | |
| | | | |
|---------------------+------+-------+---------|
| Local | | 2.00%| $5,548|
| | | | |
|---------------------+------+-------+---------|
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| Transit | | 0.71%| $1,970|
| | | | |
|---------------------+------+-------+---------|
| | | | |
| | | | |
|---------------------+------+-------+---------|
|Total State and | | 8.96%|$24,855 |
|Local | | | |
| | | | |
| | | | |
----------------------------------------------
COMMENTS:
A. Purpose of the Bill
According to the author's office, the strict wording
of the Business and Provisions code sections which outlines
provisions which exempt honorably discharged veterans from
locally-imposed license taxes and fees is confusing and
resulting in errors by veterans making retail sales of
goods. This bill will clarify existing law and represents
"one small step" towards recognizing our disabled veterans
who have already made or are making the transition from
military to civilian employment. Enactment for this bill
would help by clarifying existing law and allowing these
veterans to actively participate in small businesses in
this state.
B. Tie a Yellow Ribbon
Proponents note, "In recent years, we have seen large
numbers of veterans return home from two major foreign
conflicts in which the United States Armed Forces are
actively engaged. Many of these returning veterans face
continuing challenges from physical or psychological
disabilities directly related to their military service.
The BOE has been advised in public hearings that some of
these veterans seek to make a modest living from the
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itinerant sales of food and beverages."
BOE's support letter states that this bill represents
one small step towards recognizing our disabled veterans
who have already made, or are making the transition from
military to civilian employment. Enactment of this bill
would assist in this transition by simplifying reporting
requirements under the Sales and Use Tax Law for those
qualifying disabled veterans that are honorably discharged
or released from service that desire to engage in the
business of selling goods they own. For qualifying
disabled veterans without employees or a permanent place of
business, this bill would eliminate the need for them to
hold a seller's permit, file sales tax returns, and remit
sales tax on their sales.
C. It's not just about hot dogs anymore!
Last year, this bill would only have applied to a
narrow number of veterans who sell food such as hot dogs
from mobile food carts. This year, the bill extends to
sales beyond food products and beverages. Therefore, all
itinerant veterans who sell non-edible tangible personal
property would still be considered retailers and would
still be required to obtain a seller's permit.
D. Related Legislation
SB 809 (Committee on Veteran's Affairs) is almost
identical to this bill and passed out of this committee on
consent.
Support and Opposition
Support:Board of Equalization
CalTax
Oppose:None Received
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---------------------------------
Consultant: Gayle Miller