BILL ANALYSIS
AB 1474
Page 1
Date of Hearing: May 18, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 1474 (Cook) - As Amended: April 2, 2009
SUSPENSE
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Sales and use taxes: exemption: mobilehomes
SUMMARY : Exempts new mobilehomes from the recently enacted 1%
sales and use tax (SUT) increase under specified conditions.
Specifically, this bill :
1)Exempts a new mobilehome from the recently enacted 1% SUT
increase if both of the following conditions are met:
a) The mobilehome is sold by a retailer to a purchaser
under the circumstances described in Revenue and Taxation
Code (R&TC) Section 6012.8 or 6012.9 (i.e., sold for
occupancy as a residence); and,
b) The purchaser's contract was entered into on or before
February 20, 2009, and the sale to the purchaser occurs on
or after April 1, 2009.
1)Takes immediate effect as a tax levy.
EXISTING LAW :
1)Imposes a sales tax on retailers for the privilege of selling
tangible personal property (TPP), absent a specific exemption.
The tax is based upon the gross receipts from sales of TPP in
this state.
2)Imposes a use tax on the storage, use, or other consumption in
this state of TPP purchased from any retailer for storage,
use, or other consumption in this state, absent a specific
exemption.
3)Imposes, as of April 1, 2009, an additional SUT at the rate of
1%.
AB 1474
Page 2
4)Provides, under R&TC Sections 6012.8 and 6012.9, that:
a) "Gross receipts" from the sale of a new mobilehome shall
be 75% of the sales price of the mobilehome to the
retailer, if the mobilehome is sold by the retailer to the
purchaser for occupancy as a residence, and is thereafter
subject to property taxation;
b) The retailer shall be considered to be the consumer if
the retailer's sale would otherwise have been subject to
sales tax and if the retailer is not also the manufacturer
of the mobilehome;
c) If the retailer of the mobilehome is the manufacturer,
tax shall be measured by an amount equal to 75% of the
sales price at which a similar mobilehome would be sold by
the manufacturer to a retailer-consumer in this state; and,
d) A retailer may give a resale certificate for the
retailer's purchase of such a mobilehome and report the
gross receipts or sales price from the purchase with the
return for the period during which the mobilehome is sold
to the purchaser for occupancy as a residence.
FISCAL EFFECT : The Board of Equalization (BOE) has issued a
revised estimate projecting General Fund revenue losses of
$146,000.
COMMENTS :
1)The author states, "The manufacture and purchase of a
manufactured home is a unique process, which often
incorporates product-specific financing and customization at
the factory. Occasionally, this results in delays in
financing, manufacturing, and installation. Due to the recent
state sales tax increase, for the handful of purchases in
California, delays resulted in a price increase before
installation of the home. Many purchasers of manufactured
homes live on limited incomes, such as seniors, and this price
increase might mean that they can no longer afford the
American dream of home ownership. This bill will provide
relief to these purchasers by exempting them from the sales
tax increase, if they were under contract prior to the sales
AB 1474
Page 3
tax increase."
2)Proponents state, "[T]here are unique nuances - and sometimes
delays - involved with the financing, construction, and final
installation of a manufactured home. We, therefore, support
AB 1474 (Cook), which allows those buyers who purchased
manufactured homes under contract, on or before the enactment
of the sales tax increase, to be granted a refund from the
Board of Equalization after issuance of a certificate of
occupancy."
3)Opponents state, "We do not see a rationale for exempting
mobilehomes from the temporary 1% across the board sales tax
increase. The taxable price of a mobilehome is already 75% of
the sales price, so the increase is actually less than that
paid on other sales."
4)BOE comments:
a) "Under the law, [R&TC] Sections 6012.8 and 6012.9
provide that a sale of a new manufactured home that is sold
for installation for occupancy as a residence is subject to
tax based on 75 percent of the selling price of the
manufactured home to the retailer. In cases where a new
manufactured home is sold by a manufacturer directly to the
purchaser under similar circumstances, current law provides
that the tax is measured by an amount equal to 75 percent
of the sales price at which a similar manufactured home
ready for installation would be sold by the manufacturer to
a California dealer.
Under these provisions, the law considers a manufactured
home dealer a 'retailer-consumer' of any new manufactured
home sold to a customer for occupancy as a residence. As a
dealer who is a retailer-consumer of a manufactured home,
the imposition of the use tax is upon the dealer, and sales
tax does not apply to the amount the dealer charges the
customer for the manufactured home or any integral items
the dealer attaches to it such as carpeting, wall paneling,
room partitions, and built-in appliances. As a
retailer-consumer, the mobile home dealer may not collect
an amount for tax reimbursement from his or her customer.
Generally, the dealer owes the use tax as of the date he or
she sells the manufactured home. Generally, the date of
AB 1474
Page 4
sale is considered the date the dealer transfers title
(ownership) to the purchaser."
b) BOE also notes that, "As a retailer-consumer, for mobile
homes sold for occupancy as residences, the mobile home
dealer may not collect an amount for tax reimbursement from
his or her customer. As a result, for manufactured homes
sold for occupancy as residences within the time specified
in this bill, the bill would enable the dealer to claim a
refund for the 1 percent use tax portion. However, that
refund would not be required to be passed on to the
customer (unless the dealer inappropriately collected the
tax reimbursement from the customer)."
c) Finally, BOE notes, "Escrow is used for a variety of
high ticket items, including specialized automobiles,
motorcycles, jewelry, computer equipment, and so on. A
similar argument could be made for other items ordered
prior to the rate increase, but delivered after the
effective date of the increase."
5)Committee staff notes:
a) Who does this bill help ? Proponents of this bill note
that many mobilehome buyers live on limited incomes. In
addition, they state that without this exemption, these
individuals may no longer be able to afford the American
dream of home ownership. It should be noted, however, that
under existing law, it is the mobilehome retailer who would
be on the hook for the SUT increase, and not the buyer.
Thus, while not detracting from the equities involved, this
bill can more accurately be described as assisting
mobilehome retailers.
b) Related legislation : AB 1523 (Calderon), introduced in
the current Legislative Session, would exempt from the 1%
SUT increase sales of TPP made under fixed price contracts
entered into before the date of the rate increase. AB 1523
is set to be heard by this Committee on May 18, 2009.
REGISTERED SUPPORT / OPPOSITION :
Support
California Manufactured Housing Institute
AB 1474
Page 5
Western Manufactured Housing Communities Association
Opposition
American Federation of State, County and Municipal Employees,
AFL-CIO
California Tax Reform Association
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098