BILL ANALYSIS
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|SENATE RULES COMMITTEE | SJR 1|
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THIRD READING
Bill No: SJR 1
Author: Ducheny (D)
Amended: 4/14/09
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-3, 4/22/09
AYES: Wolk, Alquist, Florez, Padilla, Wiggins
NOES: Walters, Ashburn, Runner
SUBJECT : Sales Tax Fairness and Simplification Act
SOURCE : Author
DIGEST : This resolution urges members of the California
congressional delegation to join in support of legislative
action by the Congress of the United States to allow states
to collect use taxes on products sold over the Internet,
and for the President to sign that legislation.
ANALYSIS :
Existing Federal law is generally governed by the United
States Supreme Court decision Quill Corp. v. North Dakota
(1002) 119 L.Ed.2d 91 (Quill) that states that the commerce
clause of the United States Constitution (cl. 3, Sec. 8,
Art. I) Precludes a state from requiring an out-of-state
seller to collect and remit the use tax of that state
unless both of the following apply: (1) the tax is applied
to an activity with a substantial nexus with the taxing
state, and (2) the tax is fairly related to the services
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provided by the state.
Existing state law imposes the sales and use tax two
separate and distinct taxes. The sales tax is imposed on
retailers for the privilege of selling tangible personal
property at retail stores in this state and is measured by
the gross receipts of retailers derived from those sales.
The use tax is imposed for the privilege of utilizing
tangible personal property in this state. Specifically,
the use tax is imposed on the storage, use, or other
consumption in this state of tangible personal property
purchased from any retailer. The use tax is imposed on the
purchaser, and unless that purchaser pays the use tax to a
retailer registered to collect the California use tax, the
purchaser is liable for the tax, unless the use of that
property is specifically exempted or excluded from tax.
The sales and use taxes are the same rate (eight and
one-forth percent state wide plus any additional
transactions and use taxes) and are required to be remitted
to the Board of Equalization (BOE) on or before the last
day of the month following the quarterly period in which
the purchase was made. Both the sales and use tax require
that the "retailer be engaged in business in this state,"
and provides that sales to Californian's through telephone,
Internet and Mail Order from out-of-state retailers with no
nexus in the state are not subject to sales or use tax
collection by the retailer. If a retailer has sufficient
"business presence," as defined, that retailer is required
to register with the BOE and collect the applicable use tax
on all sales to California consumers.
This resolution:
1. Urges Congress to support legislation to allow the
states to collect use taxes on products sold over the
Internet.
2. Makes findings and declarations about the erosion of the
sales and use tax base in California due to the lack of
collections through electronic commerce.
3. States that all states could lose as much as $33 billion
in 2008 because they were not able to collect the use
tax on remote sales and that California's portion could
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be as much as $4 billion.
4. States that since 1999, 40 states have joined the
streamlined sales and use tax agreement that allows for
the collection of sales and use taxes.
The Streamlined Sales Tax Project
The Streamlined Sales Tax Project was created by state
governments, with input from local governments and the
private sector, in an effort to simplify and modernize
sales and use tax collection and administration. The goal
of the project is to develop measures to design, test and
implement sales and use tax system that radically
simplifies sales and use taxes. The Project was organized
in March 2000 and conducts its work through a steering
committee made up of co-chairs, four work groups, and a
number of sub-groups. The participants are mainly state
revenue departments, but also include state legislators,
local governments and businesses.
Between 2001 and 2001, 40 states enacted legislation
expressing the intent to simplify the states' sales and use
tax collection systems, and to participate in discussions
to allow for the collection of states' sales and use taxes.
By January 1, 2008, 22 states: Arkansas, Indiana, Iowa,
Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada,
New Jersey, North Carolina, North Dakota, Ohio, Oklahoma,
South Dakota, Tennessee, Texas, Utah, Vermont, Washington,
West Virginia, and Wyoming, representing over 35 percent of
the Total population of the United States, have enacted
legislation to provide a state statutory basis to require
remote sellers to collect the states' use tax.
According to the author's office, this resolution is a
basic fairness issue, it is now time to level the playing
field for those who claim to be out-of-state remote sellers
but who are, in reality, California brick-and-mortar
businesses.
FISCAL EFFECT : Fiscal Com.: No
SUPPORT : (Verified 4/23/09)
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California Communities United Institute
League of California Cities
DLW:do 4/23/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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