BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 155 (Calderon)
Hearing Date: 08/22/2011 Amended: 05/02/2011
Consultant: Mark McKenzie Policy Vote: G&F 6-3
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BILL SUMMARY: AB 155 would enact a "controlled group of
corporations" nexus to determine whether out-of-state retailers
must collect and remit the use tax on sales to California
consumers. In doing so, this bill would chapter out
recently-enacted provisions that established an "affiliate" and
"long-arm" nexus for purposes of use tax collections.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Chaptering out "affiliate" & $28,500 $62,000
$67,000General*
"long-arm" nexus --------(see staff comments)---------
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* Staff notes that these figures represent only the General Fund
portion of projected revenue losses as a result of chaptering
out provisions enacted in a budget trailer bill. Total
projected sales and use tax revenue losses would be $58.5
million in 2011-12 (1/2 year), $127 million in 2012-13, and $136
million in 2013-14.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
State law requires every retailer "engaged in business in this
state" that sells tangible personal property to collect the
appropriate tax from the purchaser and remit the amount to the
Board of Equalization (BOE). Unless the person pays the sales
tax to the retailer, he or she is liable for the use tax, which
is imposed at the same rate as the sales tax on any person
consuming tangible personal property in the state. When a
California resident purchases tangible personal property from a
retailer online, by mail order, or on a trip to another state,
and the retailer lacks physical presence in this state, the
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obligation rests on the consumer to remit the use tax due to
BOE.
Existing law, enacted by ABx1 28 (Blumenfield), Chapter 7 of the
2011-12 First Extraordinary Session, revised the definition of
"retailer engaged in business in this state" to include the
following, for purposes of use tax collections:
Any retailer that is a member of a commonly controlled group
and a member of a combined reporting group that includes
another member of the retailer's commonly controlled group
that, pursuant to an agreement with or in cooperation with the
retailer, performs services in this state in connection with
tangible personal property to be sold by the retailer.
(controlled group of corporations nexus)
Any retailer entering into an agreement or agreements under
which a person or persons in this state, for a commission or
other consideration, directly or indirectly refer potential
purchasers of tangible personal property to the retailer under
specified conditions. (affiliate nexus)
Any retailer that has substantial nexus with this state for
the purposes of the commerce clause of the United States
Constitution and upon whom federal law permits this state to
impose a use tax collection duty. (long-arm nexus).
AB 155 would repeal the expanded nexus provisions of ABx1 28,
and only re-enact the "controlled group of corporations" nexus
for purposes of defining a retailer engaged in business in this
state that is required to collect and remit use taxes from
California consumers. Thus, AB 155 would chapter out provisions
that establish an "affiliate" and "long-arm" nexus.
Staff notes that the 2011-12 Budget assumed General Fund revenue
gains of $200 million as a result of the passage of ABx1 28, of
which $83 million is attributable to the "controlled group of
corporations" nexus. Assuming these estimates are accurate, AB
155 would result in first year revenue losses of $117 million
due to the chaptering out of "affiliate" nexus and "long-arm"
nexus provisions.
Actual revenue impacts of ABx1 28 and AB 155 are unknown and
would depend upon numerous factors, including behavior of
retailers that would be subject to state requirements to collect
and remit the use tax from consumers as a result of the nexus
created by these bills, the scope of any subsequent BOE
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regulations, and actions of the courts in response to legal
challenges to enactment of a long-arm nexus. Staff notes that
Amazon, one of the largest out-of-state retailers that does not
currently collect and remit California use taxes, has filed a
petition for a referendum that will allow voters decide whether
to overturn ABx1 28. The petition has been approved by the
Attorney General, and Amazon has until late September to collect
504,000 signatures in order to qualify the referendum for the
next statewide election in February of 2012.