BILL ANALYSIS Ó
AB 289
Page 1
Date of Hearing: April 4, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 289 (Cedillo) - As Introduced: February 8, 2011
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Sales and use taxes: exemption: charitable thrift
stores
SUMMARY : Repeals the sunset date for the current sales and use
tax (SUT) exemption for retail items sold by thrift stores
operated by nonprofit organizations to assist individuals with
human immunodeficiency virus (HIV) or acquired immune deficiency
syndrome (AIDS). Specifically, this bill :
1)Deletes the current sunset date of January 1, 2012, thereby
extending the SUT exemption indefinitely.
2)Provides that, notwithstanding existing law, the state shall
not reimburse any local agency for any SUT revenues lost as a
result of this bill.
3)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 retailer's gross receipts from TPP
sales in this state.
2)Imposes a complementary use tax on the storage, use, or other
consumption in this state of TPP purchased from any retailer.
The use tax is imposed on the purchaser, and unless the
purchaser pays the use tax to a retailer registered to collect
the California use tax, the purchaser remains liable for the
tax, unless the use is exempted. The use tax is set at the
same rate as the state's sales tax and must be remitted to the
State Board of Equalization (BOE).
3)Provides a SUT exemption for used pieces of clothing,
household items, or other retail items sold by specified
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thrift stores operated by a "nonprofit organization." To
qualify for the exemption, the thrift store's purpose must be
to generate revenue for the funding of medical, hospice, or
social services for chronically ill individuals, and at least
75% of the thrift store's net income must be so used.
4)Defines a "nonprofit organization," for purposes of the
exemption, as a nonprofit organization that provides medical,
hospice, or social services to individuals with a chronic,
life-threatening illness, as defined in Health and Safety Code
Section 1568.01(c). Section 1568.01(c), in turn, defines a
chronic, life-threatening illness as HIV disease or AIDS.
FISCAL EFFECT : The BOE estimates that this bill would result in
annual state and local revenue losses of approximately $1
million.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
Current law provides an exemption to the Sales and ÝUse]
Tax Law for retail items sold by thrift stores operated by
non-profit organizations, which raise funds for services to
HIV or AIDS patients. This exemption will be repealed on
January 1, 2012. This bill is intended to lift the sunset
of such an exemption permanently so that services may still
be provided to patients regardless of their ability to pay.
2)BOE, which supports this bill, notes:
Permanently establishing the exemption contained in
existing law for goods sold through these thrift stores
would demonstrate the Legislature's recognition that these
nonprofit thrift stores should be treated similarly as the
other thrift stores currently qualifying for an existing
exemption, such as those operated by the Salvation Army,
Goodwill Industries and St. Vincent de Paul.
3)Proponents state, "Thrift stores rely entirely upon donations
to stock their shelves. They offer a customer a variety of
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merchandise at affordable prices. In today's economy more
people are shopping for better deals. The merchandise sales
at these thrift stores assists Ýsic] the nonprofit
organizations to provide free or low cost legal assistance,
counseling, referral services or direct benefits. Some
organizations specialize in specific issue areas, or direct
services to specific communities. Every sale helps fund vital
community resource programs."
4)The BOE notes the following in its staff analysis of this
bill:
a) Provisions would not be problematic to administer .
"Since the BOE is already administering the sales and use
tax exemption for thrift stores that benefit individuals
with HIV or AIDS, eliminating the sunset date would not
pose a problem."
b) Related legislation . "At the January 27, 2011 BOE
Legislative Committee meeting, the committee voted to
sponsor legislation to extend the sunset date on the sales
and use tax exemption for thrift stores that benefit
individuals with HIV or AIDS, from January 1, 2012 to
January 1, 2017."
5)Committee Staff Comments:
a) The BOE notes that there are currently three nonprofit
organizations operating thrift stores that qualify for this
exemption. These organizations hold seller's permits, file
tax returns, and claim exempt sales pursuant to existing
law.
b) The current SUT exemption was established by AB 3187
(Martinez), Chapter 781, Statutes of 1996. As originally
enacted, the exemption provisions included a sunset date of
January 1, 2002. In 2001, the author introduced
legislation ÝAB 180, Chapter 383] to delete permanently the
exemption's sunset date. Prior to enactment, however, AB
180 was amended in the Senate to instead extend the sunset
date to January 1, 2007. In 2006, the author again
introduced legislation (SB 1341, Chapter 373) to delete the
sunset date outright. The bill was subsequently amended to
delay the sunset date to the current date of January 1,
2012.
AB 289
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REGISTERED SUPPORT / OPPOSITION :
Support
California Catholic Conference
State Board of Equalization
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098