BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 289
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          ASSEMBLY THIRD READING
          AB 289 (Cedillo)
          As Amended May 24, 2011
          Majority vote.  Tax levy

           REVENUE & TAXATION  8-0         APPROPRIATIONS      17-0        
           
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          |Ayes:|Perea, Donnelly, Beall,   |Ayes:|Fuentes, Harkey,          |
          |     |Charles Calderon,         |     |Blumenfield, Bradford,    |
          |     |Fuentes, Gordon, Harkey,  |     |Charles Calderon, Campos, |
          |     |Nestande                  |     |Davis, Donnelly, Gatto,   |
          |     |                          |     |Hall, Hill, Lara,         |
          |     |                          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Extends 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)Extends the current sunset date from January 1, 2012, to 
            January 1, 2019. 

          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 








                                                                  AB 289
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            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 
            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 
            (H&SC) Section 1568.01(c).  H&SC 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  :  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.    

          The BOE notes the following in its staff analysis of this bill:

           1)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, 
            extending the sunset date would not pose a problem." 

           2)Related legislation  .  "At the January 27, 2011 BOE Legislative 








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            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."  

          Assembly Revenue and Taxation Committee Staff Comments:

          1)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.  


          2)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 
            (AB 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.  

           
          Analysis Prepared by  :    M. David Ruff / REV. & TAX. / (916) 
          319-2098 




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