BILL ANALYSIS Ó
AB 1307
Page 1
Date of Hearing: May 2, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 1307 (Skinner) - As Introduced: February 18, 2011
Majority vote. Fiscal committee.
SUBJECT : State Board of Equalization: seller's permits: refusal
to issue
SUMMARY : Allows the State Board of Equalization (BOE) to refuse
to issue a seller's permit to any person with an outstanding
final liability with the BOE for any amount due under the Sales
and Use Tax (SUT) Law. Specifically, this bill :
1)Authorizes the BOE to refuse to issue a seller's permit to a:
a) Person submitting an application for a permit who has an
outstanding final liability; or,
b) Business entity, if any person "controlling" the entity
has an outstanding final liability.
2)Defines "controlling" as the direct or indirect power to:
a) Vote 25% or more of any class of the voting securities
issued by a person; or,
b) Direct or cause the direction of the management and
policies of a person, whether through the ownership of
voting securities, or by contract, as specified; however,
no individual shall be deemed to control a person solely on
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account of being a director, officer, or employee of that
person.
3)Provides that a liability will not be deemed outstanding if
the person has entered into an installment payment agreement
pursuant to Revenue and Taxation Code (R&TC) Section 6832,
unless the person fails to comply with the installment
agreement.
4)Specifies that the BOE shall provide written notice to any
person denied a seller's permit and that notice shall be
served personally, by mail, or by other means deemed
appropriate by the BOE.
5)Provides that any person denied a seller's permit may request
in writing a reconsideration of the BOE's denial within 30
days of the date of the notice of denial.
6)Provides that a request for reconsideration timely filed will
afford the person a hearing in a manner consistent with a
hearing provided for by R&TC Section 6070.
7)States that if a request for reconsideration is not filed
within 30 days, the denial becomes final at the end of the
30-day period.
EXISTING LAW requires any person desiring to engage in business
as a seller in California to apply for a seller's permit with
the BOE. A seller's permit is valid for as long at the seller
maintains a business and remains in good standing with the BOE.
A person who fails to comply with any provision of the SUT Law,
including payments of amounts due, may have their seller's
permit revoked by the BOE. Prior to revocation of a seller's
permit, however, the BOE must provide advanced written notice of
the time and place of a hearing to be held which will afford the
person the opportunity to show why their seller's permit should
not be revoked.
A seller whose permit has been revoked or suspended may renew
their permit after paying a $100 reinstatement fee to the BOE.
The BOE may require a person to file a security deposit with the
BOE to ensure compliance with the SUT Law. The security deposit
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may not exceed $50,000 and it must be released by the BOE after
a three-year period in which the person has filed all tax
returns and paid all taxes to the state.
FISCAL EFFECT : The BOE estimates minor additional revenues from
taxpayers entering into installment payment agreements.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
AB 1307 is not about raising taxes or fees, but about
collecting delinquent taxes and fees owed to the State.
The BOE is charged with administering a variety of taxes
and fees and has many collection tools to facilitate the
BOE's responsibilities under the law. However, despite the
tools available to the BOE, some taxpayers simply refuse to
remit their tax and fee obligations due the state. The
BOE's growing accounts receivable balance is $1.5 billion-
an amount that has nearly doubled over the past three
years. AB 1307 provides the BOE with some additional tools
to assist them in reducing this balance and collect the
taxes and fees that support vital services in California.
2)Opponents state, "Seller's permits provide taxpayers with the
income necessary to pay their debts. Suspending a retail
taxpayer's ability to earn a living to force payment of tax
delinquencies is thus counterintuitive. The legislation
acknowledges the adverse impact that revoking a seller's
permit would have for certain taxpayers and subsequently
allows such taxpayers to maintain a seller's permit if they've
entered into an installment payment agreement. However, the
problem CalTax foresees is that not all taxpayers are eligible
for entering into an installment payment agreement, and the
Board of Equalization is not required to agree to all
agreements."
3)The BOE, this bill's sponsor, has provided the following
comments in its staff analysis of the bill:
a) Why this legislation is needed. "California's sales and
use tax system is one based on the principal of voluntary
compliance. Most retailers are honest and generally comply
with the tax laws. However, the BOE's number of overdue
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accounts receivable, as well as the overall balance,
continues to increase - further complicating the state's
budget woes. Within the last three-year period, the BOE's
accounts receivable balances for unpaid final liabilities
(liabilities that are due and not under appeal) have nearly
doubled. As of the end of 2010, these outstanding
liabilities totaled over $1.5 billion.
"Recent economic turmoil is one factor contributing to this
increase. However, other reasons include the fact that
some businesses purposefully fail to remit the tax, such as
when a taxpayer diverts the sales tax reimbursement
collected from a customer for his or her own purposes
instead of remitting the tax to the State. This bill would
provide an additional tool that would assist the BOE in
reducing its growing outstanding accounts receivable
balances from taxpayers' failure to remit the taxes that
are owed."
b) This bill gives a taxpayer a right to a hearing. "To
ensure fair treatment of taxpayers, this bill would provide
that any person denied a seller's permit due to an
outstanding final liability under this provision would be
granted a hearing regarding the manner."
c) Installment payment agreements take into account a
taxpayer's financial situation. "An installment payment
agreement allows taxpayers to pay the full payment of their
debt in smaller, more manageable amounts."
d) Committee staff notes that this bill states that written
notice provided by the BOE informing a person of a denied
seller's permit application must be served personally, by
mail, or by other means deemed appropriate by the Board,
which may include electronic transmission. "Other means
deemed appropriate" may be too broad, and a person may not
expect an official notice to come by electronic
transmission. Furthermore, what does electronic
transmission include? Specifically, it may be appropriate
to define electronic transmission as a fax or e-mail.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 1307
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State Board of Equalization (Sponsor)
Opposition
California Taxpayers Association
Analysis Prepared by : Myriam Bouaziz and M. David Ruff / REV. &
TAX. / (916) 319-2098