BILL ANALYSIS Ó AB 1307 Page 1 Date of Hearing: May 11, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1307 (Skinner) - As Introduced: February 18, 2011 Policy Committee: Revenue and Taxation Vote: 6-3 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill allows the State Board of Equalization (BOE) to refuse to issue a seller's permit to any person with an outstanding final liability with BOE for any amount due under the Sales and Use Tax Law. Specifically, this bill: 1)Provides that a liability will not be deemed outstanding if the person has entered into an installment payment agreement, unless the person fails to comply with the installment agreement. 2)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 BOE, and provides that any person denied a seller's permit may request in writing a reconsideration of BOE's denial within 30 days. 3)Provides that a request for reconsideration timely filed will afford the person a hearing conducted in a manner specified by law. FISCAL EFFECT The BOE estimates minor additional revenues from taxpayers entering into installment payment agreements. COMMENTS 1) Purpose. According to the author, AB 1307 is meant to help collect delinquent taxes and fees owed to the State. AB 1307 Page 2 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 additional tools to reduce this balance and collect the taxes and fees that support vital services in California. 2) Background . 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 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, according to BOE, 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. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081