BILL ANALYSIS Ó
AB 1307
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ASSEMBLY THIRD READING
AB 1307 (Skinner)
As Introduced February 18, 2011
Majority vote
REVENUE & TAXATION 6-3 APPROPRIATIONS 12-4
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|Ayes:|Perea, Beall, Charles |Ayes:|Fuentes, Blumenfield, |
| |Calderon, Cedillo, Alejo, | |Bradford, Charles |
| |Gordon | |Calderon, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Donnelly, Harkey, |Nays:|Harkey, Nielsen, Norby, |
| |Nestande | |Wagner |
| | | | |
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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
account of being a director, officer, or employee of that
person.
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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 :
1) 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.
2) States that 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.
3) States that a seller whose permit has been revoked or
suspended may renew their permit after paying a $100
reinstatement fee to the BOE.
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4) Specifies that the BOE may require a person to file a
security deposit with the BOE to ensure compliance with the SUT
Law. The security deposit 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 : 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.
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."
The BOE, this bill's sponsor, has provided the following
comments in its staff analysis of the bill:
1)Why this legislation is needed . "California's sales and use
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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, 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."
2)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."
3)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."
4)Assembly Revenue and Taxation 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.
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Analysis Prepared by : Myriam Bouaziz and M. David Ruff / REV.
& TAX. / (916) 319-2098
FN: 0000666