BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1307 HEARING: 6/29/11
AUTHOR: Skinner FISCAL: Yes
VERSION: 6/21/11 TAX LEVY: No
CONSULTANT: Miller
STATE BOARD OF EQUALIZATION: ENFORCEMENT
Gives the Board of Equalization (BOE) greater enforcement
tools.
Background and Existing Law
Existing state 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
sales and use tax 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A seller whose permit has been revoked or suspended may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 sales and use
tax 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.
Proposed Law
There are four distinct provisions of Assembly Bill 1307
AB 1307 -- 6/21/11 -- Page 2
all of which relate to the administration of collecting the
taxes it administers:
1. Assembly Bill 1307 allows BOE to refuse to issue a
seller's permit to any person who has an outstanding
liability with the BOE and has not entered into an
installment payment agreement. The bill requires BOE
to provide a notice to the taxpayer refused a permit.
2. The bill also requires the BOE to operate and
implement a Financial Institution Records Match system
in cooperation with the Franchise Tax Board to help
locate delinquent taxpayers and levy their accounts.
3. AB 1307 allows the BOE access to EDD's "new
employee registry" to enable the BOE to more quickly
find delinquent taxpayers.
4. The bill authorizes the BOE to request the
Contractor's State License Board to deny or suspend a
contractor's license for failure to resolve
outstanding BOE liabilities.
State Revenue Impact
According to the BOE, there would be no costs associated
with this bill.
Comments
1. Purpose of the bill . This bill is sponsored by the BOE
in order to mitigate the growing number of accounts
receivable. Within the last three-year period, the BOE's
accounts receivable balances for unpaid final liabilities
have nearly doubled; at the end of 2010, the total was $1.5
billion. The BOE has identified a common situation where
taxpayers abandon old businesses when they have a tax
liability and then apply for a seller's permit for a "new"
business even if that business is identical in every way
except the corporate structure to the old business. By
allowing BOE the flexibility to deny seller's permits, this
issue of restructuring would be significantly mitigated.
AB 1307 -- 6/21/11 -- Page 3
2. There shouldn't be a law . This bill is opposed by the
California Taxpayers Association because this bill is
overly punitive, especially since existing law already
provides the BOE with the authority to revoke a person's
seller's permit whenever that person fails to comply with
any provisions of the sales and use tax law. CalTax states
that this bill is "heavy handed and could negatively impact
many people engaged in retail."
3. Compromise is the key to a successful relationship .
This bill allows BOE to refuse a seller's permit unless the
seller enters into an installment agreement to pay owed
taxes. The bill does not specifically consider "offers in
compromise" which are based on the taxpayer's ability to
pay as a condition for issuing a seller's permit although
offers in compromise are often implicit in installment
agreements. The Committee may wish to consider
specifically amending this bill to include offers in
compromise as a valid payment plan for purposes of issuing
a seller's permit.
4. Of carrots and sticks . AB 1307 focuses on giving more
sticks to the BOE in order to have greater flexibility to
enforce existing laws and collect existing tax revenue.
The intent of the bill is to gain more information, through
a financial records institutional match program, and to
increase auditing through license revocation. These are
significant changes to the existing practices and policies
at the BOE. Proponents of the measure argue that these
tools are necessary to enforce existing laws while
opponents argue that these are brand new torture devices
that will be used to abuse taxpayers. The Committee may
wish to consider whether the options presented in this bill
are tools in furtherance of existing law or not.
5. Where next ? Should AB 1307 move out of this committee,
it should go to the Rules Committee for consideration of a
request by the Senate Business and Professions Committee.
Assembly Actions
Assembly Revenue & Taxation Committee: 6-3
Assembly Appropriations Committee:12-4
Assembly Floor: 49-27
AB 1307 -- 6/21/11 -- Page 4
Support and Opposition (6/23/11)
Support : Board of Equalization (sponsor).
Opposition : California Taxpayer's Association.