BILL NUMBER: AB 2540	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 9, 2012
	AMENDED IN ASSEMBLY  MARCH 7, 2012

INTRODUCED BY   Assembly Member Gatto

                        FEBRUARY 24, 2012

   An act to amend Section 1656.1 of the Civil Code, and to add
Section 17137 to, and to add Chapter 3.8 (commencing with Section
6301) to Part 1 of Division 2 of, the Revenue and Taxation Code,
relating to taxation,  to take effect immediately, tax levy
  and making an appropriation therefor  .


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2540, as amended, Gatto. Sales and use taxes: services: income
taxes:  exclusion.   exclusion: Veterans' homes.

   (1) The Sales and Use Tax Law imposes a tax on retailers measured
by the gross receipts from the sale of tangible personal property
sold at retail in this state, or on the storage, use, or other
consumption in this state of tangible personal property purchased
from a retailer for storage, use, or other consumption in this state.
The State Board of Equalization administers that law, the violation
of which is a crime.
   This bill would  , on and after January 1, 2013,  expand
the Sales and Use Tax Law to impose a tax on the gross receipts from
the sale in this state of, or the storage, use, or other consumption
in this state of, specified services, as defined. This bill would
require all taxes, interest, and penalties imposed and all other
amounts required to be paid to the state to be remitted and deposited
in the same manner as required by the Sales and Use Tax Law. 
This bill would appropriate, from these revenues that are deposited
into the General Fund, $30 million annually to the Department of
Veterans Affairs for the purpose of operating the Veterans' Home of
California, Redding and the Veterans' Home of California, Fresno,
thereby making an appropriation. 
   By expanding the application of the Sales and Use Tax Law, the
violation of which is a crime, this bill imposes a state-mandated
local program.
   (2) Under existing law, it is presumed that parties to a contract
for the sale of tangible personal property agree to the addition of
sales tax reimbursement to the sales price of goods sold at retail
under specified conditions. Existing law requires the State Board of
Equalization to prepare and make available a sales tax reimbursement
schedule, which specifies the amount of tax to be charged as to
specific sales prices.
   This bill would extend that provision to a contract for the sale
of specified services.
   (3) The Personal Income Tax Law imposes taxes based upon taxable
income. That law also allows specified credits, exemptions, and
exclusions, and imposes an alternative minimum tax with respect to
certain items of tax preferences.
   This bill would, for taxable years beginning on or after January
1, 2012, exclude from taxable income under this law an amount equal
to 20% of the business income of a taxpayer, not to exceed $10,000,
as specified. 
   (4) This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.  
   The 
    (4)     The  California Constitution
requires the state to reimburse local agencies and school districts
for certain costs mandated by the state. Statutory provisions
establish procedures for making that reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason. 
   (5) This bill would take effect immediately as a tax levy.

   Vote: 2/3. Appropriation: no   yes  .
Fiscal committee: yes. State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 1656.1 of the Civil Code is amended to read:
   1656.1.  (a) Whether a retailer may add sales tax reimbursement to
the sales price of the tangible personal property or specified
service sold at retail to a purchaser depends solely upon the terms
of the agreement of sale. It shall be presumed that the parties
agreed to the addition of sales tax reimbursement to the sales price
of tangible personal property or specified service sold at retail to
a purchaser if:
   (1) The agreement of sale expressly provides for such addition of
sales tax reimbursement;
   (2) Sales tax reimbursement is shown on the sales check or other
proof of sale; or
   (3) The retailer posts in his or her premises in a location
visible to purchasers, or includes on a price tag or in an
advertisement or other printed material directed to purchasers, a
notice to the effect that reimbursement for sales tax will be added
to the sales price of all items or certain items, whichever is
applicable.
   (b) It shall be presumed that the property or specified service,
the gross receipts from the sale of which is subject to the sales
tax, is sold at a price which includes tax reimbursement if the
retailer posts in his or her premises, or includes on a price tag or
in an advertisement (whichever is applicable) one of the following
notices:
   (1) "All prices of taxable items include sales tax reimbursement
computed to the nearest mill."
   (2) "The price of this item includes sales tax reimbursement
computed to the nearest mill."
   (c) (1) The State Board of Equalization shall prepare and make
available for inspection and duplication or reproduction a sales tax
reimbursement schedule which shall be identical with the following
tables up to the amounts specified therein:
                  4 3/4 percent
Price                                       Tax
.01- .10 .................................. .00
.11- .31 .................................. .01
.32- .52 .................................. .02
.53- .73 .................................. .03
.74- .94 .................................. .04
.95-1.15 .................................. .05
                    5 percent
Price                                       Tax
.01- .09 .................................. .00
.10- .29 .................................. .01
.30- .49 .................................. .02
.50- .69 .................................. .03
.70- .89 .................................. .04
.90-1.09 .................................. .05
                  5 1/4 percent
Price                                       Tax
.01- .09 .................................. .00
.10- .28 .................................. .01
.29- .47 .................................. .02
.48- .66 .................................. .03
.67- .85 .................................. .04
.86-1.04 .................................. .05
                  5 1/2 percent
Price                                       Tax
.01- .09 .................................. .00
.10- .27 .................................. .01
.28- .45 .................................. .02
.46- .63 .................................. .03
.64- .81 .................................. .04
.82- .99 .................................. .05
  1.00-1.18 ................................ .06
                  5 3/4 percent
Price                                       Tax
.01- .08 .................................. .00
.09- .26 .................................. .01
.27- .43 .................................. .02
.44- .60 .................................. .03
.61- .78 .................................. .04
.79- .95 .................................. .05
.96-1.13 .................................. .06
                    6 percent
Price                                       Tax
.01- .08 .................................. .00
.09- .24 .................................. .01
.25- .41 .................................. .02
.42- .58 .................................. .03
.59- .74 .................................. .04
.75- .91 .................................. .05
.92-1.08 .................................. .06
                  6 1/4 percent
Price                                       Tax
.01- .07 .................................. .00
.08- .23 .................................. .01
.24- .39 .................................. .02
.40- .55 .................................. .03
.56- .71 .................................. .04
.72- .87 .................................. .05
.88-1.03 .................................. .06
                  6 1/2 percent
Price                                       Tax
.01- .07 .................................. .00
.08- .23 .................................. .01
.24- .38 .................................. .02
.39- .53 .................................. .03
.54- .69 .................................. .04
.70- .84 .................................. .05
.85- .99 .................................. .06
  1.00-1.15 ................................ .07
                  6 3/4 percent
Price                                       Tax
.01- .07 .................................. .00
.08- .22 .................................. .01
.23- .37 .................................. .02
.38- .51 .................................. .03
.52- .66 .................................. .04
.67- .81 .................................. .05
.82- .96 .................................. .06
.97-1.11 .................................. .07
                    7 percent
Price                                       Tax
.01- .07 .................................. .00
.08- .21 .................................. .01
.22- .35 .................................. .02
.36- .49 .................................. .03
.50- .64 .................................. .04
.65- .78 .................................. .05
.79- .92 .................................. .06
.93-1.07 .................................. .07
                  7 1/4 percent
Price                                       Tax
.01- .06 .................................. .00
.07- .20 .................................. .01
.21- .34 .................................. .02
.35- .48 .................................. .03
.49- .62 .................................. .04
.63- .75 .................................. .05
.76- .89 .................................. .06
.90-1.03 .................................. .07
                  7 1/2 percent
Price                                       Tax
.01- .06 .................................. .00
.07- .19 .................................. .01
.20- .33 .................................. .02
.34- .46 .................................. .03
.47- .59 .................................. .04
.60- .73 .................................. .05
.74- .86 .................................. .06
.87- .99 .................................. .07
  1.00-1.13 ................................ .08


   (2) Reimbursement on sales prices in excess of those shown in the
schedules may be computed by applying the applicable tax rate to the
sales price, rounded off to the nearest cent by eliminating any
fraction less than one-half cent and increasing any fraction of
one-half cent or over to the next higher cent.
   (3) If sales tax reimbursement is added to the sales price of
tangible personal property or specified service sold at retail, the
retailer shall use a schedule provided by the board, or a schedule
approved by the board.
   (d) The presumptions created by this section are rebuttable
presumptions.
   (e) "Specified service" means a specified service as defined in
subdivision (b) of Section 6301 of the Revenue and Taxation Code.
  SEC. 2.  Chapter 3.8 (commencing with Section 6301) is added to
Part 1 of Division 2 of the Revenue and Taxation Code, to read:
      CHAPTER 3.8.  SERVICES



      Article 1.  General Provisions and Definitions


   6301.  (a) Except where the context otherwise requires, the
definitions given in Chapter 1 (commencing with Section 6001) govern
this chapter. For purposes of this chapter, the references to
tangible personal property in Chapter 1 (commencing with Section
6001) shall include a specified service.
   (b) For purposes of this chapter, "specified service" means:
   (1) Yacht and boat repair.
   (2) Private aircraft pilot or private jet services.
   (3) Astrology, tarot, and palm reading.
   (4) Personal shopping.
   (5) Party planning.
   (6) Pool maintenance.
   (7) Spa services provided to pets.
   (8) Elective cosmetic surgery. 
   (9) Access to the facilities of a country club, including access
through the imposition of a charge.  
   (10) 
    (9)  Marina services. 
   (11) 
    (10)  Limousine rental. 
   (12) 
    (11)  Shoe shining. 
   (13) 
    (12)  Nonmedical massage. 
   (14) 
    (13)  Pet grooming where the buyer is charged fifty
dollars ($50) or more for the grooming. 
   (15) 
    (14)  The provision of personal, private lessons on any
topic, excluding tutoring services for K-12 or college academic
courses. 
   (16) 
    (15)  Shoe repair. 
   (17) 
    (16)  Access to the facilities of a ski resort through
the imposition of a charge. 
   (18) Carpet cleaning.  
   (19) 
    (17)  Access to storage facilities, not including
storage facilities used for the storage of food, through the
imposition of a charge of one thousand dollars ($1,000) a month or
more. 
   (20) 
    (18)  Furniture repair. 
   (21) 
    (19)  Watch repair. 
   (22) 
    (20)  Support activities for metal mining. 
   (23) 
    (21)  Charter bus services. 
   (24) 
    (22)  Access to live theater productions through the
purchase of a ticket or membership fees or dues. 
   (25) 
    (23)  Access to the facilities of a billiard parlor
through the imposition of a charge. 
   (26) 
    (24)  Access to private, telephonic chat lines through
the imposition of a charge to callers. 
   (27) High net worth estate planning. 
   6302.  (a) For purposes of this part, the place of the sale or
purchase of a specified service is the place where the act
constituting the sale or purchase of the specified service occurs.
   (b) If the seller delivers the specified service at the seller's
place of business, the place where the act constituting the sale or
purchase of the service occurs shall be deemed to be at the seller's
place of business.
   (c) If paragraph (b) does not apply, the place where the act
constituting the sale or purchase occurs shall be deemed to be the
address of the purchaser as indicated by the seller's business
records, if the records are maintained in the ordinary course of the
seller's business and if the seller uses that address in good faith.
   (d) If paragraphs (b) and (c) do not apply, the place where the
act constituting the sale or purchase occurs shall be deemed to be
the address indicated on the purchaser's payment instrument, if the
seller uses that address in good faith.

      Article 2.  Imposition and Collection of Tax


   6305.  In addition to the taxes imposed by this part, for the
privilege of selling specified services at retail a tax is hereby
imposed upon all retailers at a rate of 7.5 percent of the gross
receipts of any retailer from the sale of all specified services sold
at retail in this state on or after January 1, 2013.
   6306.  In addition to the taxes imposed by this part, an excise
tax is hereby imposed on the storage, use, or other consumption in
this state of specified services purchased from any retailer on or
after January 1, 2013, for storage, use, or other consumption in this
state at a rate of 7.5 percent of the sales price of the specified
services.
   6307.  (a) Section 6055, regarding worthless and charged off
accounts, shall apply to this chapter. Except where the context
otherwise requires, for purposes of this chapter, the references in
that section to tangible personal property shall include a specified
service.
   (b) Section 6203.5, regarding worthless and charged off accounts,
shall apply to this chapter. Except where the context otherwise
requires, for purposes of this chapter, the references in that
section to tangible personal property shall include a specified
service.
   6308.  (a) Section 6204, regarding retailer debt, shall apply to
this chapter. Except where the context otherwise requires, for
purposes of this chapter, the references in that section to tangible
personal property shall include a specified service.
   (b) Section 6205, regarding advertising that tax will be assumed,
shall apply to this chapter. Except where the context otherwise
requires, for purposes of this chapter, the references in that
section to tangible personal property shall include a specified
service.
   (c) Section 6206, regarding separate statement of price and tax,
shall apply to this chapter. Except where the context otherwise
requires, for purposes of this chapter, the references in that
section to tangible personal property shall include a specified
service.

      Article 3.  Permits and Registration, Prescriptions, and Resale
Certificates


   6310.  (a) Except where the context otherwise requires, Article 2
(commencing with Section 6066) of Chapter 2, regarding permits, shall
apply to this chapter. For purposes of this chapter, the references
to tangible personal property in Article 2 (commencing with Section
6066) of Chapter 2 shall include a specified service.
   (b) Except where the context otherwise requires, Article 2
(commencing with Section 6225) of Chapter 3, regarding registration,
shall apply to this chapter. For purposes of this chapter, the
references to tangible personal property in Article 2 (commencing
with Section 6225) of Chapter 3 shall include a specified service.
   6311.  (a) Except where the context otherwise requires, Article 3
(commencing with Section 6091) of Chapter 2, regarding presumptions
and resale certificates, shall apply to this chapter. For purposes of
this chapter, the references to tangible personal property in
Article 3 (commencing with Section 6091) of Chapter 2 shall include a
specified service.
   (b) Except where the context otherwise requires, Article 3
(commencing with Section 6241) of Chapter 3, regarding presumptions
and resale certificates, shall apply to this chapter. For purposes of
this chapter, the references to tangible personal property in
Article 3 (commencing with Section 6241) of Chapter 3 shall include a
specified service.

      Article 4.  Exemptions


   6315.  Except where the context otherwise requires, Chapter 4
(commencing with Section 6351), regarding exemptions, shall apply to
this chapter. For purposes of this chapter, any references to
tangible personal property in Chapter 4 (commencing with Section
6351) shall include a specified service.

      Article 5.  Determinations


   6320.  Except where the context otherwise requires, Chapter 5
(commencing with Section 6451), regarding determinations, shall apply
to this chapter. For purposes of this chapter, any references to
tangible personal property in Chapter 5 (commencing with Section
6451) shall include a specified service.

      Article 6.  Collection of Tax


   6325.  Except where the context otherwise requires, Chapter 6
(commencing with Section 6701), regarding collection of tax, shall
apply to this chapter. For purposes of this chapter, any references
to tangible personal property in Chapter 6 (commencing with Section
6701) shall include a specified service.

      Article 7.  Overpayments and Refunds


   6330.  Except where the context otherwise requires, Chapter 7
(commencing with Section 6901), regarding determinations, shall apply
to this chapter. For purposes of this chapter, any references to
tangible personal property in Chapter 7 (commencing with Section
6901) shall include a specified service.

      Article 8.  Administration


   6335.  Except where the context otherwise requires, Chapter 8
(commencing with Section 7051), regarding administration, shall apply
to this chapter. For purposes of this chapter, any references to
tangible personal property in Chapter 8 (commencing with Section
7051) shall include a specified service.

      Article 9.  Disposition of Proceeds


   6340.   (a)    All fees, taxes, interest, and
penalties imposed and all amounts of tax required to be paid to the
state under this chapter shall be remitted and deposited in the same
manner as required by Section 7101. 
   (b) Notwithstanding Section 13340 of the Government Code, there is
hereby annually appropriated, on a fiscal year basis, thirty million
dollars ($30,000,000) from the General Fund, from the revenues
deposited pursuant to subdivision (a) that are transferred to the
General Fund, pursuant to subdivision (b) of Section 7102, to the
Department of Veterans Affairs for the purpose of operating the
Veterans' Home of California, Redding and the Veterans' Home of
California, Fresno. 

      Article 10.  Violations


   6345.  Chapter 10 (commencing with Section 7152), regarding
violations, shall apply to this chapter. For purposes of this
chapter, any references to tangible personal property in Chapter 10
(commencing with Section 7152) shall include a specified service.

      Article 11.  Res Judicata


   6348.  Chapter 11 (commencing with Section 7176), regarding res
judicata, shall apply to this chapter. For purposes of this chapter,
any references to tangible personal property in Chapter 11
(commencing with Section 7176) shall include a specified service.
  SEC. 3.  Section 17137 is added to the Revenue and Taxation Code,
to read:
   17137.  (a) For taxable years beginning on or after January 1,
2012, gross income shall not include an amount equal to 20 percent of
the business income of a taxpayer.
   (b) For purposes of this section:
   (1) "Business income of a taxpayer" means income from a trade or
business, whether conducted by the taxpayer or by a pass-thru entity
in which the taxpayer is a partner or shareholder.
   (2) "Pass-thru entity" means a partnership or an "S" corporation.
   (c) In the case of a pass-thru entity, the amount of business
income under this section attributable to a partner or shareholder
shall be treated as a "separately stated item" within the meaning of
Sections 702 and 1366 of the Internal Revenue Code, respectively.
   (d) The maximum amount that may be excluded from the gross income
of any taxpayer pursuant to this section for any taxable year is ten
thousand dollars ($10,000).
   (e) In the case of a husband and wife who file separate returns
(including spouses and registered domestic partners), the exclusion
under this section may be taken by either or equally divided between
them, and the limitation under subdivision (d) shall be an aggregate
ten thousand dollars ($10,000) for both returns.
  SEC. 4.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution. 
  SEC. 5.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.