BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2618|
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THIRD READING
Bill No: AB 2618
Author: Ma (D)
Amended: 4/18/12 in Assembly
Vote: 27
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 6/20/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, Kehoe,
La Malfa, Liu, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 5/29/12 - See last page for vote
SUBJECT : Sales and use taxes: auction: vehicles
SOURCE : Board of Equalization
DIGEST : This bill limits who can acquire salvage
certificate vehicles to those persons that are licensed
dealers, dismantlers, auto repair dealers, or scrap metal
processors.
ANALYSIS : Existing state law imposes a sales tax on
retailers' gross receipts for the privilege of selling
tangible personal property unless specifically exempted.
The state also imposes a complementary use tax on tangible
personal property which the consumer is required to pay.
When a seller receives a resale certificate from another
person engaged in the business of selling tangible personal
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property that holds a permit under the sales and use tax
law, the original seller is not required to collect the
sales tax. A person engaged in sales at auction is
considered a retailer for the purposes of collecting the
tax or not paying the tax under the provisions described.
Both the Revenue and Taxation Code and the Vehicle Code
require that taxes are paid on vehicles either at the time
of sale (sales tax) or at the time of registration (use
tax).
This bill provides that a licensed dismantler or any person
selling a vehicle at auction is presumed to be making a
sale at retail. This bill creates a rebuttable presumption
that a licensed dismantler or any person selling a vehicle
at auction is presumed to be making a sale at retail and
therefore subject to the tax. The seller may rebut the
presumption by accepting a resale certificate, with the
appropriate license or registration number, from a licensed
dealer, dismantler, automotive repair dealer or scrap metal
processor.
Comments
According to the Senate Governance and Finance Committee
analysis, the Board of Equalization (BOE) audits show that
car sale non-compliance with the sales and use tax law is
about 6%, higher than the average rate of 4% in the rest of
the program. This bill addresses a significant issue
around who may purchase salvage vehicles without being
required to pay the sales and use tax. By requiring the
tax reimbursement to be paid to the auto auction or
dismantler at the time of purchase, this bill mitigates a
significant opportunity to avoid the sales and use tax.
The audits specifically found that permit holders that are
not licensed dealers are acquiring salvage certificate
vehicles by issuing a resale certificate, and are not
reporting any subsequent sales of vehicles. Purchasers do
not appear to be registering the vehicles with Department
of Motor Vehicles and reporting use tax. This bill
requires that only specific persons may purchase a salvage
vehicle with a resale certificate (and therefore not pay
the sales tax) which not only mitigates the state's tax
loss but also the unfair advantage that these persons have
over new and used car dealers that are required to collect
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and remit the sales and use tax.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
The BOE estimates that this bill will raise approximately
$5.44 million annually.
SUPPORT : (Verified 7/2/12)
Board of Equalization (source)
Board of Equalization Member George Runner
California Auto Dismantlers and Recyclers Alliance, Inc.
California State Association of Counties
Californians Against Waste
Insurance Auto Auction Inc.
State of California Auto Dismantlers Association
ASSEMBLY FLOOR : 77-0, 5/29/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Harkey, Hayashi, Roger Hernández,
Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight,
Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza,
Miller, Mitchell, Monning, Morrell, Nestande, Nielsen,
Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Cedillo, Fletcher, Hall
AGB:k 7/2/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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