BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 143 HEARING: 8/14/13
AUTHOR: Holden FISCAL: Yes
VERSION: 4/8/13 TAX LEVY: Yes
CONSULTANT: Grinnell
USE TAX EXEMPTION: NATIONAL GUARD: TRANSFER ORDERS
Provides a use tax exemption for property purchased by a
qualified service member transferred to California.
Background and Existing Law
California provides various tax credits designed to provide
incentives for tax-payers that incur certain expenses, such
as child adoption, or to influence behavior, including
business practices and decisions, such as research and
development credits. The Legislature typically enacts such
tax incentives to encourage taxpayers to do something, but
for the tax credit, they would not otherwise do.
State law imposes the sales tax on every retailer "engaged
in business in this state" that sells tangible personal
property to collect the appropriate tax from the purchase
and remit the amount to the Board of Equalization (BOE).
Unless the person pays the sales tax to the retailer, he or
she is liable for the use tax, which is imposed on any
person consuming tangible personal property in the state.
The use tax is the same rate as the sales tax, and must be
remitted on or before the last day of the month following
the quarterly period in which the person made the purchase.
The Legislature added the use tax in 1935 in response to
complaints from in-state retailers that California
residents would evade the sales tax it enacted in 1933 by
purchasing property out-of-state but use it here.
Generally, when a California resident purchases tangible
personal property in another state, the obligation rests on
the consumer to remit the use tax due. Californians may
remit the use tax directly to BOE, or on the income tax
form (SB 858, Committee on Budget, 2010).
State law contains some exemptions for use taxes based on
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when the property entered the state, and where its first
use takes place. State law presumes that the use tax
applies whenever the property's first use occurs within the
state, or if the taxpayer brings the property into the
state within 90 days of purchase. If neither condition is
met, the property is not subject to use tax. Additionally,
if the taxpayer paid the sales tax to a retailer in another
state for the property, he or she need only pay the
difference between tax paid and the amount applied under
California law.
State law treats vehicles slightly differently: if a
California resident brings a vehicle into the state within
the first year after purchase, and registers it, the law
presumes that the use tax applies (SB 1100, Committee on
Budget, 2004). Nonresidents storing or using the vehicle
in the state more than half the time of the one year period
following the sale also are presumed to be subject to tax.
Taxpayers may rebut the presumption. However, members of
the armed services who purchase a vehicle prior to the
effective date of discharge are only subject to use tax if
he or she intended to use it in this state, and not
pursuant to official orders transferring him or her to this
state.
Proposed Law
Assembly Bill 143 exempts from the use tax property
purchased by a qualified active duty or reserve member of
the armed forces or National Guard, or his or her spouse or
registered domestic partner, outside the state and prior to
the report date on official orders transferring the
qualified service member to the state. The bill does not
affect state law guiding use taxes on vehicles.
The measure provides definitions for its terms, contains a
waiver for reimbursing any revenue loss to local agencies
imposing a sales or use tax, and sunsets the measure on
January 1, 2019.
State Revenue Impact
BOE estimates negligible revenue effects.
AB 143 - 4/8/13 -- Page 3
Comments
1. Purpose of the bill . According to the author, "Our
brave men and women in the Armed Forces sacrifice every day
to protect and defend the United States of America. In the
recent two wars, over two million American military
personnel have been called to serve in Afghanistan and
Iraq, and more than 40 percent of them have been deployed
more than once. California is home to 12.9% of the active
duty members stationed in the United States. Under current
law, any purchases by an active duty member of the military
from an out-of-state retailer would be subjected to Use
Tax, if the military member were to be redeployed to
California within three months of the purchase. AB 143
would exempt active military members who are transferring
into California on official military business. It is
commonsense legislation that will alleviate the unnecessary
tax burden on our active military members."
2. Yes, but . AB 143 adds an exemption from the use tax on
property purchased by members of the armed services
transferred to California. However, the measure will
neither affect a large amount of property nor tax.
Existing law already exempts property purchased more than
90 days before the service member enters the state, and
allows the taxpayer to subtract from use tax due any sales
tax paid to a retailer in another state. Additionally,
while service members transferred into the state due to
official orders may face rough treatment under current law,
AB 143 may invite future attempts to loosen the application
of the use tax for other individuals. For example,
taxpayers transferred by their public or private employers
to the state to work here can make a similar case that
current law taxes property that they bought out-of-state
but never intended on using in California. The Committee
may wish to consider the reasons for extending special
treatment for this population given its limited
application, and the possibility that other sets of
individuals may ask for a similar benefit.
Assembly Actions
Assembly Revenue and Taxation 9-0
Assembly Appropriations 17-0
Assembly Floor 77-0
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Support and Opposition (08/08/13)
Support : BOE Member George Runner; American Legion -
Department of California; AMVETS - Department of
California; California Association of County Veterans
Service Officers; California State Commanders Veterans
Council; VFW - Department of California; California State
Council Vietnam Veterans of America - California State
Council; and Veterans Democratic Club of Sacramento County.
Opposition : Unknown.