BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 163 HEARING: 6/5/13 AUTHOR: Atkins FISCAL: Yes VERSION: 4/9/13 TAX LEVY: Yes CONSULTANT: Miller SALES & USE TAX EXEMPTIONS: MILITARY THRIFT STORE Indefinitely extends the sales and use tax exemption for goods sold by a thrift stores that are both located on a military installation and operated by a "military welfare society" Background and Existing Law Sales Tax The state sales and use tax rate is 7.50% as detailed below and is general imposed on all tangible personal property unless specifically exempt. Cities and Counties may increase the sales and use tax rate up to 2% for either specific or general purposes with a vote of the people. ------------------------------------------------------------- | | | | | Rate | Jurisdiction | Purpose/Authority | | | | | |-------+--------------------+--------------------------------| | | | | |3.9375%|State (General |State general purposes | | |Fund) | | | | | | |-------+--------------------+--------------------------------| | | | | |1.0625%|Local Revenue Fund |Realignment of local public | | |2011 |safety services | | | | | | | | | | | | | |-------+--------------------+--------------------------------| | | | | AB 163 -- 4/9/13 -- Page 2 | 0.25% |State (Fiscal |Repayment of the Economic | | |Recovery Fund) |Recovery Bonds | | | | | |-------+--------------------+--------------------------------| | | | | | 0.25% |State (Education |Schools and community college | | |Protection Account) |funding | | | | | |-------+--------------------+--------------------------------| | | | | | 0.50% |State (Local |Local governments to fund | | |Revenue Fund) |health and welfare programs | | | | | |-------+--------------------+--------------------------------| | | | | | 0.50% |State (Local Public |Local governments to fund | | |Safety Fund) |public safety services | | | | | |-------+--------------------+--------------------------------| | | | | | 1.00% |Local (City/County) |City and county general | | | |operations. Dedicated to county | | | |transportation purposes | | |0.75% City and | | | |County | | | | | | | |0.25% County | | |-------+--------------------+--------------------------------| | | | | | 7.50% |Total Statewide | | | |Rate | | | | | | ------------------------------------------------------------- Many items are fully exempted from the sales and use tax in this state (prescription drugs, food, poultry litter) but only a handful are partially exempted from the sales tax at the rate of 5.5%; specifically: Farm equipment and machinery; Diesel fuel used for farming and food processing; Teleproduction and postproduction equipment; Timber harvesting equipment and machinery; and Racehorse breeding stock. Military thrift stores Existing state law provides a sales and use tax exemption AB 163 -- 4/9/13 -- Page 3 until January 1, 2014 for goods sold by a thrift store that is both located on a military installation and operated by a military welfare society. A military welfare society, in partnership with the United Sates Department of Defense, provides financial, educational and other assistance to members of the Armed Forces, eligible family members and survivors in need. Proposed Law Senate Bill 163 removes the sunset for the sales and use tax exemption for thrift stores operated by a military welfare society and on a military. State Revenue Impact The BOE estimates that this exemption results in annual state and local sales and use tax revenue losses of approximately $15,000. Comments 1. Purpose of the bill . According to the author, this bill was introduced to continue the sales and use tax exemption for the Navy-Marine Corps Relief Society thrift stores on military bases. The author notes this exemption was created in 2009 and will expire if no action is taken. These stores operated by the society use their income to provide financial, educational and other general assistance to active duty and retired services members, families and survivors. The author notes the proceeds from these thrift stores have provided $13.4 million in financial assistance, and 3,500 military families have taken financial education classes. The author points out that other thrift stores such as Goodwill and the Salvation Army are already exempt from the sales and use tax, an exemption that has existed since 1959. 2. Sunset . AB 163 permanently deletes the sunset for military thrift stores on a military installation. In an effort to make sure that tax credits are working and to gather data on performance measurements, sunsets are necessary. The Committee may wish to consider a long-term AB 163 -- 4/9/13 -- Page 4 sunset. Assembly Actions Assembly Revenue & Taxation9-0 Assembly Appropriations 17-0 Assembly Floor 76-0 Support and Opposition (5/30/13) Support : Navy Region Southwest (Sponsor); State Board of Equalization; Navy-Marine Corps Relief Society; Senator George Runner. Opposition : None received.