BILL ANALYSIS                                                                                                                                                                                                    




                                    REVISED

                     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
          

          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"  
          for 10-years.


                           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





          AB 163 -- 4/9/13 -- Page 3



           
          Existing state law provides a sales and use tax exemption  
          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.   









          AB 163 -- 4/9/13 -- Page 4



                                 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.