BILL ANALYSIS Ó
AB 187
Page 1
Date of Hearing: May 6, 2013
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 187 (Bonta) - As Amended: March 19, 2013
2/3 vote. Tax levy. Fiscal committee.
SUBJECT : Taxation: ammunition: Public Safety Emergency
Prevention Fund
SUMMARY : Imposes a tax on retailers at the rate of 10% of the
gross receipts from ammunition sales in this state on or after
January 1, 2014. Specifically, this bill :
1)Contains the following legislative findings:
a) California recognizes a clearly defined nexus between
the use of guns in violent crime and access to guns and
ammunition.
b) While many factors can contribute to an increase in gun
crime, one important way to reduce crime is through proper
funding of public safety services.
c) Communities, such as Oakland and Stockton, have been
suffering from spikes in violent crime with 131 and 71
homicides reported in 2012, respectively, in conjunction
with reductions in public safety budgets and street-level
police forces. There is a clear and compelling risk to the
safety of the public in these communities.
d) Providing a source of stable revenue through a tax on
the sale of ammunition to fund vital public safety programs
in high crime municipalities will serve California's best
interest by likely reducing acts of violence committed with
a deadly weapon in the state and thereby promoting the
health and safety of the state's residents.
2)Imposes a complimentary excise tax on the storage, use, or
other consumption in this state of "ammunition" purchased from
a retailer, as specified.
3)Defines "ammunition" to include any bullet, cartridge, or
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projectile capable of being fired from a "firearm" with a
deadly consequence. Blanks are specifically excluded from the
definition.
4)Defines a "firearm" as a device, designed to be used as a
weapon, from which is expelled through a barrel, a projectile
by the force of an explosion or other form of combustion.
5)Requires every retailer engaged in business in this state and
making sales of ammunition to collect the tax from the
purchaser and give to the purchaser a receipt therefor. Any
person violating this requirement shall be guilty of a
misdemeanor.
6)Makes it a misdemeanor for any retailer to advertise to the
public or to any customer that the tax or any part thereof
will be assumed by the retailer or that it will not be added
to the price of the ammunition.
7)Provides that the tax required to be collected by the retailer
shall be displayed separately on the sales check or receipt.
Any person violating this requirement shall be guilty of a
misdemeanor.
8)Exempts from taxation "ammunition purchased by any peace
officer required to carry or use a firearm that uses
ammunition while on duty, or by any governmental law
enforcement agency employing that peace officer, for use in
the normal course of employment."
9)Requires the State Board of Equalization (BOE) to administer
and collect the new taxes pursuant to the Fee Collection
Procedures Law.
10)Provides that the taxes are due and payable to the BOE
quarterly.
11)Provides that all revenues, net of refunds and administrative
costs, shall be deposited in a newly established Public Safety
Emergency Prevention Fund (Fund). All moneys in the Fund
shall, upon appropriation by the Legislature, be expended by
the Office of Emergency Services to support public safety
programs in high crime municipalities.
12)Takes immediate effect as a tax levy.
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EXISTING FEDERAL LAW imposes:
1)A 10% tax upon the sale of pistols and revolvers by the
manufacturer, producer, or importer.
2)An 11% tax upon the sale of firearms (other than pistols and
revolvers), shells, and cartridges by the manufacturer,
producer, or importer.
EXISTING STATE LAW imposes a:
1)Sales tax on retailers for the privilege of selling tangible
personal property (TPP), absent a specific exemption. The tax
is based upon the retailer's gross receipts from TPP sales in
this state.
2)Complementary use tax on the storage, use, or other
consumption in this state of TPP purchased from any retailer.
The use tax is imposed on the purchaser, and unless the
purchaser pays the use tax to a retailer registered to collect
the California use tax, the purchaser remains liable for the
tax, unless the use is exempted. The use tax is set at the
same rate as the state's sales tax and must generally be
remitted to the BOE.
FISCAL EFFECT : The BOE estimates that this bill would generate
annual ammunition tax revenues of $92.4 million. In addition,
the BOE estimates that this bill would annually generate $7.7
million in additional state and local sales taxes.
COMMENTS :
1)The author has provided the following statement in support of
this bill:
Across our state, communities are suffering from a
devastating combination of budget cuts to public safety and
increases in violent crime. The City of Oakland suffered
from 131 homicides in 2012 - 21 more than 2011. As of
October 2012, Oakland had 629 police officers - a ten year
low, and down from a high of 837 officers just four years
ago. The City of Stockton has also suffered similarly,
with two years of record setting homicides at 58 in 2011
and 71 in 2012. Both of these municipalities are receiving
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assistance from the California Highway Patrol, but the
state needs a serious, long-term solution to make our
streets safer.
AB 187 imposes a 10% tax on ammunition to fund the Public
Safety Emergency Prevention Fund, which would target
resources to municipalities experiencing high levels of
violent crime and [meeting] other criteria. The purchase
of ammunition by law enforcement would be exempt from such
a tax.
Taxing firearms and ammunition dates back almost 100 years,
to 1919, and AB 187 simply follows the federal precedent to
fund important public safety needs and keep our communities
safe from violence.
Public opinion supports the tax approach taken in my bill.
February's Field Poll showed 61% of Californians support a
tax on ammunition to fund violence prevention efforts.
March's USC/LA Times poll also showed majority support for
an ammunition tax.
I am committed to doing all I can as a legislator, an
attorney, and a father, to keep our children safe. The tax
makes sense and it's a perfectly responsible way to fund
emergency services. AB 187 is on the right side of history
and the people of California.
2)Proponents of this bill note:
AB 187 will tighten ammunition sales in California and
provide a much-needed revenue stream to support public
safety efforts, especially in high-crime areas.
The impact of gun violence places a tremendous strain on
the emotional and financial stability of our communities
and leads to increased public safety costs for cities
across California.
We must do all we can to reduce crime and keep our streets
safe. Reducing gun violence and giving public safety
officials the tools they need is consistently a top
priority of cities like Oakland and beyond. AB 187 will
help support these efforts across California.
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3)Opponents of this bill note:
Our Association opposes this measure due to its unwarranted
impact on licensed hunters who purchase shotgun and rifle
ammunition for legitimate sporting purposes. Not only is
this type of sporting ammunition used in relatively few
crimes overall in California, but the excellent safety
record of licensed hunters (e.g. in most years there are
only about two dozen total safety accidents from hunting)
who purchase most of this ammunition clearly demonstrates
that they are using it responsibly. Unfortunately, AB 760
[sic] indiscriminately penalizes hunters and other law
abiding citizens for the illegal or irresponsible acts of
others, rather than narrowly focusing its requirements on
those who directly contribute to gun violence.
4)The BOE notes the following in its staff analysis of this
bill:
Ammunition retailers already collect and remit sales and
use tax on their retail ammunition sales in California.
These retailers most likely sell other tangible personal
property subject to sales and use tax. Collecting an
additional tax from ammunition purchasers will require
retailers to keep track of ammunition sales separately from
other sales of tangible personal property.
Additionally, smaller ammunition retailers may find
collecting the additional tax burdensome. Larger retailers
have the ability to program into their computer system the
ammunition subject to the additional tax. Therefore, the
tax will be automatically added to the purchase price once
the product code or UPC is entered at the register.
Cashiers at smaller supply stores, which are typically not
computerized, must manually apply the additional tax, which
could likely lead to collection and reporting errors.
5)Committee Staff Comments:
a) How will the tax proceeds be used? : This bill requires
that all revenues raised, less refunds and costs of
administration, be deposited in the newly established Fund.
All moneys in the Fund, upon appropriation by the
Legislature, are to be expended by the Office of Emergency
Services to support public safety programs in high crime
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municipalities.
b) A note on unintended consequences : Some might argue
that, by increasing the retail price of ammunition sold in
California, this bill might inadvertently encourage
consumers to purchase ammunition from out-of-state
retailers. This, in turn, could have a negative effect on
sales tax revenues derived from ammunition purchases. This
bill attempts to address this issue by imposing a
complimentary excise tax, akin to a use tax, on the
storage, use, or other consumption in this state of
ammunition. The use tax itself, however, has been
historically underreported by consumers. Specifically,
when consumers buy goods from out-of-state retailers that
are not obligated to collect California's use tax, many
consumers simply fail to report their use tax obligation
directly to the state, as the law requires. Moreover,
these purchases are very difficult to identify, and
auditing individual consumers is most often cost
prohibitive. It is possible that this bill's excise tax on
ammunition could prove susceptible to similar
complications.
c) A tax upon a tax? : California's sales tax is based upon
a retailer's gross receipts from TPP sales, including sales
of ammunition. Because this bill does not specifically
exclude the ammunition tax from the definition of gross
receipts, the new tax would likely be included in the final
sales price of ammunition subject to sales tax. The author
may wish to clarify this issue by either specifically
including or excluding the new tax from the definition of
"gross receipts" subject to sales tax.
d) Federal tax on firearms and ammunition : As noted above,
federal law imposes a Firearms and Ammunition Excise Tax
(FAET) on the sale of firearms and ammunition by
manufacturers, producers, and importers. Because the
federal tax is imposed higher up the distribution chain, it
does not fall prey to some of the potential administrative
complications noted in BOE's staff analysis. Specifically,
the FAET does not require retailers to track ammunition
sales separately from other sales, which could result in
significant compliance costs for smaller retailers and
attendant reporting errors.
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e) Implementation timeline : This bill currently applies to
ammunition sales conducted on or after January 1, 2014. To
provide both the BOE and impacted retailers sufficient time
to implement this new tax, the author may wish to delay the
operative date to July 1, 2014.
f) Related legislation :
i) AB 180 (Bonta), of the current legislative session,
would authorize the City of Oakland to enact and enforce
an ordinance that is more restrictive than state law
regulating the registration or licensing of commercially
manufactured firearms. AB 180 has been referred to the
Assembly Committee on Public Safety.
ii) AB 760 (Dickinson), of the current legislative
session, would impose a tax on retailers for the
privilege of selling ammunition, as defined, at the rate
of $0.05 per item of ammunition sold in this state on or
after January 1, 2014. AB 760 is currently pending on
this Committee's suspense file.
iii) AB 992 (Ridley-Thomas), of the 2003-04 legislative
session, would have imposed a fee of $0.10 on every
munition, as defined, sold at retail. Revenues raised
would have been used to pay firearm-injury victims for
uncompensated pecuniary losses. AB 992 died on the
Assembly inactive file.
iv) SCA 12 (Perata), of the 2001-02 legislative session,
would have imposed a tax on retailers at the rate of
$0.05 for each munition sold at retail in this state.
Revenues collected would have been deposited in a
newly-established Trauma Center Fund. SCA 12 died in the
Senate Committee on Revenue and Taxation.
g) Technical amendments : Committee staff suggests the
following technical amendments to this bill:
i) On page 10, in line 12, strike "tax" and insert
"taxes";
ii) On page 10, in line 16, strike "tax" and insert
"taxes"; and,
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iii) On page 10, in line 30, strike the second "and".
REGISTERED SUPPORT / OPPOSITION :
Support
Law Center to Prevent Gun Violence
3 individuals
Opposition
California Rifle and Pistol Association, Inc.
California Waterfowl Association
National Rifle Association
1 individual
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098