BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 187
                                                                  Page  1

          Date of Hearing:  May 13, 2013

                                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  

             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.  


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          3)Defines "ammunition" to include any bullet, cartridge, or  
            projectile capable of being fired from a "firearm" with a  
            deadly consequence.  Blanks are specifically excluded from the  

          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  

          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  

          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  

          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.      


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          12)Takes immediate effect as a tax levy.  

           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  


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               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  
               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  


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               priority of cities like Oakland and beyond.  AB 187 will  
               help support these efforts across California.     

          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  

               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.  


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                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  

              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  
              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  


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               significant compliance costs for smaller retailers and  
               attendant reporting errors.  

              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 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  


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               ii)    On page 10, in line 16, strike "tax" and insert  
                 "taxes"; and, 

               iii)   On page 10, in line 30, strike the second "and".  


          City of Oakland
          Law Center to Prevent Gun Violence
          Youth ALIVE!
          3 individuals

          California Association of Firearms Retailers
          California Chapter of Safari Club International
          California Rifle and Pistol Association, Inc.  
          California Sportsmen's Lobby
          California Waterfowl Association
          Gun Owners of California
          National Rifle Association
          Outdoor Sportsmen's Coalition of California
          1 individual 
          Analysis Prepared by  :  M. David Ruff / REV. & TAX. / (916)