BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 187
                                                                  Page  1

          Date of Hearing:   May 24, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

              AB 187 (Bonta and Dickinson) - As Amended:  May 15, 2013 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            5-3

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill 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)Requires the State Board of Equalization (BOE) to administer  
            and collect the new taxes pursuant to the Fee Collection  
            Procedures Law.

          2)Provides that two-thirds of all revenues, net of refunds and  
            administrative costs, shall be deposited in the Public Safety  
            Emergency Prevention Fund, created by this bill.  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.

          3)Provides that one-third of all revenues, net of refunds and  
            administrative costs, shall be deposited into the School-Based  
            Early Mental Health Intervention and Prevention Services  
            Matching Grant Program.

          4)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.

           FISCAL EFFECT  

          1)The BOE estimates that this bill would generate annual  
            ammunition tax revenues of about $90 million. 








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          2)Based on these estimates, the bill would result in about $60  
            million for grants to support public safety programs and about  
            $30 million for grants for mental health intervention and  
            prevention.


           COMMENTS  

           1)Purpose  .  The author notes, communities are suffering from a  
            combination of budget cuts to public safety and increases in  
            violent crime.  According to the author, the City of Oakland  
            suffered 131 homicides in 2012, 21 more than 2011.  As of  
            October 2012, Oakland had 629 police officers, a 10-year low,  
            down from a high of 837 officers just four years ago.  The  
            author states that taxing firearms and ammunition dates back  
            almost 100 years, to 1919, and that AB 187 simply allows the  
            state to support public safety needs and protect communities  
            from violence. 

           2)Support  .  Proponents of this bill, including the City of  
            Oakland and the Law Center to Prevent Gun Violence, contend 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.  They note 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.

           3)Opposition  .  Opponents note this bill has an unwarranted  
            impact on licensed hunters who purchase shotgun and rifle  
            ammunition for legitimate sporting purposes.  They state not  
            only is this type of sporting ammunition used in relatively  
            few crimes overall in California, but the excellent safety  
            record of licensed hunters who purchase most of this  
            ammunition clearly demonstrates that they are using it  
            responsibly.  They argue AB 187 indiscriminately penalizes  
            hunters and other law abiding citizens for the illegal or  
            irresponsible acts of others.

           4)Collection issues  .  BOE notes ammunition retailers already  
            collect and remit sales and use tax on their retail ammunition  
            sales in California.  Most retailers sell other tangible  
            personal property subject to sales and use tax.  Collecting an  
            additional tax from ammunition purchasers will require  








                                                                  AB 187
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            retailers to keep track of ammunition sales separately from  
            other sales of tangible personal property.  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)Federal tax.   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, and the FAET  
            does not require retailers to track ammunition sales  
            separately from other sales, the FAET does not result in the  
            type of compliance costs for smaller retailers and attendant  
            reporting errors that could affect this bill.
                
            6)Related legislation  .

             a)   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 is on the Assembly floor.

             b)   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 and directs funding to the School-Based Early  
               Mental Health Intervention and Prevention Services Matching  
               Grant Program.  AB 760 is on the Assembly Revenue and  
               Taxation Committee's Suspense File.     

           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081