BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 781
                                                                  Page  1

          Date of Hearing:   May 8, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                  AB 781 (Bocanegra) - As Amended:  April 18, 2013 

          Policy Committee:                              Public  
          SafetyVote:  6-0
                        Rev and Tax                               8-0
                       
          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill makes the sale, purchase, installation, possession, or  
          use of any automated sales suppression device, zapper, or  
          phantom-ware, as defined, an alternate felony/misdemeanor,  
          punishable by up to one year in county jail and/or a fine of up  
          to $10,000, or by 16 months, two, or three years in county jail  
          and/or the fine.   

           FISCAL EFFECT  

          Unknown, probably minor nonreimbursable local law enforcement  
          and incarceration costs, offset to a degree by increased fine  
          revenue and offender financial liability.

          It is not likely many offenders would serve actual jail time  
          under this bill. By creating an alternate felony/misdemeanor,  
          however, the bill does create the possibility of longer jail  
          terms that could impact future realignment formulae and  
          exacerbate jail overcrowding.  

           COMMENTS  

           1)Rationale  . According to the author, "The Board of Equalization  
            has estimated that California loses $214 million in annual  
            sales tax revenue due to these kinds of devices.  Not only do  
            these kinds of devices place a burden on state and local  
            governments, they also place a burden on honest and  
            hardworking business owners who pay and collect taxes.  A  
            business owner that suppresses sales is able to reduce the  
            amount of income tax paid, and the amount of sales tax  








                                                                  AB 781
                                                                  Page  2

            collected.  This provides a huge competitive disadvantage for  
            honest taxpayers." 

            "Making things worse is the fact that these kinds of devices  
            and software are incredibly difficult to detect.  Even when an  
            audit is conducted, there are no guarantees of finding  
            criminal activity.  AB 781 addresses this problem by  
            criminalizing not only the use, but the sale and possession of  
            these devices and software.  Instead of simply going after the  
            user, this bill also goes after the seller and developer."

           2)Support  . The Board of Equalization, the sponsor of this  
            measure, states it has recently become aware of an electronic  
            method to skim sales that allows retailers to conceal or  
            remove sales transactions from recordkeeping systems and  
            underreport their tax or fee liabilities. When retailers use  
            this technology, detecting understated sales in tax or fee  
            audits is difficult.  
             Analysis Prepared by  :    Geoff Long / APPR. / (916) 319-2081