BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 781
Author: Bocanegra (D)
Amended: 8/12/13 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 6/19/13
AYES: Wolk, Knight, DeSaulnier, Emmerson, Hernandez, Liu
NO VOTE RECORDED: Beall
SENATE PUBLIC SAFETY COMMITTEE : 7-0, 7/2/13
AYES: Hancock, Anderson, Block, De León, Knight, Liu, Steinberg
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-1, 5/28/13 - See last page for vote
SUBJECT : Sales and use taxes: fees: administration:
violations for noncompliance: sales suppression
devices
SOURCE : State Board of Equalization
DIGEST : This bill makes it a punishable offense for any
person to sell, purchase, install, transfer or possess software
programs that falsify reported sales, as specified.
ANALYSIS : Existing law sanctions taxpayers who intentionally
fail to accurately report and remit tax and fee liabilities. In
addition to a variety of civil penalties, the law imposes
criminal penalties for violations. For example, any person who
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makes a fraudulent return with the intent to evade the
determination of an amount due, or any person who assists in the
preparation or presentation of a document that is false to a
material matter is guilty of a misdemeanor, punishable by a fine
of at least $1,000 and not more than $5,000, or imprisonment up
to one year in the county jail, or both fine and imprisonment in
the court's discretion. In addition, the law makes it a felony
if the unreported tax liability is at least $25,000 in a
consecutive 12-month period, and is punishable by a fine of at
least $5,000 and not more than $20,000, or imprisonment for 16
months, or two or three years, or both the fine and imprisonment
in the discretion of the court.
The existing Fee Collection Procedures Law (FCPL) generally
provides for the administration and collection of State Board of
Equalization (BOE) administered fees. Legislation that
establishes a new fee may reference the FCPL with minimal
verbiage. Among other things, this law includes collection,
reporting, refund, and appeals provisions, and, similar to the
Sales and Use Tax Law, provides criminal penalties for
violations.
This bill makes it a criminal offense for any person to sell,
purchase, install, transfer, or possess any automated sales
suppression device, zapper or phantom-ware (devices) with the
knowledge that the sole purpose of the device is to defeat or
evade the determination of an amount due. The offense is
punishable by a fine of up to $5,000 for three or fewer offenses
or up to $10,000 for more than three offenses, and imprisonment
in the county jail for up to three years, with sentence lengths
of: (1) not more than one year, or, 16 months, or (2) two or
three years, or both that fine or imprisonment.
This provision shall not apply to a person that is a
corporation that possesses any automated sales suppression
device or zapper or phantom-ware for the sole purpose of
developing hardware or software to combat the evasion of
taxes by use of automated sales suppression devices or
zappers or phantom-ware.
This bill applies to the Sales and Use Tax Law, and the
California Tire Fee and Covered Electronic Waste Recycling Fee,
which are fees imposed on consumers at the retail level.
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In addition to the fines, this bill specifies that the person
shall also be liable for the taxes and fees, interest, and
penalties due.
This bill defines "automated sales suppression device,"
"zapper," "electronic cash register," "phantom-ware," and
"transaction data" as follows:
"Automated sales device" or a "zapper" is a software program
carried on a memory stick or removable compact disc, accessed
through an Internet link, or accessed through any other
means, that falsifies the electronic records of electronic
cash registers and other point-of-sale systems, including but
not limited to, transaction data and transaction reports.
"Phantom-ware" as a hidden, pre-installed, or installed at a
later time programming option embedded in the operating
system of an electronic cash register or hardwired into the
electronic cash register that can be used to create a virtual
second till or may eliminate or manipulate transaction
records that may or may not be preserved in digital formats
to represent the true or manipulated record of transactions
in the electronic cash register.
"Transaction data" as including information regarding items
purchased by a customer, the price for each item, a
taxability determination for each item, a segregated tax
amount for each of the taxed items, the amount of cash or
credit tendered, the net amount returned to the customer in
change, the date and time of the purchase, the name, address,
and identification number of the vendor, and the receipt or
invoice number of the transaction.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/20/13)
State Board of Equalization (source)
AFSCME
California Grocers Association
California Retailers Association
California State Association of Counties
Home Depot
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Los Angeles County District Attorney
OPPOSITION : (Verified 8/20/13)
Taxpayers for Improving Public Safety
ARGUMENTS IN SUPPORT : The bill's sponsor, State Board of
Equalization, states, "California must be proactive and curtail
the use of these sales suppression devices. Use of this
technology not only defrauds the state, but provides users an
unfair competitive advantage over taxpayers who comply with the
law and pay their fair share of taxes and fees. The Legislature
has recognized through its enactment of criminal penalties for
deliberate taxpayer fraud and evasion that criminal sanctions
play an important role in tax administration. Specifically
criminalizing and punishing the sale, installation, and use of
sales suppression devices serve as a strong deterrent to
potential offenders."
ARGUMENTS IN OPPOSITION : The opponent says that it is
"absolute proof of the necessity of a sentencing commission to
examine California's penal statutes and determine whether or not
the sentencing structure provides effective sanctions to prevent
future criminal conduct and punish those individuals who have
committed crimes. California can no longer afford [piecemeal]
sentence enhancements without considering the need for
acquiring, either through construction or out of state housing,
additional prison beds."
ASSEMBLY FLOOR : 75-1, 5/28/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Jones, Jones-Sawyer,
Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Yamada, John
A. Pérez
NOES: Donnelly
NO VOTE RECORDED: Roger Hernández, Holden, Williams, Vacancy
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AB:k 8/21/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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