BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 919
                                                                  Page  1

          Date of Hearing:   January 23, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                  AB 919 (Williams) - As Amended:  January 17, 2014 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill allows a qualified veteran to receive from the state a  
          repayment of state and local sales taxes paid to the State Board  
          of Equalization (BOE) during the eight-year period beginning on  
          and after April 1, 2002, and before April 1, 2010, as specified.  
           The bill lays out an administrative process for filing and  
          processing of repayments and provides the amount of total  
          authorized repayment shall not exceed $50,000 for all taxpayers,  
          and is subject to appropriation by the Legislature.

           FISCAL EFFECT  

          This bill limits the allowable repayment amount to $50,000 (GF),  
          upon appropriation by the Legislature.  The BOE will have minor  
          and absorbable administrative costs for receiving and processing  
          the reimbursement filings.

           COMMENTS  

           1)Purpose  .  According to the author, disabled veterans  
            transitioning from military to civilian life can struggle to  
            reintegrate.  Frequently they are unable to find a job and  
            many veterans become vendors selling art, food, books among  
            other items.  The author argues this bill targets a small  
            group of itinerant disabled veteran vendors who live on the  
            fringe of our economy often as a direct result of their  
            military service.  The author contends that, to the extent the  
            Legislature can offer financial relief in recognizing the  
            sacrifices made by our veterans, it should take the  
            opportunity to do so.  The author states that AB 919 provides  
            modest assistance to veterans who have been required to remit  








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            sales tax, interest, and penalties to the BOE, and who lack  
            significant assets.

           2)Sponsor  .  The bill's sponsor, the BOE, notes the Legislature  
            unanimously voted to specify that honorably discharged  
            veterans with service-related disabilities who have no  
            permanent place of business are consumers, not retailers of  
            certain goods they sell.  The purpose of that legislation was  
            to ease the economic burdens of veterans who sustained  
            permanent injuries in foreign conflicts.  BOE argues that some  
            itinerant veterans acted on the belief they could make sales  
            of small items without responsibility for the tax.  These  
            itinerant veterans lack substantial assets and many  
            experienced forced collection action by BOE.  The sponsor  
            believes a small number of these veterans are in need of  
            relief for prior periods; specifically to allow qualified  
            veteran vendors to submit a claim for reimbursement of the  
            monies paid during the years when the law was unclear.
                
            3)Background-sales and use tax.   A sales tax is imposed 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.  Retailers of TPP must generally obtain a seller's  
            permit and report and remit the tax to the BOE.  Existing law,  
            however, classifies a variety of retailers as consumers, and  
            not retailers, of specified TPP they sell.  These retailers  
            are not required to obtain seller's permits or to report tax  
            on their qualifying sales.  Instead, these retailers are only  
            required to pay tax on the taxable goods used to produce the  
            property they sell.  This consumer reporting status is  
            primarily designed to alleviate reporting burdens for small  
            businesses, while minimizing the revenue losses associated  
            with complete SUT exemptions.

           4)Background  .  This bill, and a number of related bills  
            preceding it, stem from the efforts of veteran William M.  
            Connell.  Since at least June 25, 1993, Mr. Connell has  
            operated a mobile food business known as "All American Surf  
            Dog."  For years, Mr. Connell has asserted that, under a law  
            originally enacted in the 19th century, he has no obligation  
            to collect or remit SUT on his retail sales.  Mr. Connell has  
            brought litigation against the state over the collection of  
            sales tax on four separate occasions.  While Mr. Connell met  
            with failure in the courts on the first three occasions, the  








                                                                  AB 919
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            fourth case was settled.  The BOE agreed to refund Mr. Connell  
            an undisclosed amount of money in full consideration for the  
            settlement and releases contained in the settlement contract.   
            In addition to requiring the dismissal of Mr. Connell's  
            appeal, the settlement contract required Mr. Connell to  
            refrain from further litigation or administrative claims  
            against the BOE, and furthermore, Mr. Connell agreed to waive  
            any known or unknown claims.

            Apparently unsatisfied with his legislative victory, which  
            relieves him of the obligation to either collect or remit  
            sales tax and unconcerned with the settlement he voluntarily  
            reached with the state,  Mr. Connell is now seeking  
            retroactive relief for sales tax payments made to the BOE  
            between April 1, 2002, and April 1, 2010.  Essentially, this  
            bill is asking the Legislature to retroactively conform the  
            law to support Mr. Connell's position that he was never under  
            a legal obligation to collect sales tax; this, despite the  
            fact that Mr. Connell's position was repeatedly rejected as  
            lacking merit by the courts, by the BOE itself, and by the  
            Legislature's own Office of Legislative Counsel.
                
            5)Small bill, big issues.   This bill raises significant issues:

             a)   The bill could be seen as special legislation that gifts  
               public funds, despite the findings specifically stating it  
               is not such a gift.  BOE has informed the committee there  
               are at least several vendors who failed to collect sales  
               tax based on their understanding of the 1893 statute and  
               would be affected by this bill.

             b)   This bill provides retroactive relief to conform the law  
               to one individual's repeatedly rejected legal  
               interpretation.

             c)   This bill would seem to ignore the existing settlement.   
               It is not clear how the BOE would be in a position to pay  
               Mr. Connell, given that he signed a settlement contract  
               with the BOE forever releasing his claims for this period  
               in exchange for an unspecified settlement payment.  BOE  
               would have to ignore the settlement contract to pay him,  
               although the author has taken amendments to eliminate the  
               possibility of double payment.  

             d)   The Legislature in considering this bill ignores the  








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               settlement contract voluntarily entered into by the  
               taxpayer and the BOE.  

           7)Related legislation  .

             a)   SB 805 (Committee on Veterans Affairs), Chapter 246,  
               Statutes of 2011, extended the sunset date for the  
               preferential consumer status provisions from January 1,  
               2012, until January 1, 2022.

             b)   SB 809 (Committee on Veterans Affairs), Chapter 621,  
               Statutes of 2009 provided that a qualified veteran, as  
               specified, is a consumer, and not a retailer, of TPP, with  
               certain limitations.

           8)There is no registered opposition to this bill.  
             
             

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