BILL ANALYSIS Ó AB 1412 Page 1 Date of Hearing: April 29, 2013 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Raul Bocanegra, Chair AB 1412 (Committee on Revenue and Taxation) - As Introduced: March 19, 2013 Majority vote. Fiscal committee. SUBJECT : Sales and use taxes: claim for refund: customer refunds SUMMARY : Authorizes a person to irrevocably assign to a customer the right to receive a refund under the Sales and Use Tax (SUT) Law, provided specified conditions are met. Specifically, this bill authorizes a person (i.e., a retailer) to make an irrevocable election to assign to a customer the right to receive a SUT refund if all of the following conditions are met: 1)The amount represents excess tax reimbursement that must be paid by the person to the customer under existing law; 2)The irrevocable election to assign to the customer the amount refunded is evidenced by a statement signed by the person and the customer authorizing the named customer to receive the amount refunded; and, 3)The signed statement is submitted to the State Board of Equalization (BOE) in conjunction with the person's claim for refund. EXISTING LAW : 1)Imposes a 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)Imposes a 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 AB 1412 Page 2 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. 3)Provides that any amount collected or paid in excess of what is due under the SUT Law must be credited by the BOE against any other amounts due from the person from whom the excess amount was collected or by whom it was paid, and the balance refunded, as specified. 4)Provides that, when an amount represented to a customer as SUT reimbursement is computed upon an amount that is not taxable or is in excess of the taxable amount and is actually paid by the customer, the amount paid must be returned to the customer upon notification by the BOE or by the customer that this excess has been ascertained. FISCAL EFFECT : Unknown. COMMENTS : 1)An overview of current law : Revenue and Taxation Code Section 6901 currently requires the BOE to refund any overpayment of use tax directly to the purchaser, even though the retailer collected and remitted the tax. While this statute allows the BOE to refund excess use tax directly to a purchaser, the BOE may currently issue a refund for excess sales tax reimbursement only to the retailer that collected and reported the tax. 2)What would this bill do? : This bill authorizes a retailer to irrevocably assign to a customer the right to receive a refund of excess sales tax reimbursement, provided certain conditions are met. Specifically, the retailer and the customer would need to sign the irrevocable assignment and submit it to the BOE with the retailer's claim for refund. This, in turn, would allow the BOE to directly refund the customer who paid the excess tax. 3)Working with the BOE : At the January 15, 2013 BOE Legislative Committee Meeting, the BOE members unanimously voted to sponsor a proposal to authorize a direct refund of excess sales tax reimbursement in the amount of $300,000 or more to a single customer. The BOE's staff analysis notes that the absence of this threshold could result in certain AB 1412 Page 3 administrative complications. The author's office is engaged in ongoing conversations with BOE staff to resolve these issues. REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition None on file Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098