BILL ANALYSIS Ó AB 1412 Page 1 ASSEMBLY THIRD READING AB 1412 (Revenue and Taxation Committee) As Amended May 24, 2013 Majority vote REVENUE & TAXATION 8-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Bocanegra, Dahle, Gordon, |Ayes:|Gatto, Harkey, Bigelow, | | |Mullin, Nestande, Pan, V. | |Bocanegra, Bradford, Ian | | |Manuel Pérez, Ting | |Calderon, Campos, | | | | |Donnelly, Eggman, Gomez, | | | | |Hall, Ammiano, Linder, | | | | |Pan, Quirk, Wagner, Weber | | | | | | ----------------------------------------------------------------- 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 entire amount represents excess tax reimbursement that must be paid by the person to a single customer under existing law. 2)The refund amount is $50,000 or greater. 3)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. 4)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 AB 1412 Page 2 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 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 : According to the Assembly Appropriations Committee, minor and absorbable costs to the Board of Equalization. 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 AB 1412 Page 3 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 : To address potential administrative concerns raised by the BOE staff, this bill was amended in the Assembly Appropriations Committee to apply only to refund amounts of $50,000 or greater to a single customer. The BOE members voted unanimously to sponsor this proposal with the amendments taken. Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0000753