BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2681| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2681 Author: Dababneh (D) Amended: As introduced Vote: 27 SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/25/14 AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 75-0, 5/28/14 - See last page for vote SUBJECT : Sales and use tax: retail sale: storage use: counterfeit mark SOURCE : Board of Equalization DIGEST : This bill provides that a retail sale or sale at retail also includes any sale by a convicted seller of tangible personal property with a counterfeit mark regardless of whether the sale is for resale in the regular course of business. ANALYSIS : Existing law imposes the sales tax on every retailer engaged in business in this state that sells tangible personal property, and requires them to collect the appropriate tax from the purchase and remit the amount to the Board of Equalization (BOE). Sales tax applies whenever a retail sale is made, which is basically any sale other than one for resale in the regular course of business. Unless the person pays the sales tax to the retailer, he or she is liable for the use tax, CONTINUED AB 2681 Page 2 which is imposed on any person consuming tangible personal property in the state. The use tax rate is the same rate as the sales tax rate, and must be remitted on or before the last day of the month following the quarterly period in which the person made the purchase. The Legislature added the use tax in 1935 in response to complaints from in-state retailers that California residents would evade the sales tax it enacted in 1933 by purchasing property out-of-state, but use it here. Federal and state law make it a criminal act to willfully manufacture, intentionally sell, or knowingly possess for sale any counterfeit of a mark registered with the Secretary of State or the Principal Register of the United States Patent and Trademark Office. Federal law also makes it a criminal act to traffic in: Goods and services knowingly using a counterfeit mark in connection with the goods and services, Specified products knowing that a counterfeit mark has been applied to it, the use of which is likely to cause confusion, a mistake, or deceive someone, Counterfeit military goods or service, knowing that the use, malfunction, or failure of which is likely to cause serious bodily injury or death, disclosure of classified information, impairment of or significant harm to combat operations, or to national security or a member of the armed forces, Counterfeit drugs. Existing law applies the sales tax to illegal sales, but does not apply to sales for resale. This bill: 1.Provides that a "retail sale" or "sale at retail" includes any sale of tangible personal property with a counterfeit mark by an individual convicted of selling counterfeit merchandise under state or federal law, regardless of whether it's for resale. BOE must mail a determination for any unreported tax to a convicted seller or purchaser within one year from the date of the last month of conviction. Any fine or restitution amount must first be satisfied before BOE can collect the tax. CONTINUED AB 2681 Page 3 This bill disconnects unfair trade protection provisions in the Business and Professions Code to any person other than the seller once the tax is imposed. 2.Defines a "convicted seller" as a person convicted of a violation under Penal Code Section 350 or 653(w) or United States Code, Title 18, Section 2320. The conviction must have occurred on or after the date of sale. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/4/14) Board of Equalization (source) California Retailers Association ARGUMENTS IN SUPPORT : According to the author, "Counterfeit goods unfairly compete with legitimate brands, while tarnishing the brand's reputation, and causing a revenue loss to the state. Moreover some counterfeit products potentially cause sickness or injury, such as counterfeit drugs or auto parts. The removal of the sale for resale exclusion under AB 2681 is appropriate, considering these sales are illegal and can do significant harm to the public. It also demonstrated California's intolerance towards criminal activity." ASSEMBLY FLOOR : 75-0, 5/28/14 AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins NO VOTE RECORDED: Frazier, Gordon, Rendon, Ting, Vacancy AB:nl 8/5/14 Senate Floor Analyses CONTINUED AB 2681 Page 4 SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED