BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 688 HEARING: 5/8/13
AUTHOR: Galgiani FISCAL: Yes
VERSION: 4/1/13 TAX LEVY: Yes
CONSULTANT: Miller
SALES AND USE TAXES: EXEMPTIONS: ANIMALS: DRUG AND
MEDICINES.
Exempts certain animal related drugs from the sales and use
tax.
Background and Existing Law
Sales Tax
The state sales and use tax rate is 7.50% as detailed below
and is general imposed on all tangible personal property
unless specifically exempt. Cities and Counties may
increase the sales and use tax rate up to 2% for either
specific or general purposes with a vote of the people.
-------------------------------------------------------------
| | | |
| Rate | Jurisdiction | Purpose/Authority |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|3.9375%|State (General |State general purposes |
| |Fund) | |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|1.0625%|Local Revenue Fund |Realignment of local public |
| |2011 |safety services |
| | | |
| | | |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Fiscal |Repayment of the Economic |
SB 688 -- 4/1/13 -- Page 2
| |Recovery Fund) |Recovery Bonds |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Education |Schools and community college |
| |Protection Account) |funding |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local |Local governments to fund |
| |Revenue Fund) |health and welfare programs |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local Public |Local governments to fund |
| |Safety Fund) |public safety services |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 1.00% |Local (City/County) |City and county general |
| | |operations. Dedicated to county |
| | |transportation purposes |
| |0.75% City and | |
| |County | |
| | | |
| |0.25% County | |
|-------+--------------------+--------------------------------|
| | | |
| 7.50% |Total Statewide | |
| |Rate | |
| | | |
-------------------------------------------------------------
Many items are fully exempted from the sales and use tax in
this state (prescription drugs, food, poultry litter) but
only a handful are partially exempted from the sales tax at
the rate of 5.5%; specifically: Farm equipment and
machinery; Diesel fuel used for farming and food
processing; Teleproduction and postproduction equipment;
Timber harvesting equipment and machinery; and Racehorse
breeding stock.
Sales and use taxes: animals:
Veterinarians are generally treated as "consumers" under
the sales and use tax laws and are required to pay the tax;
SB 688 -- 4/1/13 -- Page 3
however, a licensed veterinarian's drug and medicine
purchases are exempt from the sales and use tax when he or
she administers them directly to the animals or as an
additive to feed or drinking water to prevent or control
disease.
Animal shelters and animal rescue organizations are
generally obligated to pay sales taxes on their drug and
medicine sales, unless those sales are made in connection
with a pet adoption.
Proposed Law
Senate Bill 688 exempts drugs and medicines used, furnished
or sold for the treatment of animals by any of the
following persons:
1. A licensed veterinarian,
2. A city, city and county, county, or other local
government animal shelter, or
3. A nonprofit animal welfare or rescue organization.
SB 688 defines different terms including "animal," "drugs
and medicines," "licensed veterinarian," and "nonprofit
animal welfare or rescue organization."
State Revenue Impact
According to the BOE, SB 688 results in a $10.2 million
annual revenue loss for both the state and local
governments; This loss represents a statewide loss of $5.2
million and a local government loss of at least $5 million
depending on the additional transactions and use tax in
that jurisdiction..
Comments
1. Purpose of the bill . The BOE and the California
Veterinary Medical Association are the co-sponsors of this
measure and provide the following statement: "This bill
enables California veterinarians to reduce medical costs
and improve pet health. The BOE believes that medication
provided by a licensed veterinarian offers more quality
assurance than medication obtained elsewhere. Other outlets
SB 688 -- 4/1/13 -- Page 4
often are not well regulated and may not remit California
sales tax. Exempting drugs and medicines sold by licensed
veterinarians, local animal shelters, and animal welfare
and rescue organizations will reduce the cost of purchasing
medication under a veterinarian's supervision, and will
discourage consumers from going to other outlets to
purchase medicine for their pets." The sponsors have
further found that in addition to the unregulated, cheaper
medicines, pet owners are often not treating their animals
due to the rising costs of veterinary medicine and the low
take up rate of insurance (7% of pet owners have
insurance).
2. Yes, but . Generally, tax exemptions are meant to
change behavior or encourage economic activity in a state.
This exemption, while for a worthy cause, would do neither.
Instead, the bill simply reduces the costs of these
products to veterinarians and pet owners.
Support and Opposition (5/2/13)
Support : Board of Equalization (BOE) and California
Veterinary Medical Association (sponsors); American Society
of the Prevention of Cruelty to Animals (ASPCA); California
Animal Medical Center; Equine Solutions; Myrtle Avenue
Veterinary Hospital; State Humane Association of
California; PawPAC.
Opposition : California Teacher's Association
(CTA).