BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1183 HEARING: 4/9/14
AUTHOR: DeSaulnier FISCAL: Yes
VERSION: 2/20/14 TAX LEVY: No
CONSULTANT: Grinnell
BICYCLE TAX
Allows cities, counties, and regional park districts to
impose a tax on bicycles.
Background and Existing Law
In 1933, California enacted its sales tax, followed by the
use tax two years later. Charter cities began applying
their own sales taxes soon after, commencing with the City
of San Bernardino in 1945. The Legislature also first
authorized general law cities to levy their own sales and
use taxes in 1949. While BOE administered the state tax,
each city imposed, collected, and audited its own sales and
use tax, which could be set at any rate the city chose, and
could apply to different products than the state or other
city sales taxes.
In 1955, the Legislature enacted the Bradley Burns Local
Sales and Use Tax Law to provide uniformity for local sales
and use taxes. The uniform act allowed local agencies to
levy its own tax of one percent, and centralized
administration, collection, and audit with the Board of
Equalization (BOE), replacing the previous system where
each city implemented its own tax on whatever products it
chose. The Act required local agencies to be perfectly
uniform with each other and the state, charge the same
rate, and adopt the state's base for the sales tax, which
is "tangible personal property." Subsequently, the
Legislature allowed cities, counties, and special districts
to impose their own transactions and use tax within its
jurisdiction subject to voter approval, known as "local
add-ons" or "district taxes," so long as they relied on the
same base and procedures as the sales and use tax.
The California Constitution requires 2/3 voter approval
when a local agency wants to impose or increase a special
SB 1183 - 2/20/14 -- Page 2
tax (Proposition 13, 1978). However, the Legislature must
authorize school or special districts to impose taxes
because these agencies have no plenary taxing powers.
Responding to Proposition 13's reduction in local revenue,
the Legislature generally authorized all local agencies to
impose special taxes with 2/3 voter approval (SB 785,
Foran, 1979), but voters subsequently approved an
initiative requiring the Legislature to grant specific
taxing power to local agencies to impose taxes (Proposition
62, 1986). The Legislature allows park districts to form
Mello-Roos district to levy special taxes, and impose
qualified special taxes, commonly known as parcel taxes.
Proposed Law
Senate Bill 1183 allows a city, county or regional park
district to impose a special tax at the point of sale on
bicycles, except for those with a wheel diameter of less
than 20 inches. The local agency can impose whatever rate
of tax it chooses, so long as the rate is specified in the
ordinance placing the tax on the ballot for voter approval.
BOE must collect and remit the tax to the local agency
imposing the tax similar to sales and use taxes. The local
agency may use the net proceeds of the tax to:
Improve paved and natural surface trails, including
rehabilitating, restoring, and expanding existing
trails,
Develop new trails, and
Maintain local and regional trail systems and
networks.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "In a
2002, National Highway Transportation Safety Administration
survey, seven in ten people said that they would like to
bike more than they do now. However, less than half of
those surveyed were satisfied by how their communities were
designed for bicycling. The survey also indicated that the
most popular changes for bicyclists were additional bike
SB 1183 - 2/20/14 -- Page 3
lanes, paths, and trails, followed by improvements to
existing facilities. These preferences align with large
health and safety benefits associated with use of bicycle
facilities, recognized in California's Active
Transportation Program, and the state's Sustainable
Communities Act, SB 375. Despite its clear benefits and
alignment with state goals, bike trail facilities suffer
from a lack of stable funding. Unlike roadway
infrastructure, which is supported by a variety of fuel and
motor vehicle taxes, bike trail infrastructure lacks
funding support from users. Existing law does not allow
communities to a levy a tax specific to the point of sale
of a bicycle, other than sales and use taxes generally
applicable to tangible personal property. SB 1183 allows
cities, counties, or regional park districts to impose a
point of sale tax on new bicycles, subject to voter
approval, for the purpose of maintaining, improving, and
constructing paved and natural surface trails. SB 1183
gives communities a new choice and mechanism for supporting
local bicycle infrastructure. Investing in bicycle
infrastructure and promoting cycling can draw new money to
a local economy by attracting, residents, visitors, and
businesses."
2. A steep climb ? SB 1183 allows local agencies to impose
a tax on bicycles to fund bike trail creation, expansion,
and improvement. However, the bill presents potential
administrative headaches for BOE, as well as buyers and
sellers of bicycles. First, BOE would need to inform
affected taxpayers of the new tax, create new tax returns,
receive and remit revenue, and adjudicate appeals, a
complicated process that the measure doesn't fund with an
appropriation. BOE does administer sales and use taxes for
cities, counties, and some transportation districts, which
BOE funds by retaining a percentage of revenue to pay its
costs, but the total proceeds of SB 1183's tax may not
cover BOE's administrative costs. BOE also would have to
collect information about a park district's boundaries to
identify retailers and bring them into compliance with the
collection and remitting process, as BOE isn't currently
aware of regional park districts because they don't impose
sales and use taxes. Second, bicycle sellers would have to
adjust their software systems to account for potential
differences in tax rates imposed on bicycles in
jurisdictions imposing the tax, and those that operate in a
jurisdiction imposing the tax may be placed at a
SB 1183 - 2/20/14 -- Page 4
competitive disadvantage to those who don't because of
different final prices and compliance burdens. Lastly,
bicycle purchasers who buy a bike and pay the added tax may
not reside within the boundaries of the jurisdiction
imposing it, or use the public bicycle trails the tax
funds. The Committee may wish to consider whether SB 1183
represents wise tax policy.
3. A ticket to pleasure ride ? The Legislature has allowed
countywide special districts to impose their own
transactions and use taxes on transfers of tangible
personal property within the county, generally for
transportation. SB 1183 would set a precedent by allowing
regional park districts, regional park, or open-space
district to impose a point-of-sale tax. However, state law
does authorize a county or regional park districts to
impose a "pleasure riding tax," not above $10 per horse,
mule, or other animal used substantially for pleasure
riding or trail use to fund trail maintenance, acquisition,
and construction. The taxing agency may make payment of
the tax a condition of using its trails. As an
alternative, the Committee could amend SB 1183 to conform
the current pleasure riding tax to include bicycles.
4. Amendments needed . SB 1183 should be amended to
account for the following issues:
The measure doesn't similarly enact a use tax
requirement, so a taxpayer buying a bicycle in a
jurisdiction that doesn't impose the tax, on-line, or
in another state or country won't pay the tax, but can
use the bike in his or her home jurisdiction without
paying the tax.
The bill doesn't further qualify who must collect
and remit the tax beyond "at the point of sale." Does
this include wholesale transactions, sales for resale,
or an occasional bike sale to a friend or family
member?
SB 1183 doesn't allow for a credit against another
agency's tax if overlapping jurisdictions impose the
same tax, similar to the credit against the county
sales tax for taxes paid on purchases made in cities.
Providing that the bike tax isn't part of the sales
and use tax base.
Cities and counties, a term that refers solely to
the City and County of San Francisco, aren't included
on the list of entities that can impose the tax.
SB 1183 - 2/20/14 -- Page 5
Support and Opposition (04/03/14)
Support : California Park and Recreation Society; East Bay
Regional Park District.
Opposition : California Retailers' Association, California
Taxpayers' Association, Howard Jarvis Taxpayers'
Association.