BILL ANALYSIS Ó
RECONSIDERATION - FOR VOTE ONLY
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1367 HEARING: 5/14/2014
AUTHOR: Anderson FISCAL: Yes
VERSION: 2/21/2014 TAX LEVY: Yes
CONSULTANT: Bouaziz
SALES AND USE TAX EXEMPTION: PUBLIC SAFETY FIRST RESPONDER
VEHICLES AND EQUIPMENT
Provides a sales and use tax exemption for the sale of
public safety first responder vehicles, and any required
equipment on those vehicles, purchased by a local public
agency.
Background and Existing Law
State law imposes a sales and use tax on the sale, storage,
or use of tangible personal property unless exempted by
state law.
The current state sales and use tax rate on tangible
personal property is 7.5% and is imposed as follows:
3.9375% state sales tax allocated to the General
Fund.
1.0625% state sales tax allocated to realignment of
local public safety services.
0.25% state sales tax allocated to repayment of
Economic Recovery Bonds.
0.25% state sales tax allocated to school and
community college funding.
0.50% state sales tax allocated to local
governments for health and welfare programs.
0.50% state sales tax allocated to local
governments for public safety services.
1.00% Bradley-Burns Uniform Local Sales and Use Tax
(allocated to cities and counties).
Proposed Law
Senate Bill 1367 exempts public safety first responder
SB 1367 -- 02/21/14 -- Page 2
vehicles, and any required equipment on those vehicles,
purchased by a local public agency from sales and use
taxes.
The bill defines "local public agency" as a city, county,
municipal corporation, district, or public authority
located within this state which provides or may provide
first responder emergency services.
This measure does not reimburse local governments for the
sales tax loss. As a tax levy, SB 1367 takes effect
immediately, but shall not become operative until the first
day of the calendar quarter commencing more than 90 days
after the effective date of this act.
State Revenue Impact
The Board of Equalization (BOE) estimates that this bill
would result in an annual sales and use tax loss of $17.9
million. This estimate only takes into account purchases
made for fire, ambulance, and police vehicles.
Comments
1. Purpose of the bill . According to the author, "This
bill would exempt government public safety first responders
from paying state and local sales tax on emergency vehicles
and related emergency equipment. Our communities are
constantly lacking the adequate public safety services
families expect, such as police and fire services. This
bill will ensure that our tax money is spent on providing
the best public safety services possible to keep our
communities safe."
2. Precedent . This bill sets a potentially dangerous
precedent for extending a sales and use tax exemption to
local government entities. This precedent is of concern
for two reasons:
additional exemptions will result in a greater
overall reduction in sales tax revenues; and
exempting local government entities from sales and
use taxes has the potential to reallocate significant
amounts of local sales tax revenue among the state's
SB 1367 -- 02/21/14 -- Page 3
taxing jurisdictions. (See Comment #3)
3. Effect of Exemption . SB 1367's exemption cuts costs
for one branch of government, but reduces revenues for
others. Since the sales tax is levied by the State,
cities, and counties, any exemption from the tax means a
loss in revenues to those entities. For example, if Fire
District Z purchases a $100,000 fire engine in neighboring
City A, they will save $7,500 in sales and use tax. City
A, where the fire engine was sold, will lose approximately
$2,063. The county City A is in will lose $1,000, and the
State General Fund will lose $4,438. In effect, the State,
city, and county governments would help subsidize the
purchase of a first responder vehicle.
4. Lack of Definition . SB 1367 does not define "public
safety first responder." Without a definition a first
responder could be almost anyone. For example, if a
mountain lion is roaming city streets and animal control is
called, animal control would be a public safety first
responder, and therefore able to claim the sales and use
tax exemption for the purchase of a new animal control
vehicle. The author may wish to clearly define who is and
who is not a "public safety first responder."
Support and Opposition (05/01/14)
Support : Alpine Fire Protection District;
Altaville-Melones Fire Protection District; American Canyon
Fire Protection District; Burbank Fire Department;
California Ambulance Association; California Police Chief's
Association; California State Sheriff's Association; City
of Chula Vista Fire Department; Cordelia Fire Protection
District; Corte Madera Fire Department; Fallen Leaf Fire
Department; Fort Dick Fire Protection District; Fortuna
Fire Protection District; Georgetown Fire Protection
District; Heartland Fire & Rescue; Humboldt Bay Fire Joint
Powers Authority; Inverness Public Utilities District;
Kentfield Fire Protection District; Los Angeles County Fire
Department; Mill Valley Fire Department; National City Fire
Department; Naval Base Ventura County Fire Department;
North County Fire Protection District; Peace Officers
Research Association of California; Rancho Santa Fe Fire
Protection District; Samoa Peninsula Fire District; San
Diego County Fire Districts Association; San Diego
SB 1367 -- 02/21/14 -- Page 4
Fire-Rescue Department; San Miguel Consolidated Fire
Protection District; Santa Barbara County Fire Department;
Santa Maria Fire Department; Scotia Volunteer Fire
Department; Tulare County Fire Department; Turlock Fire
Department; Ventura County Fire Protection District;
Zayante Fire Protection District; 1 individual letter.
Opposition : None received.