BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 88 (Gomez) - Sales and use taxes: exemption: energy or water
efficient home appliances.
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|Version: July 15, 2015 |Policy Vote: GOV. & F. 6 - 1 |
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|Urgency: Yes |Mandate: No |
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|Hearing Date: August 17, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 88 would provide a sales and use (SUT) tax exemption
for a public utility's ENERGY STAR refrigerator or clothes
washer purchases that are provided at no cost to low-income
participants in an energy efficiency program, as defined.
Fiscal
Impact:
The Board of Equalization (BOE) estimates that this bill
would result in an annual state and local revenue loss of
$4.5 million, $2.1 million of which would be General Fund.
BOE would incur some absorbable administrative costs
AB 88 (Gomez) Page 1 of
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related to notifying affected retailers, developing and
publishing applicable guidelines, and answering inquiries
from the general public and affected retailers.
Background: Except where a specific exemption or exclusion is provided,
current law imposes the SUT on all retailers for the privilege
of selling tangible personal property (TPP) at retail in
California, or on the storage, use, or other consumption in this
state of TPP purchased from a retailer. Under current law, tax
does not apply to TPP sold to retailers or other sellers who
resell the property before they make a taxable use of the
property.
Current law imposes the SUT on energy efficient appliance
purchases to the same extent as it imposes the tax on any other
TPP sales not otherwise statutorily exempted or excluded from
tax. While current law statutorily exempts TPP sales to the
United States government, it contains no statutory exclusion or
exemption when the purchaser is a utility company or a local
government agency. Consequently, unless a utility company
purchases TPP, such as appliances, for purposes of reselling it
prior to making a taxable use of it, tax applies to the
property's sale to the utility company.
Proposed Law:
This bill would provide a SUT exemption for the sale of energy
or water efficient home appliances, as defined, purchased by a
public utility that is provided at no cost to a low income
participant (as defined) in an energy efficiency program. The
bill (1) specifies that any savings from the exemption must be
used by the public utility to purchase additional energy or
water efficient home appliances, and (2) would apply to federal,
state, or ratepayer-funded energy or water efficiency programs.
The bill would take effect immediately as a tax levy, but its
operative date would occur on the first day of the first
calendar quarter commencing more than 90 days after the
effective date of this act. It would remain in effect until
AB 88 (Gomez) Page 2 of
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January 1, 2021.
Staff
Comments: California Public Utilities Commission data indicate
that 2014 refrigerator and clothes washer expenditures for the
four large investor-owned utilities within the Low Income Energy
Savings Assistance Program amounted to $54 million. However,
this expenditures data include installation costs, which are
exempt from the SUT. Thus, BOE staff made a corresponding
downward adjustment, lowering the expenditure to $50 million. In
addition, staff added two large publicly-owned utilities'
expenditures for total estimated purchase costs of $4 million.
BOE staff then applied the current average statewide sales and
use tax rate (8.42 percent), and concluded that the total annual
state and local annual revenue loss would be $4.5 million.
To that extent that public utilities beyond the six considered
by BOE engage in appliance expenditures that may be exempted
under the bill's provisions, BOE's estimate of the bill's
revenue loss could be understated.
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