BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1561 (Cristina Garcia) - Sales and use taxes: exemption: sanitary napkins: tampons: menstrual sponges and menstrual cups ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 15, 2016 |Policy Vote: GOV. & F. 5 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 1561 would provide a temporary sales and use tax (SUT) exemption for specified feminine hygiene products. Fiscal Impact: The Board of Equalization (BOE) indicates that this bill would result in a 2016-17 state and local revenue loss of $20 million, $10 million of which would be General Fund. The agency would incur absorbable implementation costs. Background: Except where a specific exemption or exclusion is provided, AB 1561 (Cristina Garcia) Page 1 of ? 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. After the State collects SUT revenue ($48 billion in 2013-14), it allocates the money to various state and local funds. Roughly half-collected from an approximately 3.9 percent rate-goes to the General Fund and can be spent on any state program, such as education, health care, and criminal justice. Another 1.25 percent, known as the Bradley-Burns rate, goes to cities and counties for general purposes. Three sales tax funds have uniform state rates and support specified programs-an approximately 1.1 percent rate for 2011 realignment (county-administered criminal justice, mental health, and social service programs); a 0.5 percent rate for 1991 realignment (county-administered health and social services programs); and a 0.5 percent rate for city and county public safety programs pursuant to Proposition 172 (1993). Additionally, some local governments levy optional local rates-known as Transactions and Use Taxes (TUTs)-and a small portion of these funds are used for general purposes. As of January 1, 2017, the average statewide SUT rate will be 8.21 percent. State law fully exempts many items from SUT (such as prescription drugs, food, electricity, and poultry litter), while other items are exempted from the state sales tax, but not the local share, such as 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. Partial SUT exemptions are difficult for both retailers and the BOE, and complicate return preparation and processing. Moreover, errors attributable to these partial exemptions occur frequently, resulting in additional return processing workload for BOE. Proposed Law: This bill would establish a temporary SUT exemption for tampons, sanitary napkins, menstrual sponges, and menstrual cups. As a tax levy, the bill would take effect immediately, and remain in effect until January 1, 2022. AB 1561 (Cristina Garcia) Page 2 of ? Staff Comments: The BOE revenue estimate assumes that national sales of affected feminine hygiene products total $2 billion annually; BOE assumes annual California sales of $240 million (12 percent of the national total). -- END --