BILL ANALYSIS                                                                                                                                                                                                    



          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
          
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          |Version: June 15, 2016          |Policy Vote: GOV. & F. 5 - 0    |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 1, 2016    |Consultant: Robert Ingenito     |
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          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  
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          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  
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          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). 




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