BILL ANALYSIS Ó AB 1561 Page A CONCURRENCE IN SENATE AMENDMENTS AB 1561 (Cristina Garcia and Chang) As Amended August 15, 2016 Majority vote. Tax levy -------------------------------------------------------------------- |ASSEMBLY: |78-0 |(June 2, 2016) |SENATE: |38-0 |(August 18, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: REV. & TAX. SUMMARY: Establishes a sales and use tax (SUT) exemption for tampons, sanitary napkins, menstrual sponges, and menstrual cups. The Senate Amendments: 1)Provide that the exemption shall become operative on January 1, 2017. 2)Add coauthors. AB 1561 Page B EXISTING LAW: 1)Imposes a sales tax on retailers for the privilege of selling tangible personal property (TPP), absent a specific exemption. The tax is based upon the retailer's gross receipts from TPP sales in this state. 2)Imposes a complimentary use tax on the storage, use, or other consumption of TPP purchased out-of-state and brought into California. The use tax is imposed on the purchaser; and unless the purchaser pays the use tax to an out-of-state retailer registered to collect California's use tax, the purchaser remains liable for the tax. The use tax is set at the same rate as the state's sales tax and must generally be remitted to the State Board of Equalization (BOE). AS PASSED BY THE ASSEMBLY, this bill: 1)Provided that, notwithstanding existing law, the state shall not reimburse any local agency for SUT revenues lost as a result of this exemption. 2)Took immediate effect as a tax levy, but only became operative on the first day of the first calendar quarter commencing more than 90 days after this bill's effective date. 3)Sunset after five years. FISCAL EFFECT: According to the Senate Appropriations Committee, the 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. AB 1561 Page C COMMENTS: 1)The author has provided the following statement in support of this bill: AB 1561 is a bipartisan effort to make menstrual products exempt from the sales and use tax at both the state and local level. California women pay over 20 million dollars annually for taxing tampons and sanitary napkins, which are essential health items for women. As a state we should not be taxing women for being born women. The tax is especially unjust for women who are low-income or homeless who struggle to pay for these basic necessities each month for the majority of their adult life. Menstrual products need to be more accessible and eliminating the tax on tampons and sanitary napkins is an important first step in making them more affordable. California's tax code exempts health items like walkers, medical identification tags, and prescription medication, including Viagra. Tampons and sanitary napkins are not exempt even though women do not have the choice to ignore their periods and are far from being luxuries items. When these items are labelled as "feminine hygiene" products, it makes people forget that the FDA regulates both products as medical devices. There is no equivalent health product that is used only by one gender on a monthly basis for 40 years of life. Across the world, countries as well as select states in the [United States] are organizing to repeal the sales tax on feminine hygiene products. California should continue to be a leader by addressing the gender inequality in our tax code and exempt menstrual products. 2)The BOE notes the following in its staff analysis of this bill: AB 1561 Page D Certain care providers and hospitals would additionally benefit from the proposed exemption: "Since sales of these products to these service enterprises are currently subject to tax, this bill would provide an additional benefit to these entities that purchase these products for their clients or patients." 3)Assembly Revenue and Taxation Committee Comments: a) An inherently regressive tax: The SUT has been widely criticized as a regressive exaction that most heavily impacts those least able to pay. For example, a survey by the Nevada Legislative Counsel Bureau long ago concluded that in the case of a retail sales tax with food exempt, "the lowest income group would experience the highest ratio of tax to income..." (Survey of Sales Taxes Applicable to Nevada 59 (Bull. No. 3, May, 1948).) Others, however, contend that a degree of progressivity is provided via the various exemptions built into most state SUT laws (i.e., for certain necessities of life such as food, housing, and medical care). Proponents of this bill might argue that an exemption for sanitary napkins and tampons would further promote a degree of progressivity in an already regressive tax regime. Proponents might also note that, to reduce the regressive nature of the SUT tax, exemptions have been enacted for numerous necessities of life, including food and prescription medications. Critics, however, might contend that SUT exemptions are a blunt instrument for affecting social policy. While this bill would provide financial relief to low-income women struggling to make ends meet, it would also provide relief indiscriminately to wealthy AB 1561 Page E consumers who might not even notice the exemption.<1> b) Taking a different tact: A recent editorial in the New York Times noted that even without being taxed, tampons and pads are unaffordable for some individuals. As a result, the editorial noted that policymakers around the country are offering different proposals for ensuring that women have access to these products. Specifically, New York City Councilmember Julissa Ferreras-Copeland is working on legislation to require all public schools in the city to provide free tampons and pads in restrooms. Moreover, in Congress, Representative Grace Meng of New York introduced legislation allowing individuals to pay for feminine hygiene products with their health care spending accounts. ("End the Tampon Tax." Editorial. New York Times 8 Feb. 2016, page A24.) Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0004312 --------------------------- --------------------------- <1> The author's office notes that women in California pay roughly $7 per month on sanitary napkins and tampons. Applying the statewide average SUT rate of 8.335%, purchasers are paying roughly $0.58 per month in SUT on these products. AB 1561 Page F