BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                                    AB 1561


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          GOVERNOR'S VETO


          AB  
          1561 (Cristina Garcia and Chang)


          As Enrolled  August 30, 2016


          2/3 vote


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          |ASSEMBLY:  |78-0  |(June 2, 2016) |SENATE: |38-0  |(August 18,      |
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          |ASSEMBLY:  |77-0  |(August 23,    |        |      |                 |
          |           |      |2016)          |        |      |                 |
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          Original Committee Reference:  REV. & TAX.


          SUMMARY:  Establishes a sales and use tax (SUT) exemption for  
          tampons, sanitary napkins, menstrual sponges, and menstrual  
          cups.












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          The Senate amendments:


          1)Provide that the exemption shall become operative on January  
            1, 2017.  


          2)Add coauthors. 


          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.  











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          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.


          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 labeled as  
               "feminine hygiene" products, it makes people forget that  
               the FDA [Food and Drug Administration] regulates both  
               products as medical devices.  There is no equivalent health  











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               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:


               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  











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               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  
               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.)  


          GOVERNOR'S VETO MESSAGE:


          ---------------------------
          <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.   










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               I am returning the following seven bills without my  
               signature:


               Assembly Bill 717


               Assembly Bill 724


               Assembly Bill 1561


               Assembly Bill 2127


               Assembly Bill 2728


               Senate Bill 898


               Senate Bill 907


               Each of these bills creates a new tax break or expands an  
               existing tax break.  In total, these bills would reduce  
               revenues by about $300 million through 2017-18.


               As I said last year, tax breaks are the same as new  
               spending - they both cost the General Fund money.  As such,  
               they must be considered during budget deliberations so that  
               all spending proposals are weighed against each other at  
               the same time.  This is even more important when the  
               state's budget remains precariously balanced.


               Therefore, I cannot sign these measures.











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          Analysis Prepared by:M. David Ruff / REV. & TAX. / (916)  
                          319-2098          FN: 0005055