BILL ANALYSIS Ó
AB 2365
Page 1
Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2365 (Gipson) - As Amended May 16, 2016
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill excludes from the Sales and Use Tax (SUT) Law a
pawnbroker's receipts from a transaction where customers buy
back their property after defaulting on a loan. This exclusion
is operative on taxable years starting on January 1, 2017, and
before January 1, 2022.
FISCAL EFFECT:
Annual state and local revenue loss of approximately $33,000.
AB 2365
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COMMENTS:
1)Purpose. According to the author, AB 2365 provides a fair
taxing structure for consumers who are trying to reacquire
their seized collateral from a pawn shop. The BOE, who is a
sponsor, argues that this bill resolves a confusing area of
the law and eliminates a barrier for some customers seeking to
regain ownership of their former property.
2)Pawnbrokers and sales tax. Every pawnbroker loan for which
goods are received as security must be evidenced by a written
contract, and the loan contract must set forth the loan period
and the date on which the loan will become due and payable.
Pawnbrokers are required by law to retain every article
pledged for the duration of the applicable loan period.
If any pledged article is not redeemed during the loan period
and the customer and pawnbroker do not mutually agree in
writing to extend the loan period, the pawnbroker must notify
the customer within one month after the loan period expires.
This notice works to extend the right of redemption for a
period of 10 days from the date of mailing or electronic
transmission of that notice.
If any pledged article is not redeemed within the 10-day
notice period, the pawnbroker becomes automatically vested
with title to the pledged article. The pawnbroker may then
sell or dispose of the property as he or she wishes.
Pawnbrokers are considered retailers under the SUT Law as they
are in the business of making retail sales of tangible
personal property (TPP). As such, tax applies to pawnbroker
sales to the same extent as sales by any other retailer of TPP
in this state. When a customer seeks to repurchase the
collateral, the transaction constitutes a retail sale.
AB 2365
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Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081