BILL ANALYSIS Ó
Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON AGRICULTURE
Bill Dodd, Chair
AB 2678
(Gray) - As Amended April 12, 2016
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Revenue and |9-0 |Ridley-Thomas, | |
|Taxation | |Brough, Dababneh, | |
| | |Gipson, Mullin, | |
| | |O'Donnell, Patterson, | |
| | |Quirk, Wagner | |
| | | | |
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SUBJECT: State-designated fairs: funding.
SUMMARY: Requires taxable sales and purchases within a "state
designated fair" to be segregated on the Sales and Use Tax (SUT)
return and also mandates that 30% of the state's General Fund
(3.9375%) SUT revenues derived from those segregated sales and
purchases, be deposited into the Fair and Exposition Fund
(Fund); and, repeals these provisions January 1, 2022.
Specifically, this bill:
1)Provides that, for purposes of the SUT Law, the return shall
segregate the seller's gross receipts and the property's sales
price when the place of sale or use in this state is within a
"state designated fair" or any real property of a "state
designated fair" leased to another party.
2)Defines a "state designated fair" to include California
Exposition and State Fair (Cal Expo), District Agricultural
Associations, County Fairs, and Citrus Fairs, known as the
California Fairs Network (CFN).
3)Provides that notwithstanding any provision of the
Bradley-Burns Uniform Local SUT Law or the Transactions and
Use Tax Law, this bill shall not apply to any tax levied by a
county, city, or district pursuant to either of those laws.
4)Provides that, except as otherwise specified, 30% of all SUT
revenues, less refunds and costs of administration, that were
segregated shall be transferred to the Fund in the State
Treasury. Specifically, the moneys shall be deposited into
the separate account in the Fund.
5)Provides that any amounts deposited into the separate account
shall be continuously appropriated and allocated as specified,
except that any amounts transferred to the Fund in excess of
$11 million shall be allocated for capital outlay projects
dealing with public health and safety, major and deferred
maintenance, and other related fair projects.
6)Provides a sunset on these provisions of January, 1, 2022.
EXISTING LAW:
1)Establishes the Fund. The Fund is charged with, among other
things, allocating money to support CFN.
2)Requires certain license fees from satellite wagering to be
deposited into a separate account in the Fund. These moneys
are continuously appropriated for specified fair-related
purposes, including the payment of expenses incurred in
establishing and operating satellite wagering facilities at
fairs.
3)Defines a state designated fair as the California Exposition
and State Fair in the City of Sacramento and those fairs
designated as district agricultural associations, county
fairs, and citrus fruit fairs, that may receive financial
support or are otherwise governed by horse racing statutes.
4)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.
5)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 BOE.
FISCAL EFFECT: According to the Assembly Revenue and Taxation
Committee analysis, BOE estimates that this bill would result in
annual General Fund SUT losses of $20 million.
COMMENTS: According to the author, AB 2678 will provide a
stable and reliable source of funding for California's fairs and
offer much needed help for specific fair-related purposes and
projects on fairgrounds. Over the past 75 years, there has been
a designated funding source for fairs from which the state has
made significant investments in promoting the business
operations and improving the infrastructure of California's
fairs. Without state funding, these properties will continue to
deteriorate and in their demise create public safety issues.
The reality is that, through sales tax, the California Fairs
Network is currently a huge revenue generator for the state of
California. Without funding to maintain the infrastructure,
what were once valuable state assets may become state
liabilities.
Western Fairs Association and the California Fairs Alliance
recognize that CFN is the only form of local government that
does not receive a portion of the sales taxes generated on their
property. More than 12 million Californians attend their
hometown fair each year, creating jobs, tax income, and building
community pride and harmony throughout the state. Additionally,
another 20 million Californians attend non-fair events at
fairgrounds each year, most with a non-profit or charitable
element. As it currently stands, none of the resulting
locally-generated dollars come back to assist fairgrounds with
infrastructure or operating needs.
According to BOE analysis, interim events are held on state
designated fairgrounds: "In addition to the various annual
fairs, other events held on the designated fairgrounds include
motorized racing, craft fairs, doll shows, gun shows, home and
garden shows, harvest festivals, farmers' markets, cultural
festivals and concerts, motor home, RV, and boat shows, and
more. Events may also include corporate events, private dinner
parties, and wedding receptions.
According to the author's office, "this bill's segregated
reporting requirements are intended to apply to all events and
activities that are held on the state designated fairgrounds.
Taxpayers making sales at events held on state designated
fairgrounds would need to segregate these sales when filing
their sales and use tax returns. Taxpayers who hold a seller's
permit for a permanent place of business and who make sales both
at events at state designated fairs and events held at other
locations, would need to segregate those sales made at state
designated fairs. BOE staff would need to know what events and
activities occur at state designated fairs to instruct taxpayers
to properly report their sales and purchases at these
locations."
BOE also identified that Cal Expo hosts private venues: "While
Cal Expo hosts the annual California State Fair, it is also home
to Bonney Field, a large sports and entertainment venue that
includes food and beverage concessions and merchandise sales.
Additionally, Raging Waters is a water park located within Cal
Expo's grounds with dining and snack areas. However, it is not
clear whether sales transactions made at Bonney Field or Raging
Waters would be subject to the proposed segregation reporting
requirements. Would these restaurants and snack areas be
required to segregate their food and beverage sales?
BOE staff can work with the author's office to better identify
the events and activities that would be subject to the
segregated reporting requirements in this bill."
Prior to 2009, license fees imposed on horse racing wagers were
deposited into the Fund which, in addition to supporting the
annual budget of the California Horse Racing Board, also
supplemented the income of CFN. SB 16 X2 (Ashburn), Chapter 12,
Statutes of 2009, in turn, shifted the horse racing industry's
obligation to fund fairs through license fees imposed on wagers
to the General Fund (GF). Specifically, SB 16 X2 provided an
annual continuous appropriation of $32 million from the GF to
support CFN. This change was done as part of a package of
measures designed to provide economic stimulus for the horse
racing industry.
In fiscal year 2011-12, fair funding at the state level was
eliminated as part of a package of budget cuts designed to
address the state's ongoing financial crisis. However, the
2016-17 budget currently contains a $3 million appropriation to
support CFN and a $4 million allocation for infrastructure needs
at fairgrounds.
This bill requires taxable sales and purchases within a state
designated fair to be segregated on the SUT return and also
mandates that 30% of the state's GF portion (3.9375%) SUT
revenues (or 1.1813%) derived from these segregated sales and
purchases are deposited in the Fund. Amounts deposited shall be
continuously appropriated and allocated as provided in statute.
Statute specifies the allocation of moneys for the following
purposes:
i) Servicing bonds issued for constructing or acquiring
improvements at a fair's racetrack enclosure, satellite
wagering facilities, health and safety repair projects,
or handicapped access compliance projects at fairs;
ii) For payment to the State Race Track Leasing
Commission to be pledged for the repayment of debt
necessary to construct a racetrack grandstand at the 22nd
District Agricultural Association fairgrounds;
iii) For the payment of expenses incurred in establishing
and operating satellite wagering facilities at fairs;
iv) For the support of an equipment and operating fund
to produce and display a consolidated California signal
at satellite wagering facilities and fairs;
v) For health and safety repair projects at fairs,
including fire and life safety improvement projects,
California Code of Regulations compliance projects, and
long-term deferred maintenance projects; and,
vi) For the development and payment of revenue
generating projects, the establishment of pilot projects
to restructure the current fair system, and for projects
realizing a cost savings for more efficient utilization
of existing fair resources.
Proponents of this bill might argue that earmarking specified
SUT revenues would provide a stable and much-needed source of
funding for CFN. Opponents, however, might contend that the
practice of earmarking restricts the Legislature's ability to
fund vital state programs in a holistic manner through the
annual budgetary process. Specifically, opponents might argue
that this bill elevates specific fair funding needs above other
vital programs designed to address basic human necessities, such
as health and social services. In addition, this bill would
potentially establish a precedent for future dedicated funding
legislation.
Legislative history : AB 700 (Krekorian), of the 2009-10 Regular
Session, would have required 20% of the state's GF SUT revenues,
remitted by specified taxpayers, be deposited into a newly
established Creative Industries and Community Economic
Revitalization Fund for specified purposes. AB 700 died in the
Assembly Appropriations Committee.
AB 1365 (Karnette), of the 2007-08 Regular Session, would have
required all SUT revenues derived from the sale of art be
allocated to the California Arts Council. AB 1365 was held in
the Assembly Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
Alameda County Fair
Antelope Valley Fair Association
Butte County Fair
Calaveras County Fair
California Fair Network
California Fairs Alliance
California Mid-State Fair, 16th District Agricultural
Association
California Mid-Winter Fair and Fiesta. 45 District Agricultural
Association
California State Association of Counties
Contra Costa County Fair
Del Norte County Fair
Dixon May Fair
Earl Warren Showgrounds, 19th District Agricultural District
El Dorado County Fair
Gold Country Fair
Kings Fair
Lake County Fair, 49th District Agricultural Association
Lassen County Fair
Lodi Grape Festival
Mariposa 35-A District Fairgrounds
Mendocino County Fair and Apple Show
Monterey County Fair, 7th District Agricultural Association
Mother Load Fairgrounds
Napa County Fair Association, Inc.
Napa Valley Expo, 25th District Agricultural Association
National Wine Show Association, Inc.
Nevada County Fairgrounds
Placer County Fair Association
Redwood Empire Fair
Rural County Representatives of California
Salinas Valley Fair
San Mateo County Event Center
Santa Barbara County Fair
Santa Cruz County Fair, 14th District Agricultural Association
San Benito County Fair, 33rd District Agricultural Association
Schools' Agriculture and Nutrition Fair, 48th District
Agricultural Association
Shasta District Fair, 27th District Agricultural Association
Silver Dollar Fair
Siskiyou Golden Fairground
Solano County Fair Association
Sonoma County Fair and Event Center
Sonoma-Marin Fair
Tulelake-Butte Valley Fair
Ventura County Fair
Western Fairs Association
26th District Agricultural Association
Yolo County Fair, 40th District Agricultural Association
Yuba-Sutter Fair
Honorable Fiona Ma, Chair, State Board of Equalization
AB 2678
Page 11
Opposition
None on file
Analysis Prepared by:Jim Collin / AGRI. / (916) 319-2084