BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 120 |Hearing |4/29/15 |
| | |Date: | |
|----------+---------------------------------+-----------+---------|
|Author: |Anderson |Tax Levy: |Yes |
|----------+---------------------------------+-----------+---------|
|Version: |3/26/15 |Fiscal: |Yes |
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|Consultant|Bouaziz |
|: | |
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SALES AND USE TAXES: EXCLUSION: PUBLIC SAFETY FIRST
RESPONDER VEHICLE AND EQUIPMENT
Provides a sales and use tax exemption for the sale of public
safety first responder vehicles, and any required equipment on
those vehicles, in excess of $300,000 purchased by a local
public agency.
Background and Existing Law
State law imposes a sales and use tax on the sale, storage, or
use of tangible personal property unless exempted by state law.
Generally, nonprofits, public agencies, and charities are
subject to sales and use tax, unless otherwise exempted. Cities
and Counties may increase the sales and use tax rate up to 2% as
a transactions and use tax for either specific or general
purposes with a vote of the people.
The current state sales and use tax rate on tangible personal
property is 7.5% and is imposed as follows:
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| | | |
| Rate | Jurisdiction | Purpose/Authority |
| | | |
|-------+--------------------+--------------------------------|
SB 120 (Anderson) 3/26/15 Page 2
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| | | |
|3.9375%|State (General |State general purposes |
| |Fund) | |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|1.0625%|Local Revenue Fund |Realignment of local public |
| |2011 |safety services |
| | | |
| | | |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Fiscal |Repayment of the Economic |
| |Recovery Fund) |Recovery Bonds |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Education |Schools and community college |
| |Protection Account) |funding |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local |Local governments to fund |
| |Revenue Fund) |health and welfare programs |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local Public |Local governments to fund |
| |Safety Fund) |public safety services |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 1.00% |Local (City/County) |City and county general |
| | |operations. Dedicated to county |
| | |transportation purposes |
| |0.75% City and | |
| |County | |
| | | |
| |0.25% County | |
|-------+--------------------+--------------------------------|
| | | |
| 7.50% |Total Statewide | |
| |Rate | |
SB 120 (Anderson) 3/26/15 Page 3
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| | | |
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Proposed Law
Senate Bill 120 exempts purchases in excess of $300,000 of
public safety first responder vehicles, and any required
equipment on those vehicles, from sales and use taxes.
The bill defines "local public agency" as a city, county,
municipal corporation, district, or public authority located
within this state which provides or may provide first responder
emergency services.
This measure does not reimburse local governments for the sales
tax loss. As a tax levy, SB 120 takes effect immediately, but
shall not become operative until the first day of the calendar
quarter commencing more than 90 days after the effective date of
this act.
State Revenue Impact
The Board of Equalization (BOE) estimates that this bill would
result in an annual sales and use tax loss of $3 million. This
estimate only takes into account purchases of first responder
vehicles (fire and ambulance) and any equipment required on
those vehicles.
Comments
1. Purpose of the bill. According to the author, "Our local
government first responders are on the front lines ensuring
public safety in our communities. Their efforts are funded with
the tax dollars of hard-working families. Taxpayers expect the
taxes they pay to fund first responder services go directly to
ensuring public safety. This bill will ensure that our tax
money is spent on providing the best public safety services
possible to keep out communities safe by reducing government
public safety first responder's state and local sales tax
liability on emergency vehicles and related emergency equipment
to the first $300,000 of the sales price of an individual item."
SB 120 (Anderson) 3/26/15 Page 4
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2. Precedent. This bill sets a potentially dangerous precedent
for extending a sales and use tax exemption to local government
entities. This precedent is of concern for two reasons:
additional exemptions will result in a greater overall
reduction in sales tax revenues; and
exempting local government entities from sales and use
taxes has the potential to reallocate significant amounts
of local sales tax revenue among the state's taxing
jurisdictions. (See Comment #3)
3. Effect of Exemption. SB 120's exemption cuts costs for one
branch of government, but reduces revenues for others. Since
the sales tax is levied by the State, cities, and counties, any
exemption from the tax means a loss in revenues to those
entities. For example, if Fire District Z purchases a $100,000
fire engine in neighboring City A, they will save $7,500 in
sales and use tax. City A, where the fire engine was sold, will
lose approximately $2,063. The county City A is in will lose
$1,000, and the State General Fund will lose $4,438. In effect,
the State, city, and county governments would help subsidize the
purchase of a first responder vehicle.
4. Let's get clear. SB 120 does not define "public safety first
responder." Without a definition, a first responder could be
almost anyone. For example, if a mountain lion is roaming city
streets and animal control is called, animal control would be a
public safety first responder, and therefore able to claim the
sales and use tax exemption for the purchase of a new animal
control vehicle. Additionally, SB 120 does not explicitly state
if each transaction or each item over $300,000 qualifies for the
sales and use tax exemption. The Committee may wish to consider
clarifying the bill's language to carry out the author's intent.
5. Related Legislation. Last year's SB 1367 (Anderson)
contained provisions similar to this bill without the $300,000
threshold. The bill failed passage out of this Committee.
Support and
Opposition (4/23/15)
SB 120 (Anderson) 3/26/15 Page 5
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Support : California State Firefighters' Association (CSFA);
Fire Districts Association of California (FDAC); North Tahoe
Fire Protection District.
Opposition : Unknown.
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