BILL ANALYSIS Ó
SB 533
Page 1
Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 533
(Pan) - As Amended July 6, 2015
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|Policy |Local Government |Vote:|9 - 0 |
|Committee: | | | |
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| | | | |
|-------------+-------------------------------+-----+-------------|
| |Revenue and Taxation | |5 - 3 |
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Urgency: No State Mandated Local Program: YesReimbursable:
Yes
SUMMARY:
This bill repeals and replaces the statutory prohibition on
local agencies entering into agreements that result in the
payment, transfer, diversion, or rebate of sales and use tax
revenues under the Bradley-Burns Uniform Local Sales and Use Tax
Law (Bradley-Burns), prohibiting agreements that reduce the
Bradley-Burns revenues that another local agency would receive
absent the agreement when a retailer continues to maintain a
SB 533
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physical presence within that other local agency. The bill
specifies the prohibition does not apply to mutual tax revenue
sharing agreements among local agencies where the agreement does
not result in payment of revenues to a retailer, and certain
other narrow exceptions.
The bill further requires a local agency entering into an
agreement that would reduce the Bradley-Burns revenues received
by another local agency to notify the affected local agency 60
days prior to ratification and post the proposed agreement to
its website 30 days prior to ratification, as well as post to
its website any other agreements that reduce the Bradley-Burns
revenues another local agency would receive absent the
agreement, including agreements entered into before January 1,
2016 that remain in effect.
FISCAL EFFECT:
No impact to state revenues; possible, though very likely minor,
reimbursable state mandate costs to local agencies for providing
required notifications.
COMMENTS:
1)Purpose. According to the author and sponsor, this bill
eliminates the current exception for retailers that have
expanded operations into another jurisdiction and conduct
comparable operations there. The author and sponsor contend
this exception allows local agencies to agree with retailers
to rebate the retailers' sales tax if the retailers agree to
book sales tax in the new local agencies' jurisdiction,
thereby depriving the retailers' original local agency of
sales tax revenue.
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The sponsor, the City of West Sacramento, recently experienced
a significant decrease in sales tax revenue from a local
business as a result of such an agreement. Supporters argue
this change is necessary to maintain the sales tax revenue
that funds the infrastructure and services needed to support
those retail operations, and to provide transparency to local
agencies and taxpayers with respect to future agreements .
2)Diverting the Tax Stream. Bradley-Burns sales taxes are
allocated among local agencies based on the place of sale of
taxable transactions. The Revenue and Tax Code specifies the
"place of sale" for purposes of local sales tax is the place
of business of the retailer. Regulations adopted by the Board
of Equalization specify that for retailers with more than one
place of business in the state, the place of sale for any
given transaction is the location where the "principal
negotiations are conducted."
The distribution of Bradley-Burns revenue based on the place
of sale gives local agencies an incentive to make land use
decisions that favor revenue-generating uses for land. With
the increasing importance of sales tax revenue relative to
property tax revenue following the enactment of Proposition
13, local agencies may seek strategic solutions to boost sales
tax revenues, and sales tax rebate agreements to attract
retail have become popular. Michael Coleman, a local
government finance commentator, estimates those incentive
agreements rebate 50-85% of sales tax revenue to corporations.
Statewide, an estimated average of 15-20% of aggregate
Bradley-Burns sales tax revenues are rebated to corporations.
3)Opposition. San Bernardino County argues SB 533 unnecessarily
prohibits legitimate economic incentives that can be used to
encourage local businesses to expand and upgrade, generating
net tax revenue and jobs for local communities. The county
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believes the bill has the potential to encourage lawsuits
against local agencies from other agencies claiming revenue
losses, leading to complications and uncertainty over future
economic development.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081