BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 598| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 598 Author: Hill (D) Amended: 4/15/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/8/15 AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 SUBJECT: Sales and use taxes: consumer designation: all volunteer fire department SOURCE: Author DIGEST: This bill designates volunteer fire departments as consumers under the Sales and Use Tax Law. ANALYSIS: Existing law: 1)Imposes the sales tax on every retailer engaged in business in this state that sells tangible personal property, and requires them to collect the appropriate tax from the consumer at purchase. Sales tax applies whenever a retail sale is made, unless it is a resale in the regular course of business. 2)Provides that, generally, retailers must obtain a seller's SB 598 Page 2 permit, and report to the Board of Equalization (BOE) any sales tax collected from purchasers quarterly on a return. Nonprofits, public agencies, and charities are generally treated the same way as any other retailer, and don't have blanket exemptions from collecting and remitting the tax, unless otherwise exempted. 3)Designates certain sellers as "consumers," meaning that the law considers the tax paid when they purchase property, and the seller neither obtains a permit, nor collects the tax from the purchaser at sale before remitting to BOE. 4)Specifies that "consumers" include: Licensed medical and veterinary professionals dispensing specified products during the course of performing professional services, Qualified itinerant vendors, The Department of Transportation's leases and sales of automobiles, and Nonprofit organizations that intermittently or irregularly sell food, nonalcoholic beverages, and other property made by the organization's members. This bill: 1)Designates volunteer fire departments as consumers under the Sales and Use Tax Law for all its sales of tangible personal property, so long as its profits are solely and exclusively used to further the department's purposes. SB 598 Page 3 2)Requires volunteer fire departments, in order to qualify, to: a) Pay its members hourly or per incident, not with a regular salary, b) Have as its purpose the protection of life, property, and the environment within a designated geographic area from fires, disasters, and emergency incidents through education, prevention, training, and emergency response, c) Be organized as a tax exempt organization for state and federal purposes, and d) Meet the definition of "volunteer fire department," used in the welfare exemption from property tax.3)Provides that consumer treatment does not apply to volunteer fire departments with more than $100,000 in receipts from the sale of tangible personal property in each of the last two calendar years. 4)Sunsets on January 1, 2026. Background Many parts of California rely on volunteer fire departments to provide fire prevention and emergency response, especially in rural areas. These departments are mostly comprised of residents who voluntarily band together to provide these vital public services, and many have grown over time into present day fire districts. A volunteer fire department is currently eligible for the welfare exemption from property tax for property it owns that's used for departmental purposes. While some districts are funded and overseen by counties, many SB 598 Page 4 districts must solicit donations and sell items at fundraisers. However, selling property in California requires registering with BOE, and collecting and remitting a tax, which can be a burden for districts that must provide services with less administrative support than larger agencies. Formed in 1950, the La Honda Volunteer Fire Brigade wants volunteer fire departments added to the list of "consumers," thereby removing requirements the Sales and Use Tax Law places on retailers. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified4/29/15) Ben Lomond Fire Protection District Butte Valley Fire Protection District California Fire Chiefs Association California State Firefighters' Association County of San Mateo Fire District Association of California La Honda Fire Brigade Pliocene Ridge Community Services District Wildland Residents Association OPPOSITION: (Verified4/29/15) None received ARGUMENTS IN SUPPORT: According to the author, "All volunteer fire departments across the state solely rely on fundraisers to buy lifesaving equipment. The La Honda Fire Brigade in my district is no different. Their livelihood relies exclusively on volunteers, from the 14 individuals who serve as firefighters, to the board members who organize fundraising efforts like the annual pancake breakfast and crab cioppino dinner. Unfortunately any fundraisers dealing with selling hot/prepared food or tangible goods are subject to California SB 598 Page 5 sales tax. SB 598 would simply exempt All-volunteer fire departments from having to pay sales tax on their fundraising efforts. All of the money raised would be able to stay with them. If they are able to raise $1000 at a pancake breakfast - they will keep the full $1000 and not have to send $92.50 (San Mateo County has a sales tax rate of 9.25%) to the State. Everyday these volunteers put their lives on the line and provide an important resource to the communities they serve. We should help them any way we can and allowing them to keep all of their fundraising dollars is an important first step." Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119 4/29/15 16:07:42 **** END ****