BILL ANALYSIS Ó SB 598 Page 1 Date of Hearing: July 8, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 598 (Hill) - As Amended June 29, 2015 ----------------------------------------------------------------- |Policy |Revenue and Taxation |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: NoReimbursable: No SUMMARY: This bill designates, until January 1, 2021, all-volunteer fire departments as consumers, and not retailers, under the Sales and Use Tax Law, of tangible personal property they sell if the profits are used solely and exclusively in furtherance of the fire departments' purposes. The bill stipulates the preferential tax status shall not apply if the all-volunteer fire department has gross receipts from the sale of tangible personal property of $100,000 or more in each of the two preceding calendar years. The bill further specifies it shall become operative on the first day of the first calendar quarter commencing more than 90 days after the bill's effective date. SB 598 Page 2 FISCAL EFFECT: 1)Minor and absorbable costs to the Board of Equalization (BOE) to administer the changes to procedures and systems, and notify affected fire departments and other persons. 2)Estimated revenue decreases for the state and local jurisdictions of approximately $42,000 per year, approximately half of which is from the General Fund. COMMENTS: 1)Purpose. According to the author, all-volunteer fire departments often rely on fundraisers to purchase equipment and pay for station maintenance and operational expenses. Many of these fundraisers involve selling hot food and beverages, such as pancake breakfasts and barbeques, and/or tangible goods such as t-shirts. Currently, the sale of these items attracts sales and use tax, requiring the fire departments to collect and remit taxes to the BOE. SB 598 would relieve all-volunteer fire departments from this burden, saving on administrative costs. 2)Nonprofit Sales Tax. In general, nonprofits are required to collect and remit sales and use tax to the same extent as any other retailer. As a result, nonprofits, including charities, engaged in selling tangible personal property must obtain sellers' permits and report sales and use tax to the BOE. California law does, however, designate certain nonprofit and charitable organizations as consumers, rather than retailers, under the sales and use tax law. This is done on a SB 598 Page 3 case-by-case basis through statute, and current consumer designees include certain nonprofit veterans' organizations, nonprofit youth organizations, parent teacher associations, and schools and school districts. According to the BOE, statutory consumer status is usually conferred to minimize reporting burdens for the specified organizations and minimize revenue losses associated with a complete SUT exemption. 3)Spartoli Voluntarii. All-volunteer fire departments protect lives and property within defined geographical areas from fires, disasters, and other emergency incidents through education, prevention, training, and emergency response. According to the California State Firefighters' Association, the state has approximately 250 all-volunteer departments served by approximately 25,000 volunteer firefighters. Volunteers are not paid a regular wage but may be compensated on an hourly or per-incident basis. The all-volunteer fire departments primarily serve rural areas and often operate on limited budgets funded through public finances, grants, and charitable fundraising activities. The BOE indicates it seldom audits these fire departments due to their low sales volume and lack of complexity. Analysis Prepared by:Joel Tashjian / APPR. / (916) 319-2081 SB 598 Page 4