BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 598  


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          Date of Hearing:  July 8, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 598  
          (Hill) - As Amended June 29, 2015


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          |Policy       |Revenue and Taxation           |Vote:|9 - 0        |
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          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.









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          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  








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            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















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