BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 640| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 640 Author: Beall (D), et al. Amended: 6/2/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/15/15 AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Sales and use taxes: claim for refund: customer refunds SOURCE: Author DIGEST: This bill authorizes a retailer to make an irrevocable election to assign the right to file a claim for refund of excess sales tax reimbursement in the amount of $1,000 or greater to a single customer so that the Board of Equalization (BOE) may directly refund the amount to the customer. ANALYSIS: Existing law allows BOE to issue a refund for excess sales tax reimbursement only to the retailer that collected and reported the tax. This bill: 1)Authorizes BOE to refund excess sales tax reimbursement to the SB 640 Page 2 customer who was overcharged upon the retailer's irrevocable assignment of the right to file a claim for refund and to receive the refund. 2)Only allows refunds of $1,000 or more to a single customer. 3)Requires the retailer and the customer to sign the irrevocable assignment and submit it to the BOE with the customer's claim for refund. Background State law imposes a sales tax on retailers for the privilege of selling tangible personal property, absent a specific exemption. The tax is based upon the retailer's gross receipts from sales in this state. BOE must credit against any other amounts due from the person from whom the excess amount was collected or, by whom it was paid. When a customer remits sales tax to a retailer, but the transaction is either not taxable or is in excess of the taxable amount, the retailer must return the amount paid to the customer or remit it to the state. The customer cannot obtain a refund directly from BOE. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee, BOE would likely incur costs in the hundreds of thousands of dollars annually to implement the provisions of the bill. SUPPORT: (Verified5/29/15) California Chamber of Commerce California Manufacturers & Technology Association California Retailers Association California Society of CPAs California State Board of Equalization SB 640 Page 3 California Taxpayers Association Matson Inc. Ryan TechAmerica TechNet OPPOSITION: (Verified5/29/15) None received ARGUMENTS IN SUPPORT: According to the author, "SB 640 would streamline the process by which a customer files for and receives a refund of excess sales tax from the Board of Equalization (BOE). Currently, the Revenue and Taxation Code requires the BOE to refund any overpayment of use tax directly to the purchaser, even though the retailer collected and remitted the tax. This process is different for excess sales tax reimbursement. Current statute requires the BOE to refund excess sales tax only to the retailer that collected and reported the tax. This creates a situation where the retailer serves as the middleman between customers and the BOE. Unfortunately, customers who are rightfully owed a sales tax refund are not able to access it if the retailer is not willing or able to file a claim for the refund on their behalf. Additionally, there have been instances where customers were not given the refunds once the retailer received them from the BOE. SB 640 would allow, under limited circumstances, a retailer to assign to a customer the right to access their sales tax refund directly from the BOE. This would shorten the refund process by approximately two to three months and eliminate processing by the retailer as the middleman. This bill will enable customers to receive refunds in a more expeditious fashion and ease the workload of certain retailers who will no longer be required to issue refund checks themselves, nor file a claim for refund on the customer's behalf. SB 640 is a common sense measure that increases government efficiency and gets California businesses the money they are owed in a timely manner." SB 640 Page 4 Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119 6/2/15 15:28:58 **** END ****