BILL ANALYSIS Ó
SB 640
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Date of Hearing: August 26, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 640
(Beall) - As Amended August 18, 2015
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill authorizes a customer to file a claim for refund of
excess sales and use tax paid by the customer in an amount of
$1,000 or greater, allowing the Board of Equalization (BOE) to
make a direct refund to the customer. The bill requires
merchants to make records available to BOE for purposes of
excess tax payment verification and requires BOE to publish any
proposed determination with respect to amounts in excess of
$50,000 prior to final determination.
FISCAL EFFECT:
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1)Estimated one-time administrative costs of $5.4 million in FY
2015-16, and ongoing annual administrative costs of
approximately $6.6 million thereafter to create and modify
systems to track and issue refunds, likely General Fund.
2)Unknown, but potentially significant GF revenue decreases as a
result of additional refunds.
COMMENTS:
1)Purpose. According to the author, this bill streamlines the
process by which a customer can file and receive a refund of
excess sales tax. Current law requires BOE to refund any
excess sales tax to the retailer that collected and remitted
the tax, even though retailers pass the tax costs to the
consumers. As a result, customers who have a legitimate claim
to sales tax refund are not able to access it unless the
retailer is willing or able to file a claim on their behalf.
This bill allows a customer to apply directly to BOE for sales
tax refunds in instances where the excess tax paid is $1,000
or more, which the author believes will improve access and
shorten the refund process.
Supporters, led by the California Taxpayers Association, argue
the bill will also improve business efficiency by eliminating
the need for retailers to respond to customer refund requests
and inquiries and process and issue refund payments.
2)Retailer Participation Still Required. Though this bill
expedites the process by which customers may request sales tax
refunds, and arguably improves the alignment of interests of
the ultimate bearer of sales tax with the refund process, the
bill still requires BOE to access retailer records in order to
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verify payment of the tax and ensure the customer has not been
refunded by the retailer. Since customer records are not
normally sent to BOE as part of remitting sales tax, the
process will require BOE to request additional retailer data
instead of relying on retailer remittance data to verify tax
payments. Furthermore, retailers can currently claim refunds
on behalf of multiple customers, allowing BOE to adjudicate
many potential claims in one process. As a result, the
efficiency gains anticipated by allowing customers to request
sales tax refunds directly may be limited.
3)Business Benefit. This bill began as a response, at least in
part, to a California Supreme Court decision that held
customers cannot challenge a retailer's sales tax
determination because the retailer, and not the customer, is
the legal taxpayer. In the case, Target had not sought a
determination from BOE on whether hot coffee purchased "to go"
was subject to sales tax, but had charged and remitted sales
tax on the beverages. The court held only Target could apply
for a refund under current law.
While this bill provides customers an opportunity to apply
directly for a refund, it limits the opportunity to instances
in which the excess sales tax exceeds $1,000 and the entire
claim amount is owed to a single customer. As a result, the
bill specifically excludes everyday customers and ordinary
transactions, and may limit retailers' ability to claim
refunds for excess taxes relating to multiple customers.
Instead, this bill benefits businesses that make purchases
generating substantial sales tax (like capital equipment).
While business customers are certainly entitled to swift
resolution of improper overpayments of tax, it is less clear
whether the current retailer-controlled system is insufficient
to resolve these cases. Many business customers are
important, repeat clients to retailers, and therefore the
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incentives for those retailers to resolve improper tax
payments are arguably much greater than for retailers seeking
refunds on behalf of individual shoppers.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081