BILL ANALYSIS Ó
SB 640
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, 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:
SB 640
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1)Estimated one-time administrative costs of $5.4 million in FY
2016-17, 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 state 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.
3)Who benefits? SB 640 is partly a response 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.
SB 640
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This bill provides customers an opportunity to apply directly
for a refund, but 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 is likely to most benefit businesses that
make purchases generating substantial sales tax, like capital
equipment.
4)New workload for BOE. SB 640 will lead to significant new
workload and administrative requirements for BOE. This new
workload primarily comes from the need to validate a
customer's claim for a refund: BOE will need to review each
claim and then confirm with the retailer that the tax was paid
in the first place. This process requires additional
documentation such as returns and sales invoice information in
order to verify that the claim is valid.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081