BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 680 (Wieckowski) - Sales taxes: exemption: motor vehicles
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|Version: May 14, 2015 |Policy Vote: T. & H. 9 - 0, |
| | GOV. & F. 5 - 2 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 26, 2015 |Consultant: Robert Ingenito |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: SB 680 would exempt from sales tax (1) any qualified
new motor vehicle, and (2) qualified accessories sold to a
person for permanent use outside the State, under specified
conditions.
Fiscal
Impact: This bill's revenue impact relative to current law is
completely dependent upon future taxpayer behavior, and is thus
unknown. However, based on historical experience, this bill
could reduce annual sales tax revenue by up to $25,000 annually
($12,000 General Fund). Implementation costs to the Board of
Equalization (BOE) would be minor and absorbable.
SB 680 (Wieckowski) Page 1 of
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Background: State law imposes the sales tax on every state retailer engaged
in business that sells tangible personal property, and requires
them to collect the appropriate tax from the consumer at
purchase. Sales tax applies whenever a retail sale is made,
unless it is (1) a resale in the regular course of business, or
(2) otherwise exempt. The largest exempt categories are (1) food
consumed at home, and (2) prescription medicine.
When a taxable sale occurs in California, the sales tax applies
regardless of whether the taxpayer lives in California, or
subsequently moves the property outside the State, with limited
exceptions. Sales tax also applies when the seller delivers the
property in California, regardless of whether the purchaser
transports it outside this state, and whether it's actually
transported.
The sales tax does not apply when an in-state retailer sells an
item which is subsequently shipped and used outside the State,
because federal and state law considers the taxpayer's use of
the item interstate commerce; however, the use tax in the
destination state may apply. Taxpayers must ship the product
directly to the purchaser through its own delivery vehicle,
another means it owns, or through a common carrier to enjoy the
exemption.
Proposed Law:
This bill would exempt from the sales tax (both the state and
local portions) purchases of new automobiles and accessories for
permanent use outside the State. To be eligible, the purchaser
must (1) move the vehicle out-of-state within 30 days, (2)
obtain from the Department of Motor Vehicles a one-trip permit
for driving or moving the vehicle to a point outside the State,
and (3) provide the purchaser with an exemption certificate.
The measure requires the exemption certificate to (1) identify
the vehicle, seller, and purchaser, (2) state that the vehicle
will be removed from the State within 30 days of the date of
purchase, and (3) provide that the vehicle will be licensed and
registered outside the State for permanent use there.
The bill would take effect immediately as a tax levy.
SB 680 (Wieckowski) Page 2 of
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Staff
Comments: Included in the bill's definitions is that "qualified
motor vehicle" applies solely to vehicles previously sold.
Consequently, the bill's proposed exemption generally would not
apply to new car dealers, because such dealers first purchase
their cars from manufacturers. Thus, the bill only would apply
to manufacturers who also sell at retail. Tesla Motors is the
only automobile manufacturer currently doing so.
Anecdotal evidence indicates that in 2014, one taxpayer from
out-of-state purchased and took delivery of a Tesla automobile
in California (Alameda County). This taxpayer reportedly paid a
total of about $8,500 in sales tax; based on Alameda's current
sales tax rate of 9.5 percent, this suggests the retail price of
the car was about $90,000. Taxpayer behavior is such that it is
unlikely to expect that many out-of-state buyers will take
delivery of a Tesla automobile inside the State (and thus pay
the sales tax per current law) when they instead have the option
to ship the car outside the State for pickup, thereby avoiding
California sales tax. Thus, the number of taxpayers taking
delivery inside the State and paying the related sales tax is
likely to be very small. Staff assumes the number to be a
maximum of three per year. Based on this assumption, and (1)
further assuming that the average price of a Tesla automobile
will increase in line with the growth in the new car component
of the Consumer Price Index over the next three years, and (2)
using the expected average statewide sales tax rate of 8.17
percent, the annual sales tax loss from this bill beginning in
2017-18 relative to current law would be about $24,000. Of this
amount, about $12,000 would be General Fund.
Vehicle Code Section 415(a) defines "motor vehicle" to mean any
self-propelled vehicle, and includes such items as bulldozers,
tractors, buses, go-carts, dune-buggies, all-terrain vehicles,
snowmobiles and recreational vehicles. By referencing this
section, an estimate of the potential revenue losses resulting
from the bill must also consider the extent to which these
manufacturers/retailers make sales to out-of-state purchasers
who take delivery of the products in California. Specifically,
to the extent that out-of-state purchasers take possession of
SB 680 (Wieckowski) Page 3 of
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these non-automobile types of motor vehicles in California from
in-state manufacturers, a further sales tax revenue loss would
occur. The magnitude is unknown, but likely to be very small.
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