BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 898 |Hearing |4/20/16 |
| | |Date: | |
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|Author: |Nguyen |Tax Levy: |No |
|----------+---------------------------------+-----------+---------|
|Version: |4/4/16 |Fiscal: |Yes |
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|Consultant|Bouaziz |
|: | |
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Sales and use taxes: exemption: animal blood
Provides a sales and use tax exemption for the sale of animal
blood.
Background
State law imposes a sales and use tax (SUT) on the sale,
storage, or use of tangible personal property unless exempted by
state law. Generally, nonprofits, public agencies, and
charities are subject to sales and use tax, unless otherwise
exempted. Cities and Counties may increase the SUT rate up to
2% as a transactions and use tax for either specific or general
purposes with a vote of the people.
The current state SUT rate on tangible personal property is 7.5%
and is imposed as follows:
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| | | |
| Rate | Jurisdiction | Purpose/Authority |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|3.9375%|State (General |State general purposes |
| |Fund) | |
SB 898 (Nguyen) Page 2
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| | | |
|-------+--------------------+--------------------------------|
| | | |
|1.0625%|Local Revenue Fund |Realignment of local public |
| |2011 |safety services |
| | | |
| | | |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Fiscal |Repayment of the Economic |
| |Recovery Fund) |Recovery Bonds |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Education |Schools and community college |
| |Protection Account) |funding |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local |Local governments to fund |
| |Revenue Fund) |health and welfare programs |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local Public |Local governments to fund |
| |Safety Fund) |public safety services |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 1.00% |Local (City/County) |City and county general |
| | |operations. Dedicated to county |
| | |transportation purposes |
| |0.75% City and | |
| |County | |
| | | |
| |0.25% County | |
|-------+--------------------+--------------------------------|
| | | |
| 7.50% |Total Statewide | |
| |Rate | |
| | | |
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State law exempts human whole blood, plasma, blood products, and
blood derivatives, or any human body parts held in a bank for
medical purposes, from SUT. This exemption does not apply to
animal blood and blood products. SB 898 seeks to exempt animal
blood and blood products from SUT as well.
Proposed Law
Senate Bill 898 provides a sales and use tax exemption for the
sale of animal blood, plasma, blood products, and blood
derivatives, sold for use in the cure, mitigation, treatment, or
prevention of injury or disease in animals.
SB 898 requires the State Board of Equalization (BOE) to cancel
any current notice of determination and any related penalties
and interest, and shall not issue any new notice of
determination.
SB 898 makes findings and declarations.
State Revenue Impact
BOE estimates an annual state and local sales and use tax
revenue loss of $158,000. This amount does not include unpaid
liabilities that this bill requires the BOE to cancel.
Comments
1. Purpose of the bill. According to the author, "SB 898
amends the California Revenue and Taxation code to clarify that
the sale and use of animal blood, blood products, and
derivatives by a licensed animal blood bank are not subject to
tax. Since one of the two animal blood bank organizations
provides an integral portion of the California's animal donor
blood, the need to ensure the protection of this vital service
is necessary and appropriate. Furthermore a similar tax
exemption exists in the California tax code for human blood
banks, a logical application of this exemption should extend
towards animals as well."
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2. Animal blood banks. According to the California Department
of Food and Agriculture, only two animal blood banks in
California hold licenses to produce, market, and sell animal
blood and blood products. These facilities provide whole blood,
plasma, platelets, and clotting factors to veterinary hospitals
and clinics. The blood used to make these products is collected
from an animal "blood donor" housed permanently or
semi-permanently at the blood bank. California law does not
allow pet owners to volunteer their animals as donors to
commercial blood banks.
3. Small universe, big impact. With such a small number of
taxpayers, proponents argue that absent SB 898, the cost of
animal blood will increase and the supply will decrease, even
potentially placing one of the two facilities out of business.
The two California facilities account for a significant portion
of North America's animal blood supply. Animal blood banks are
critical to save animal lives, and proponents state without SB
898, access to life saving animal blood and blood products will
be jeopardized.
4. Precedent. SB 898 requires the State Board of Equalization
(BOE) to cancel any current notice of determination and any
related penalties and interest, and shall not issue any new
notice of determination. While in this case the use of the
tangible personal property is laudable, and the amount of
revenue loss is relatively small, the bill sets a dangerous
precedent for future SUT exemptions. Taxpayers that believe a
SUT exemption applies to a type of tangible personal property
could forgo remitting SUT to BOE, and when a notice of
determination is issued, attempt to push legislation through the
process with both a SUT exemption and a cancelation of any
current notice of determination provision.
5. Shrinking revenue source. SUT exemptions erode an already
shrinking base. Although the SUT represents the state's second
largest source of General Fund (GF) revenues, in the past 60
years there has been a dramatic reduction in the state's
reliance on the SUT and a corresponding increase in its reliance
on personal income tax revenues. In fiscal year (FY) 2014-15,
SUT revenues are estimated to comprise 23% of the state's GF
revenues, down from nearly 60% in FY 1950-51. In effect, each
SUT exemption is subsidized by State, city, and county
governments whose own taxes produce less revenue from a smaller
SB 898 (Nguyen) Page 5
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base.
Support and
Opposition (4/18/16)
Support : ACVS Veterinary Surgeon; American Emergency Clinic;
American Holistic Veterinary Medical Association; American
Holistic Veterinary Medical Foundation; Animal Urgent Care;
California Veterinary Medical Association; Center for
Integrative Animal Medicine; Eye Care for Animals; Hemopet;
Holistic Veterinary Care; Meridian Veterinary Care; SAGE Centers
for Veterinary Specialty and Emergency Care; VCA Emergency
Animal Hospital and Referral Center.
Opposition : California State Association of Counties; League of
California Cities.
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