BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1210 (Gaines) - Sales and use taxes: exemption: school
supplies
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: May 4, 2016 |Policy Vote: GOV. & F. 6 - 0 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: No |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: May 16, 2016 |Consultant: Robert Ingenito |
| | |
-----------------------------------------------------------------
This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1210 would provide a partial sales and use tax (SUT)
exemption for clothing, footwear, school supplies, books,
computers, and educational software, subject to specified
limits, for two days each August.
Fiscal
Impact: The Board of Equalization (BOE) indicates that this bill
would result in an annual General Fund revenue loss of $12
million. The agency would incur significant costs to administer
the partial SUT exemption (General Fund). These costs have yet
to be determined, but would reach at a minimum the hundreds of
thousands of dollars annually.
SB 1210 (Gaines) Page 1 of
?
Background: Except where a specific exemption or exclusion is provided,
current law imposes the SUT on all retailers for the privilege
of selling tangible personal property (TPP) at retail in
California, or on the storage, use, or other consumption in this
state of TPP purchased from a retailer.
After the state collects SUT revenue ($48 billion in 2013-14),
it allocates the money to various state and local funds. Roughly
half-collected from an approximately 3.9 percent rate-goes to
the General Fund and can be spent on any state program, such as
education, health care, and criminal justice. Another 1.25
percent, known as the Bradley-Burns rate, goes to cities and
counties for general purposes. Three sales tax funds have
uniform state rates and support specified programs-an
approximately 1.1 percent rate for 2011 realignment
(county-administered criminal justice, mental health, and social
service programs); a 0.5 percent rate for 1991 realignment
(county-administered health and social services programs); and a
0.5 percent rate for city and county public safety programs
pursuant to Proposition 172 (1993). Additionally, some local
governments levy optional local rates-known as Transactions and
Use Taxes (TUTs)-and a small portion of these funds are used for
general purposes. As of January 1, 2017, the average statewide
SUT rate will be 8.21 percent.
State law fully exempts many items from SUT (such as
prescription drugs, food, and poultry litter), while other items
are exempted from the state sales tax, but not the local share,
such as farm equipment and machinery, diesel fuel used for
farming and food processing, teleproduction and postproduction
equipment, timber harvesting equipment and machinery, and
racehorse breeding stock. Partial SUT exemptions are difficult
for both retailers and the BOE, and complicate return
preparation and processing. Moreover, errors attributable to
these partial exemptions occur frequently, resulting in
additional return processing workload for BOE.
Proposed Law:
This bill would provide an annual two day partial "sales and use
SB 1210 (Gaines) Page 2 of
?
tax holiday" for back to school supplies. Specifically, the bill
would (1) provide a General Fund (3.9375 percent rate) SUT
exemption for the sale of, and the storage, use, or other
consumption in this state of clothing, footwear, specified
school supplies, books, computers, and educational computer
software, (2) require purchases to be made at the retailer's
physical place of business, and (3) apply to transaction
beginning at 12:01 a.m. on the second Saturday of August and
ending at 11:59 p.m. on the following day each year, beginning
in 2017.
The bill would specify limits for each qualified TPP, which vary
by category. The clothing, footwear and books limit is $100. The
school supplies limit is $60. The initial $1,000 and $300 are
exempt for computers and educational software.
Staff
Comments: The BOE revenue estimate primarily employs spending
data from the Census Bureau and the Bureau of Economic Analysis,
and excludes all electronic sales (internet), mail order, and
other direct selling. The figures are for the entire nation,
requiring BOE to assume a California share (12 percent,
proportional to population). Collectively, BOE assumes that
total annual sales of items impacted by the bill are estimated
to be $38 billion. BOE further assumes that two days of sales
(plus the impact of people timing their purchases to qualify for
the SUT exemption) total $313 million. At the General Fund SUT,
the estimated revenue loss would be $12 million.
BOE notes that partial SUT exemptions complicate tax
administration. BOE would incur costs to notify affected
taxpayers, modify tax returns, revise regulations and pamphlets,
answer inquiries from industry and the public, program changes,
audit claimed amounts, revise sales tax returns, and review
returns with claimed exemptions. In addition, administrative
costs would also be incurred in computer programming, return
analysis, and return processing. These costs have yet to be
determined, but will reach at a minimum the hundreds of
thousands of dollars annually.
SB 1210 (Gaines) Page 3 of
?
-- END --