BILL ANALYSIS Ó
SB 1481
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Date of Hearing: June 13, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
SB
1481 (Committee on Governance and Finance) - As Amended June 6,
2016
Majority vote. Fiscal committee.
SENATE VOTE: 36-0
SUBJECT: Prepaid Mobile Telephony Services Surcharge Collection
Act
SUMMARY: Makes four largely technical changes to the Prepaid
Mobile Telephony Services (MTS) Surcharge Collection Act (the
"Act") to ease the Act's administration. Specifically, this
bill:
1)Corrects statutory cross-references in the Act.
2)Makes conforming and technical changes to Revenue and Taxation
Code (R&TC) Section 42010(j), which governs when the prepaid
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MTS surcharge and local charge constitute a seller's debt to
California.
3)Provides that, if an address is not available to the seller to
determine whether the prepaid consumer's address is in
California (i.e., a "known-address transaction"), the
transaction will be deemed to be a known-address transaction
occurring in California if the mobile telephone number is
associated with a location in California.
4)Clarifies that if a seller is exempt from collecting the
prepaid MTS surcharge and local charges under existing law's
de minimis sales provisions, the seller shall not be required
to register with the State Board of Equalization (BOE).
EXISTING LAW:
1)Establishes the Act, which imposes a prepaid MTS surcharge
based on a percentage of the sales price of each retail
transaction occurring in this state for prepaid MTS. The
surcharge is imposed in lieu of any charges imposed under the
Emergency Telephone Users Surcharge Act as well as specified
Public Utilities Commission (PUC) surcharges.
2)Requires, on and after January 1, 2016, and before January 1,
2020, the prepaid MTS surcharge imposed on prepaid consumers
to be collected by the seller from each prepaid consumer at
the time of each retail transaction occurring in this state.
The Act specifies the circumstances for determining when a
transaction occurs in this state.
3)Requires every seller under the Act to register with the BOE.
Beginning January 1, 2017, the Act exempts a seller, other
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than a direct seller, with de minimis sales of prepaid MTS of
less than $15,000 during the previous calendar year from
collecting the surcharge. The Act further requires the
Department of Finance annually to review and adjust the de
minimis sales threshold, as provided.
FISCAL EFFECT: According to the BOE, this bill would not impact
state revenues.
COMMENTS:
1)The Senate Committee on Governance and Finance notes the
following in support of this bill:
SB 1481 makes . . . changes to the MTS Act to ensure that
BOE can correctly implement it beginning later this year.
BOE states that the measure will also help reduce costs,
and improve taxpayer communication. SB 1481 only contains
items with universal agreement; should anyone object to a
provision in the measure, it will be removed.
2)Committee Staff Comments:
a) Overview of existing law : Existing law imposes a
prepaid MTS surcharge on each prepaid consumer. The seller
must collect the surcharge from each prepaid consumer at
the time of each retail transaction in California. The
prepaid MTS surcharge is imposed as a percentage of the
sales price of each retail transaction that occurs in
California. The prepaid MTS surcharge is imposed in lieu
of any charges imposed under the Emergency Telephone Users
Surcharge Act and the PUC surcharges for prepaid MTS.
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b) What would this bill do ? This bill would make four
largely technical changes to the Act to ease
administration. Each of these changes is described below.
i) Correcting erroneous cross-references : The Act
requires the BOE to calculate the prepaid MTS surcharge
annually by adding the following:
(1) The surcharge rate reported under R&TC Section
41030(d); and,
(2) The PUC's reimbursement fee and
telecommunications universal service surcharges,
established by the PUC under Public Utilities Code
Section 319(a) and (b).
This bill, in turn, would delete the reference to Public
Utilities Code Section 319(a), given that Section 319(a)
merely includes definitional terms, and would correctly
reference both Section 319(b) and (c).
ii) Making conforming and technical changes to R&TC
Section 42010(j) : This bill would make conforming and
technical changes to R&TC Section 42010(j), which governs
when the prepaid MTS surcharge and local charge
constitute a seller's debt to this state. Specifically,
R&TC Section 42010(j) provides that the prepaid MTS
surcharge a seller must collect and any amount unreturned
to the consumer that is not owed as part of the
surcharge, constitute a seller's debt to California.
Section 42010(j) also contains similar, but not
identical, language related to local charges. The BOE
notes, however, that the local charge provision is not
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consistent with either the prepaid MTS surcharge
provision, or other similar provisions in the R&TC.
Thus, this bill makes conforming changes to this section,
which the BOE states are necessary for the efficient and
effective administration of both the Act and the Local
Prepaid MTS Collection Act.
iii) Modifying the language governing "known-address
transactions" : For purposes of the Act, a retail
transaction is considered to occur in California under
specified circumstances. Specifically, a retail
transaction occurs in California if the prepaid consumer
makes the retail transaction in person at a business
location in California (i.e., a point-of-sale
transaction). If a transaction is not a point-of-sale
transaction, it is still considered to occur in
California if the prepaid consumer's address is in
California (i.e., a known-address transaction). A
known-address transaction, in turn, occurs in California
under any of the following circumstances:
(1) The retail sale involves shipping an item to
the prepaid consumer at a location in California;
(2) If the prepaid consumer's address is known by
the seller to be in California, as specified;
(3) The prepaid consumer provides an address
during the purchase transaction that is in California,
as specified; or,
(4) The mobile telephone number is associated with
a location in California.
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This bill would specify that if an address is not
available to the seller to determine whether any of the
circumstances in examples (1) through (3) above exist,
the transaction will be deemed to be a known-address
transaction occurring in California if the mobile
telephone number is associated with a location in
California. The BOE notes the following as justification
for this change in law:
Under existing law, a known out-of-state resident may
be charged the prepaid MTS surcharge on their prepaid
MTS purchase, even if the product is shipped from an
out-of-state seller to the prepaid consumer's
out-of-state address. For example, a Sacramento,
California resident moves to Oregon. The resident
wants to maintain an existing wireless telephone
number with the (916) area code, which is now common
practice. If that Oregon resident purchases prepaid
MTS in a transaction where their address is not
available to the retailer, the Prepaid MTS surcharge
applies, even if the retailer knows the prepaid
consumer has an Oregon address.
iv) Altering the Act's registration requirements : The
Act requires every seller to register with the BOE. The
Act also provides, however, that beginning January 1,
2017, specified sellers with de minimis sales of prepaid
MTS of less than $15,000 during the previous calendar
year are exempt from collecting the prepaid MTS
surcharge.
This bill would clarify that if a seller is exempt from
collecting the prepaid MTS surcharge under the Act's de
minimis sales provision, the seller shall not be required
to registers with the BOE. This bill, however, would
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also provide that nothing shall prevent a seller from
registering with the BOE on a voluntary basis to collect
and remit the surcharge even if the seller meets the de
minimis sales threshold. The BOE notes the following as
justification for this change in law:
The [Act] requires a seller to register with the BOE
whether or not they make [de minimis] prepaid MTS
sales. These [de minimis] sellers registered with the
BOE must continue to file returns with the BOE
although they are not required to collect the prepaid
MTS surcharge. This creates a burden to small sellers
that the [de minimis] provisions are intended to
address.
REGISTERED SUPPORT / OPPOSITION:
Support
State Board of Equalization (Sponsor)
Opposition
None on file
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Analysis Prepared by:M. David Ruff / REV. & TAX. / (916)
319-2098