BILL NUMBER: AB 2412 ENROLLED
BILL TEXT
PASSED THE ASSEMBLY AUGUST 30, 2000
PASSED THE SENATE AUGUST 29, 2000
AMENDED IN SENATE AUGUST 18, 2000
AMENDED IN SENATE JULY 6, 2000
AMENDED IN SENATE JUNE 13, 2000
AMENDED IN ASSEMBLY MAY 15, 2000
AMENDED IN ASSEMBLY APRIL 24, 2000
INTRODUCED BY Assembly Members Migden and Aroner
FEBRUARY 24, 2000
An act to amend Section 6203 of the Revenue and Taxation Code,
relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 2412, Migden. Sales and use taxes: retailer.
The Sales and Use Tax Law imposes a tax on the gross receipts from
the sale in this state of, or the storage, use, or other consumption
in this state of, tangible personal property. That law imposes the
sales tax upon "retailers," and defines a "retailer engaged in
business in this state" to include specified entities. Existing law
provides that every retailer engaged in business in this state and
making sales of tangible personal property for storage, use, or other
consumption in this state, that engages in specified activity in
this state shall, at the time of sale or at the time the storage,
use, or other consumption becomes taxable, collect the tax from the
purchaser.
This bill would clarify that the processing of orders
electronically, by fax, telephone, the Internet, or other electronic
ordering process, does not relieve a retailer of responsibility for
collection of the tax from the purchaser if the retailer is engaged
in business in this state.
This bill would also clarify that a retailer is presumed to have
an agent within the state if the retailer is related, as specified,
to a retailer maintaining sales locations in this state, provided the
retailer sells similar products under a similar name as the
California retailer, or facilities or employees of the related
California retailer are used to advertise or promote sales by the
retailer to California purchasers.
This bill would state the intent of the Legislature in enacting
the bill and would specify that the provisions are intended to
prospectively clarify existing law.
The bill would incorporate changes made by AB 330, to become
operative if both bills are chaptered and this bill is chaptered
last.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6203 of the Revenue and Taxation Code is
amended to read:
6203. (a) Except as provided by Sections 6292 and 6293, every
retailer engaged in business in this state and making sales of
tangible personal property for storage, use, or other consumption in
this state, not exempted under Chapter 3.5 (commencing with Section
6271) or Chapter 4 (commencing with Section 6351), shall, at the time
of making the sales or, if the storage, use, or other consumption of
the tangible personal property is not then taxable hereunder, at the
time the storage, use, or other consumption becomes taxable, collect
the tax from the purchaser and give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
(b) As respects leases constituting sales of tangible personal
property, the tax shall be collected from the lessee at the time
amounts are paid by the lessee under the lease.
(c) "Retailer engaged in business in this state" as used in this
section and Section 6202 means and includes any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or
temporarily, directly or indirectly, or through a subsidiary, or
agent, by whatever name called, an office, place of distribution,
sales or sample room or place, warehouse or storage place, or other
place of business.
(2) Any retailer having any representative, agent, salesperson,
canvasser, independent contractor, or solicitor operating in this
state under the authority of the retailer or its subsidiary for the
purpose of selling, delivering, installing, assembling, or the taking
of orders for any tangible personal property.
(3) As respects a lease, any retailer deriving rentals from a
lease of tangible personal property situated in this state.
(4) (A) Any retailer soliciting orders for tangible personal
property by mail if the solicitations are substantial and recurring
and if the retailer benefits from any banking, financing, debt
collection, telecommunication, or marketing activities occurring in
this state or benefits from the location in this state of authorized
installation, servicing, or repair facilities.
(B) This paragraph shall become operative upon the enactment of
any congressional act that authorizes states to compel the collection
of state sales and use taxes by out-of-state retailers.
(5) Notwithstanding Section 7262, a retailer specified in
paragraph (4) above, and not specified in paragraph (1), (2), or (3)
above, is a "retailer engaged in business in this state" for the
purposes of this part and Part 1.5 (commencing with Section 7200)
only.
(d) (1) For purposes of this section, "engaged in business in this
state" does not include the taking of orders from customers in this
state through a computer telecommunications network located in this
state which is not directly or indirectly owned by the retailer when
the orders result from the electronic display of products on that
same network. The exclusion provided by this subdivision shall apply
only to a computer telecommunications network that consists
substantially of online communications services other than the
displaying and taking of orders for products.
(2) This subdivision shall become inoperative upon the operative
date of provisions of a congressional act that authorize states to
compel the collection of state sales and use taxes by out-of-state
retailers.
(e) Except as provided in this subdivision, a retailer is not a
"retailer engaged in business in this state" under paragraph (2) of
subdivision (c) if that retailer's sole physical presence in this
state is to engage in convention and trade show activities as
described in Section 513(d)(3)(A) of the Internal Revenue Code, and
if the retailer, including any of his or her representatives, agents,
salespersons, canvassers, independent contractors, or solicitors,
does not engage in those convention and trade show activities for
more than seven days, in whole or in part, in this state during any
12-month period and did not derive more than ten thousand dollars
($10,000) of gross income from those activities in this state during
the prior calendar year. Notwithstanding the preceding sentence, a
retailer engaging in convention and trade show activities, as
described in Section 513(d)(3)(A) of the Internal Revenue Code, is a
"retailer engaged in business in this state," and is liable for
collection of the applicable use tax, with respect to any sale of
tangible personal property occurring at the convention and trade show
activities and with respect to any sale of tangible personal
property made pursuant to an order taken at or during those
convention and trade show activities.
(f) The Legislature finds and declares that the deletion of
language by the act adding this subdivision that was contained in
paragraphs (5) and (8) of subdivision (c) is intended to codify the
holdings of recent court cases.
(g) (1) The processing of orders electronically, by fax,
telephone, the Internet, or other electronic ordering process, does
not relieve a retailer of responsibility for collection of the tax
from the purchaser if the retailer is engaged in business in this
state pursuant to this section.
(2) For purposes of this section, a retailer is presumed to have
an agent within the state, as defined in paragraphs (1) and (2) of
subdivision (c), if both of the following conditions exist:
(A) The retailer holds a substantial ownership interest, directly
or through a subsidiary, in a retailer maintaining sales locations in
California or is owned in whole or in substantial part by such a
retailer, or by a parent or subsidiary thereof. For purposes of this
subparagraph, "substantial ownership interest" in an entity means
that degree of ownership of equity interests in an entity that is not
less than that degree of ownership specified by Section 78p of Title
15 of the United States Code, or any successor to that statute, with
respect to a person other than a director or officer.
(B) The retailer sells the same or substantially similar line of
products as the retailer maintaining sales locations in California
under the same or substantially similar business name, or facilities
or employees of the related retailer located in this state are used
to advertise or promote sales by the retailer to California
purchasers.
SEC. 1.5. Section 6203 of the Revenue and Taxation Code is amended
to read:
6203. (a) Except as provided by Sections 6292 and 6293, every
retailer engaged in business in this state and making sales of
tangible personal property for storage, use, or other consumption in
this state, not exempted under Chapter 3.5 (commencing with Section
6271) or Chapter 4 (commencing with Section 6351), shall, at the time
of making the sales or, if the storage, use, or other consumption of
the tangible personal property is not then taxable hereunder, at the
time the storage, use, or other consumption becomes taxable, collect
the tax from the purchaser and give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
(b) As respects leases constituting sales of tangible personal
property, the tax shall be collected from the lessee at the time
amounts are paid by the lessee under the lease.
(c) "Retailer engaged in business in this state" as used in this
section and Section 6202 means and includes any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or
temporarily, directly or indirectly, or through a subsidiary, or
agent, by whatever name called, an office, place of distribution,
sales or sample room or place, warehouse or storage place, or other
place of business.
(2) Any retailer having any representative, agent, salesperson,
canvasser, independent contractor, or solicitor operating in this
state under the authority of the retailer or its subsidiary for the
purpose of selling, delivering, installing, assembling, or the taking
of orders for any tangible personal property.
(3) As respects a lease, any retailer deriving rentals from a
lease of tangible personal property situated in this state.
(4) (A) Any retailer soliciting orders for tangible personal
property by mail if the solicitations are substantial and recurring
and if the retailer benefits from any banking, financing, debt
collection, telecommunication, or marketing activities occurring in
this state or benefits from the location in this state of authorized
installation, servicing, or repair facilities.
(B) This paragraph shall become operative upon the enactment of
any congressional act that authorizes states to compel the collection
of state sales and use taxes by out-of-state retailers.
(5) Notwithstanding Section 7262, a retailer specified in
paragraph (4) above, and not specified in paragraph (1), (2), or (3)
above, is a "retailer engaged in business in this state" for the
purposes of this part and Part 1.5 (commencing with Section 7200)
only.
(d) (1) For purposes of this section, "engaged in business in this
state" does not include the taking of orders from customers in this
state through a computer telecommunications network located in this
state which is not directly or indirectly owned by the retailer when
the orders result from the electronic display of products on that
same network. The exclusion provided by this subdivision shall apply
only to a computer telecommunications network that consists
substantially of online communications services other than the
displaying and taking of orders for products.
(2) This subdivision shall become inoperative upon the operative
date of provisions of a congressional act that authorize states to
compel the collection of state sales and use taxes by out-of-state
retailers.
(e) Except as provided in this subdivision, a retailer is not a
"retailer engaged in business in this state" under paragraph (2) of
subdivision (c) if that retailer's sole physical presence in this
state is to engage in convention and trade show activities as
described in Section 513(d)(3)(A) of the Internal Revenue Code, and
if the retailer, including any of his or her representatives, agents,
salespersons, canvassers, independent contractors, or solicitors,
does not engage in those convention and trade show activities for
more than 15 days, in whole or in part, in this state during any
12-month period and did not derive more than one hundred thousand
dollars ($100,000) of net income from those activities in this state
during the prior calendar year. Notwithstanding the preceding
sentence, a retailer engaging in convention and trade show
activities, as described in Section 513(d)(3)(A) of the Internal
Revenue Code, is a "retailer engaged in business in this state," and
is liable for collection of the applicable use tax, with respect to
any sale of tangible personal property occurring at the convention
and trade show activities and with respect to any sale of tangible
personal property made pursuant to an order taken at or during those
convention and trade show activities.
(f) Any limitations created by this section upon the definition
of "retailer engaged in business in this state" shall only apply for
purposes of tax liability under this code. Nothing in this section
is intended to affect or limit, in any way, civil liability or
jurisdiction under Section 410.10 of the Code of Civil Procedure.
(g) (1) The processing of orders electronically, by fax,
telephone, the Internet, or other electronic ordering process, does
not relieve a retailer of responsibility for collection of the tax
from the purchaser if the retailer is engaged in business in this
state pursuant to this section.
(2) For purposes of this section, a retailer is presumed to have
an agent within the state, as defined in paragraphs (1) and (2) of
subdivision (c), if both of the following conditions exist:
(A) The retailer holds a substantial ownership interest, directly
or through a subsidiary, in a retailer maintaining sales locations in
California or is owned in whole or in substantial part by such a
retailer, or by a parent or subsidiary thereof. For purposes of this
subparagraph, "substantial ownership interest" in an entity that is
not less than that degree of ownership of equity interests in an
entity means that degree of ownership specified by Section 78p of
Title 15 of the United States Code, or any successor to that statute,
with respect to a person other than a director or officer.
(B) The retailer sells the same or substantially similar line of
products as the retailer maintaining sales locations in California
under the same or substantially similar business name, or facilities
or employees of the related retailer located in this state are used
to advertise or promote sales by the retailer to California
purchasers.
SEC. 2. The Legislature finds and declares all of the following:
(a) The amendment to Section 6203 of the Revenue and Taxation Code
by this act is intended to prospectively clarify existing law.
(b) This amendment is necessary in order to prospectively clarify
that a retailer that is engaged in business in the state cannot be
relieved of the nexus created by its location in the state through
use of an affiliate, subsidiary, or related company, the purpose of
which is to engage in similar transactions through the processing of
orders by electronic means.
(c) In amending Section 6203 of the Revenue and Taxation Code in
this act, it is not the intent of the Legislature to in any way
extend or broaden the definition of retailer engaged in business in
the state, but solely to prospectively clarify the definition for use
by all retailers. Also, it is not the intent of the Legislature in
amending Section 6203 of the Revenue and Taxation Code in this act to
affect, in any way, any investigation, audit, or other enforcement
action by the State Board of Equalization that has been initiated
prior to January 1, 2001.
(d) In defining the term "substantial ownership interest" on the
basis of standards set forth in federal law, it is the intent of the
Legislature to incorporate those longstanding parameters of federal
securities law that identify those principal stockholders of a legal
entity that may fairly be equated with persons exerting a substantial
influence over that entity.
(e) Pursuant to Section 3.5 of Article III of the California
Constitution, the Legislature hereby directs the State Board of
Equalization to fully enforce this act.
SEC. 3. Section 1.5 of this bill incorporates amendments to
Section 6203 of the Revenue and Taxation Code proposed by this bill
and AB 330. It shall only become operative if (1) both bills are
enacted and become effective on or before January 1, 2001, (2) each
bill amends Section 6203 of the Revenue and Taxation Code, and (3)
this bill is enacted after AB 330, in which case Section 6203 of the
Revenue and Taxation Code, as amended by AB 330, shall remain
operative only until the operative date of this bill, at which time
Section 1.5 of this bill shall become operative, and Section 1 of
this bill shall not become operative.