BILL ANALYSIS
AB 659
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 659 (Hayashi)
As Amended August 17, 2009
Majority vote. Tax levy
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|ASSEMBLY: |76-0 |(May 28, 2009) |SENATE: |38-0 |(August 27, |
| | | | | |2009) |
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Original Committee Reference: REV. & TAX.
SUMMARY : Provides that specified garment cleaning businesses
shall be regarded as consumers, rather than retailers, of
tangible personal property (TPP) they sell, provided those sales
do not exceed 0.5% of their total gross receipts for the
preceding calendar year.
The Senate amendments add a sunset date of January 1, 2013.
EXISTING LAW :
1) Imposes a sales tax on retailers for the privilege of
selling TPP, absent a specific exemption. The tax is based
upon the gross receipts from sales of TPP in this state.
2) Designates any person who received 20% or less of
his/her total gross receipts from the alteration of
garments during the preceding calendar year as a consumer
of property the person uses in altering new or used
clothing, provided both of the following conditions are
met:
a) That person operates one or more locations as a pickup
and delivery point for garment cleaning, or provides
spotting and pressing services on the premises but not
garment cleaning, or operates a garment cleaning or dyeing
plant on the premises; and,
b) 75% or more of that person's total gross receipts
represent charges for garment cleaning or dyeing services.
AS PASSED BY THE ASSEMBLY , this bill:
AB 659
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1) Designated any person who received no more than 0.5% of
his/her total gross receipts from the sale of TPP during
the preceding calendar year as a consumer, rather than a
retailer, with respect to those sales, provided both of the
following conditions were met:
a) That person operated one or more locations as a pickup
and delivery point for garment cleaning, or provided
spotting and pressing services on the premises but not
garment cleaning, or operated a garment cleaning or dyeing
plant on the premises; and,
b) 75% or more of that person's total gross receipts
represented charges for garment cleaning or dyeing
services.
1) Provided that sales tax would not apply to sales of TPP
when those sales did not exceed the 0.5% limitation set
forth above. However, if a person's TPP sales exceeded
0.5% of his/her total gross receipts during the preceding
calendar year, that person would be a retailer of TPP and
sales tax would apply to the gross receipts from those
sales.
2) Provided that, notwithstanding existing law, the state
would not reimburse any local agency for sales and use tax
revenues lost as a result of this bill.
3) Took immediate effect as a tax levy, but only became
operative on the first day of the first calendar quarter
beginning more than 90 days after its effective date.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : The author states, "This bill is a fiscally
responsible measure. Under current law, it would cost the state
more to enforce this tax than it would actually receive in
revenues. AB 659 relieves small, family-run businesses of the
burden of tracking the number of collar stays and lint brushes
AB 659
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they sell. And AB 659 relieves the state of the administrative
burden of tracking sales taxes on these small, inexpensive
items."
Proponents state, "The passage of AB 659 will tremendously
assist dry cleaners in that they will be relieved of a potential
financial and administrative burden. Without bill AB 659 dry
cleaners are sure to fall prey to an unrealistic economic policy
or regulation. It would be ridiculous as well as burdensome for
a sales tax to be imposed on such sales transactions as lint
rollers and collar stays because the sale of such items composes
a tiny portion of profits. As you may know, most of the time
those items are given to customers as promotional gifts. Please
understand that dry cleaners would prefer not to sell or carry
those items if it meant that they would have to pay sales tax
and track all transactions for tax purposes."
BOE, which is sponsoring this bill, states:
1) "This bill is sponsored by the Board in order to relieve
dry cleaning establishments from the burdensome and
time-consuming task of maintaining records and filing sales
tax returns for negligible sales of tangible items. Some
dry cleaners make incidental sales of items such as lint
brushes and collar stays simply as a matter of convenience
to customers with very little profit margin, and the burden
associated with complying with the tax law far outweighs
the economic benefit to California."
2) "The bill stems from the Board's education outreach
efforts wherein staff contacted operators of dry-cleaning
establishments to verify that the operators held a
California seller's permit when their clothes cleaning and
alteration operations were such that a permit was required.
In response, representatives from the industry expressed
their understanding that dry cleaners are not required to
hold seller's permits because they provide services and are
consumers of products they use in their clothes cleaning
and alteration activities. Consequently, even though a
small percentage of these establishments make infrequent
sales of inexpensive items, such as lint brushes and collar
stays as a matter of convenience to customers with little
markup, some of the establishments were unaware of their
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tax reporting obligations."
Committee Staff Comments: BOE has sponsored this bill to
relieve garment cleaning businesses from the administrative
hassle of tracking incidental sales of TPP. As long as a
business' TPP sales account for no more than 0.5% of its total
gross receipts, the business shall be considered a consumer, and
not a retailer, of that property. BOE notes that this bill
would eliminate the need to register hundreds of dry cleaning
establishments that sell TPP, but are currently not registered.
As such, BOE estimates that workload savings would likely more
than offset the $12,257 revenue loss estimated for this bill.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
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