BILL ANALYSIS
AB 1087
Page 1
ASSEMBLY THIRD READING
AB 1087 (Ma)
As Amended June 1, 2009
Majority vote
REVENUE & TAXATION 6-1 APPROPRIATIONS 12-5
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|Ayes:|Charles Calderon, Beall, |Ayes:|De Leon, Ammiano, Charles |
| |Coto, Ma, Portantino, | |Calderon, Davis, Fuentes, |
| |Fong | |Hall, John A. Perez, |
| | | |Price, Skinner, Solorio, |
| | | |Torlakson, Krekorian |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|DeVore |Nays:|Nielsen, Duvall, Harkey, |
| | | |Miller, |
| | | |Audra Strickland |
| | | | |
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SUMMARY : Modifies the current sales and use tax (SUT) exclusion
for separately stated transportation charges. Specifically,
this bill provides that charges for transportation are
separately stated for purposes of the exclusion if the charges
are stated as a single amount and are not included within a
single amount that combines transportation charges with other
charges.
EXISTING LAW :
1)Imposes a sales tax on retailers for the privilege of selling
tangible personal property (TPP), absent a specific exemption.
The tax is based upon the gross receipts from sales of TPP in
this state.
2)Imposes a use tax on the storage, use, or other consumption in
this state of TPP purchased from any retailer for storage,
use, or other consumption in this state, absent a specific
exemption.
3)Provides, under the SUT Law, that the terms "gross receipts"
and "sales price" do not include separately stated charges for
transportation from the retailer's place of business or other
point from which shipment is made directly to the purchaser.
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However, the exclusion may not exceed a reasonable charge for
transportation "by facilities of the retailer or the cost to
the retailer of transportation by other than facilities of the
retailer." In other words, in cases where the retailer uses a
common carrier, the exclusion is limited to the retailer's
cost for the transportation.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the Board of Equalization (BOE) estimates this bill
would result in an annual increase in sales tax revenues of $3.8
million, of which $2.5 million would accrue to the General Fund
and the remainder would accrue to special funds and local funds.
COMMENTS : The author states, "AB 1087 will provide much needed
simplicity and clarity for retailers in California and the Board
of Equalization in determining the extent to which delivery
charges are subject to sales tax. With the changes proposed in
this bill, the applicable sales tax can be collected from the
ultimate consumers at the time of the transaction just as other
sales taxes are paid. These changes will streamline the
accounting process for small businesses and other retailers that
offer delivery services to their customers. They will also
greatly ease administrative and audit burdens for retailers and
the Board of Equalization."
This bill is sponsored by the California Retailers Association,
which states:
Most retailers charge their customers a flat fee for
delivery of merchandise. (The amount of the fee may
be based on the total purchase price for the
merchandise.) In many instances, the amount the
delivery company charges the retailer exceeds what the
retailer charged its customer, resulting in no tax
being due. However, to the extent the delivery
company charges the retailer less than the amount the
retailer charged the customer for the delivery, this
difference is not excluded from the definition of
'sales price' or 'gross receipts' and is thus subject
to sales tax. At the time the customer is completing
the transaction, the retailer typically has no way of
knowing the exact amount that the delivery company
will charge for the delivery, thus the retailer cannot
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effectively collect the proper amount of sales tax
from the customer. This puts retailers in the
untenable position of being forced to pay sales tax
out of their pockets that should be paid by the
ultimate consumers.
Committee Staff Notes:
1)Revenue and Taxation Code (R&TC) Section 6011 and 6012 impose
SUT on all charges related to the retail sale of TPP, except
those charges specifically excluded. For example, current law
excludes from the definition of "sales price" and "gross
receipts" (i.e., the tax measure) certain separately stated
transportation charges. [R&TC Sections 6011(c)(7) and
6012(c)(7)]. This exclusion, however, may not exceed "a
reasonable charge for transportation by facilities of the
retailer or the cost to the retailer of transportation by
other than facilities of the retailer."
2)Existing law also provides that the terms "sales price" and
"gross receipts" include the cost of services that are part of
the sale of TPP. In other words, related handling charges are
currently taxable whether separately stated or not. Moreover,
under existing law, a charge for "shipping and handling" does
not constitute a separate statement of shipping charges, and,
if there is no further itemization, the entire charge would be
included in the computation of tax.
3)To further complicate matters, BOE notes, "Although a
designation such as, 'shipping and handling' or 'postage and
handling' is not regarded as a separate statement of
transportation charges, under the Board's Regulation 1628,
Transportation Charges, the designation 'postage and
handling,' 'shipping and handling,' or similar designation,
coupled with a statement of the actual amount of postage
placed on the package mailed to a customer, constitutes a
separate statement of transportation charges and those
transportation charges are excludable from the measure of
tax."
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
AB 1087
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FN: 0001039