BILL ANALYSIS
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THIRD READING
Bill No: AB 1087
Author: Ma (D)
Amended: 9/2/09 in Senate
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-3, 7/8/09
AYES: Wolk, Alquist, Florez, Padilla, Wiggins
NOES: Walters, Ashburn, Runner
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 50-28, 6/3/09 - See last page for vote
SUBJECT : Sales and use taxes: administration
SOURCE : California Retailers Association
DIGEST : This bill modifies the current sales and use tax
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.
Senate Floor Amendments of 9/2/09 add language contained in
AB 759 (Ma) which prohibits a foreign incorporated entity
domiciled in a jurisdiction that does not have an income
tax treaty in force with the United States from contracting
with a state agency.
CONTINUED
AB 1087
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ANALYSIS :
Existing law (1) imposes a sales tax on retailers for the
privilege of selling tangible personal property, absent a
specific exemption. The tax is based upon the gross
receipts from sales of tangible personal property in this
state; (2) imposes a use tax on the storage, use, or other
consumption in this state of tangible personal property
purchased from any retailer for storage, use, or other
consumption in this state, absent a specific exemption; and
(3) provides, under the Sales and Use Tax 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. 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.
Existing law prohibits the state from entering into any
contract with a publicly traded foreign incorporated entity
or subsidiary if all of the following apply:
1.The United States if the principal market for the public
trading of the foreign incorporated entity.
2.The foreign incorporated entity has no substantial
business activities in the place of incorporation
compared to the business activity of its subsidiary or
subsidiaries.
3.The foreign entity was incorporated through a transaction
or a series of transactions in which it acquired
substantially all of the properties held by a domestic
corporation or partnership and immediately after the
acquisition more than 50 percent of the publicly traded
stock was transferred to the same shareholders or
partners that owned the domestic corporation or
partnership.
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Existing law permits the chief executive of a state agency
or a designee to waive the ineligibility of a vendor that
meets the above test by making a written finding that the
contract is necessary to meet a "compelling public
interest."
Existing law requires each vendor submitting a bid or
contract to certify under penalty of perjury that it is not
an ineligible vendor pursuant to the test described above.
This bill adds another requirement to the list of contract
prohibitions as follows:
The foreign incorporated entity is domiciled in a
jurisdiction that
Does not have an income tax already in force with the
United
States.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
Water's-edge $100 $400
$400 General
provision
FTB audits/ Potentially significant
administrative General
administration savings
Expatriate Unknown, potential increase
in state Various
corporations contract costs to the extent
more
companies are
prohibited from contract-
ing with the state
SUPPORT : (Verified 9/2/09)
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California Retailers Association (source)
Betty Yee, Chair, Board of Equalization
ARGUMENTS IN SUPPORT : The author's office 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 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 merchandize. (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 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."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Tom Berryhill,
Blumenfield, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani,
Galgiani, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,
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Jones, Krekorian, Lieu, Bonnie Lowenthal, Ma, Mendoza,
Monning, Nava, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Saldana, Skinner,
Solorio, Swanson, Torlakson, Torres, Torrico, Bass
NOES: Adams, Anderson, Bill Berryhill, Blakeslee, Conway,
Cook, DeVore, Duvall, Emmerson, Fletcher, Fuller, Gaines,
Garrick, Gilmore, Hagman, Harkey, Jeffries, Knight,
Logue, Miller, Nestande, Niello, Nielsen, Silva, Smyth,
Audra Strickland, Tran, Villines
NO VOTE RECORDED: Block, Yamada
DLW:cm 9/3/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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