BILL ANALYSIS
AB 1304
Page 1
Date of Hearing: May 11, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 1304 (Saldana) - As Amended: April 20, 2009
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Sales and use taxes: exemption: electric cars
SUMMARY : Provides a partial sales and use tax (SUT) exemption
for electric vehicles (EVs), EV batteries, tangible personal
property (TPP) that will become a component of EV
infrastructure, and associated services. Specifically, this
bill :
1)Provides a SUT exemption for all of the following:
a) EVs;
b) EV batteries;
c) Labor and services rendered with respect to exchanging,
installing, repairing, altering, or improving EV batteries;
d) Labor and services rendered with respect to installing,
constructing, repairing, or improving EV infrastructure;
and,
e) TPP that will become a component of EV infrastructure
during the course of installing, constructing, repairing,
or improving EV infrastructure.
1)Defines an "EV" as a passenger vehicle that uses electricity
as its sole source of propulsion power, including plug-in EVs
and extended-range EVs.
2)Defines "EV infrastructure" as structures, machinery, and
equipment necessary to support an EV, including battery
charging stations, rapid charging stations, and battery
exchange stations.
3)Defines a "battery charging station" as "an electrical
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component assembly or cluster of component assemblies designed
specifically to charge batteries within [EVs], which meet or
exceed any standards, codes, and regulations set forth by the
Society for Automotive Engineers, the National Electrical
Code, or any other federal, state, and local agencies."
4)Defines a "rapid charging station" as "an industrial grade
electrical outlet and associated equipment that allows for
faster recharging of [EV] batteries through higher power
levels, which meets or exceeds any standards, codes, and
regulations set forth by the Society for Automotive Engineers,
the National Electrical Code, or any other federal, state, and
local agencies."
5)Defines a "battery exchange station" as "an automated facility
that will enable an [EV] with a swappable battery to enter a
drive lane and exchange the depleted battery with a fully
charged battery through an automated process, which meets or
exceeds any standards, codes, and regulations set forth by the
Society for Automotive Engineers, the National Electrical
Code, or any other federal, state, and local agencies."
6)Provides that the exemption shall not apply to any tax levied
pursuant to:
a) The Bradley-Burns Uniform Local SUT Law; or,
b) The Transactions and Use Tax Law.
7)Takes immediate effect as a tax levy, but only becomes
operative on the first day of the first calendar quarter
beginning more than 90 days after its effective date.
EXISTING LAW imposes a:
1)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)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.
FISCAL EFFECT : The Board of Equalization (BOE) is currently
working on revenue estimates.
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COMMENTS :
1)The author states, "California has shown extraordinary
effectiveness in moving clean technologies out of the
laboratory and into the mainstream while creating jobs and
entirely new industries. The California Green Innovation
Index indicates that between 1990 and 2006, the state's green
technology sector grew 84 percent, with as much of this growth
linked to solar and green transportation sectors. As the
demand for a shift to electric-drive technology increases, EVs
linked to a cleaner power grid concurrently address the
problems of oil dependence, air pollution, and climate change
while building clean technology transportation." The author
goes on to state, "There are at least half a dozen states that
have either passed or have under consideration tax credits for
EVs. Automotive companies are competing to be first to market
plug-in hybrids and full electric vehicles. By exempting the
sales tax, California will become more attractive to car
manufacturers as a place to invest their business. It is
imperative that California's market be ready for these
vehicles and barriers to implementing are minimized."
2)Proponents state that AB 1304 will accelerate the market for
both EVs and the charging infrastructure needed to support
them. Specifically, proponents state, "AB 1304 will support
both electric vehicles and electric vehicle components by
reducing their cost to consumers and businesses with sales tax
relief."
3)Opponents state, "We do not believe that there is any evidence
that such an exemption would [have] a meaningful impact on the
deployment of electric cars. However, if such an exemption
were to be demonstrated to be valuable, it should be paid for
out of the proposed carbon fund created by SB 31 and AB 231,
not the state's General Fund."
4)BOE staff notes that partial SUT exemptions complicate
administration. Specifically, BOE states:
"Currently, most sales and use tax exemptions apply to the
total applicable sales and use tax. However, there are
currently a few partial exemptions in California law, where
only the state tax portion (6.25%) of the state and local
sales and use tax rate is exempted, such as sales and
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purchases of teleproduction equipment and farm equipment.
These partial exemptions are difficult for both retailers
and the Board. They complicate return preparation and
return processing. And, errors on returns attributable to
these partial exemptions occur frequently, which result in
additional return processing workload for the Board.
"This measure proposes a 7.25% exemption, which would add
an additional exemption category (since current law does
not have any partial exemptions other than a 6.25%
exemption). This would require a revision to the sales and
use tax return and result in a new, separate computation on
the return. This partial exemption would add a new level
of complexity, which would create a corresponding increase
in errors in reporting the tax to the Board. This increase
in errors would further complicate the Board's
administration of the sales and use tax law and complicate
reporting obligations of retailers."
5)Committee staff comments:
a) What qualifies as an EV? : This bill provides a partial
SUT exemption for EVs, which this bill defines as passenger
vehicles that use electricity as their sole source of
propulsion power. Committee staff understands this to mean
that the exemption would not apply to hybrid vehicles that
use both fuel and electricity for propulsion.
Nevertheless, the author makes reference to both "plug-in
hybrids" and "full electric vehicles". If the author
wishes to include plug-in or other hybrid vehicles within
the scope of the exemption, Committee staff recommends
amending this bill to make this clear.
b) What isn't covered? :
i) This bill would provide a partial exemption for EVs,
EV batteries, TPP that will become a component of EV
infrastructure, and associated services. As currently
drafted, this exemption is extremely broad. For example,
"EV infrastructure" is defined to include structures,
machinery, and equipment necessary to support EVs,
including "rapid charging stations". A "rapid charging
station", in turn, is defined as "an industrial grade
electrical outlet and associated equipment that allows
for faster recharging" of EV batteries. Committee staff
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does not know what the inclusion of "associated
equipment" is meant to capture. Thus, the author may
wish to focus the scope of this bill's proposed
exemption.
ii) In addition, this bill provides a partial exemption
for labor and services rendered with respect to
exchanging, installing, repairing, altering, or improving
EV batteries. As BOE notes in its staff analysis, sales
tax generally does not apply to labor charges. Therefore,
the exemption this bill proposes should be limited to
those labor and service charges that are already subject
to tax under existing law. BOE staff has indicated that
they will work with the author's office to refine this
bill's scope consistent with the author's intent.
c) Sunset date : This bill provides an expansive SUT
exemption designed to spur California's transition to a
green economy. Nevertheless, this bill provides a
permanent exemption. The author may wish to consider a
sunset date so that the Legislature can review the efficacy
of this tax expenditure in the future.
REGISTERED SUPPORT / OPPOSITION :
Support
Plug In America
Opposition
California Tax Reform Association
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098