BILL ANALYSIS
SB 765
Page 1
Date of Hearing: July 15, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 765 (Dutton) - As Amended: June 29, 2009
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill provides a sales and use tax exemption for property
sold by thrift stores operated by the Navy-Marine Corps Relief
Society. The exemption would sunset on January 1, 2014.
FISCAL EFFECT
1)The Board of Equalization estimates that the exemption for
this single entity would reduce sales and use taxes by $21,000
per year, of which $15,000 would be attributable to the
General Fund.
2)The measure will create pressure to provide similar exemptions
for sales of thrift stores operated by other non-profit
organizations, potentially resulting in much more significant
revenue reductions (potentially exceeding $1 million) in
future years.
COMMENTS
1)Background . The California sales and use tax applies to sales
of all tangible personal property, unless the property is
specifically exempted. There is currently no general exemption
for thrift stores operated by charitable organizations.
However, current law does provide specific exemptions in this
area. These include sales by thrift stores operated by
nonprofit organizations in cases where the proceeds are used
to fund medical, hospice, or social services to chronically
ill individuals. Exemptions also apply to sales made by
certain charitable organizations qualifying for the property
tax "welfare exemption" under Section 214 of the Revenue and
SB 765
Page 2
Taxation Code. Sales of thrift store operated by Goodwill and
Salvation Army are also exempt from sales and use taxes under
the welfare exemption.
2)Beneficiary of proposed exemption . As narrowly drafted, this
bill applies only to the sales of thrift stores operated by
the Navy-Marine Corps Relief Society. The Society is a
nonprofit, charitable organization that provides financial and
educational assistance to members of the Naval Services. It
works in partnership with the Navy and Marine Corps, and
operates 28 thrift stores, seven of which are located on naval
or marine bases in California. The stores sell used clothing,
uniforms, and household items to service members and their
families. The income realized from these stores is returned to
the Navy and marine Corp community in the form of relief
services. The Board of Equalization indicates that the agency
contacted them, stating its belief that its sales are not
subject to the sales tax.
3)Rationale . The bill is sponsored by the Board of Equalization
to "provide a small but important exemption in the law for
items purchased by service members and their families in their
time of need." The Board believes that the price of the goods
sold by the Society's thrift stores should not be increased by
the addition of sales tax.
4)Fiscal pressure. As noted, sales by thrift stores are
generally subject to taxation. This bill exempts just one
entity from the sales and use tax, but the reasons offered for
the exemption apply equally to thrift stores benefiting other
worthy causes. Thus, the measure creates a strong fiscal
pressure to expand the exemption for thrift store sales, which
could result in more significant revenue reductions in future
years.
5)Related legislation. This bill is nearly identical to SB 1450
(Dutton) and AB 1919 (Silva) from the 2008 session, both of
which were held on suspense by this committee.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081