BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
SB 809 - Committee on Veteran's Affairs
Amended: April 23, 2009
Hearing: May 13, 2009 Tax Levy Fiscal: Yes
SUMMARY: Specifies that certain United States veterans
would be regarded as consumers, rather than
retailers, of tangible personal property that
they sell
EXISTING LAW
Imposes the sales and use tax on the gross receipts on
tangible personal property unless statutorily exempted; the
law does not contain a general exemption from the sales or
use tax for sales to or by veterans. The following chart
shows the basic sales and use tax rate for the state; in
addition, cities and counties may levy transactions and use
taxes with a vote of the people for either general or
special purposes in that city.
-----------------------------
|Rate |Jurisdiction |
|-----+-----------------------|
|5.75%|State (General Fund) |
| | |
|-----+-----------------------|
|0.25%|State (Fiscal Recovery |
| |Fund) |
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|-----+-----------------------|
|0.50%|State (Local Revenue |
| |Fund) |
|-----+-----------------------|
|0.25%|State (General Fund) |
| | |
|-----+-----------------------|
|0.50%|State (Local Public |
| |Safety Fund) |
|-----+-----------------------|
|1.00%|Local (County/City) |
| | 0.25% County |
| |transportation funds |
| | 0.75% City and |
| |county operations |
|-----+-----------------------|
|8.25%|Total Statewide Base |
| |Sales/Use Tax |
-----------------------------
Under the law, every retailer or any other person
engaged in the business of selling tangible personal
property which is taxable in this state is required to
obtain a seller's permit and report the tax on his or her
sales on a return prescribed by the Board. However,
California's Sales and Use Tax Law places a variety of
retailers making taxable sales of tangible personal
property under a "consumer" reporting status. Under a
"consumer" reporting status, a qualifying retailer making
otherwise taxable sales is not required to obtain a
seller's permit or report tax on those sales. Rather, the
qualifying retailer is only required to pay tax on his or
her cost of the taxable components of the products he or
she sells.
The "consumer" reporting status is primarily intended
to minimize reporting burdens placed on smaller businesses
and entities, while minimizing the associated revenue loss
that can accompany a complete exemption from the tax. The
law has extended this consumer reporting status to certain
sales by such entities as nonprofit youth groups, PTAs,
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nonprofit veterans' organizations, various charitable
organizations, schools and school districts, optometrists,
veterinarians, podiatrists, licensed hearing aid
dispensers, and others with respect to certain products
they sell.
THIS BILL
Specifies that a "qualified itinerant vendor" is a
consumer (not a retailer) of tangible personal property
owned by the qualified itinerant vendor, except alcoholic
beverages.
The bill would specify that a person is a "qualified
itinerant vendor" when all of the following apply:
1) The person was a member of the United States Armed
Forces who received an honorable discharge or a release
from active duty under honorable conditions from
service,
2) The person is unable to obtain a livelihood by manual
labor due to a service-connected disability.
3) For the purposes of selling tangible personal property,
the person is a sole proprietor with no employees, and
4) The person has no permanent place of business in this
state.
The bill would define "permanent place of business" as
any building or other permanently affixed structure,
including a residence that is used in whole or in part for
the purpose of making sales of, or taking orders and
arranging for shipment of, tangible personal property, and
would exclude from that term, any building or other
permanently affixed structure, including a residence, used
for any of the following:
1) The storage of tangible personal property.
2) The cleaning or the storage of equipment or other
property used in connection with the manufacture or sale
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of tangible personal property.
The bill would specify that its provisions do not
apply to either of the following:
1) A person engaged in the business of serving meals,
food, or drinks to a customer at a location owned,
rented, or otherwise supplied by the customer, or
2) A person operating a vending machine.
The bill would become operative on the first day of
the first calendar quarter commencing more than 90 days
from the bill's effective date.
FISCAL EFFECT:
The BOE estimates a total revenue loss of $24,855
associated with this bill as follows:
----------------------------------------------
| | | Rates| Dollars|
| | | | |
|---------------------+------+-------+---------|
| State | | 6.25%| $17,337|
| | | | |
|---------------------+------+-------+---------|
| General Fund | | 6.00%| $16,644|
| | | | |
|---------------------+------+-------+---------|
| Fiscal Recovery | | 0.25%| $693|
|Fund | | | |
| | | | |
|---------------------+------+-------+---------|
| Local | | 2.00%| $5,548|
| | | | |
|---------------------+------+-------+---------|
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| Transit | | 0.71%| $1,970|
| | | | |
|---------------------+------+-------+---------|
| | | | |
| | | | |
|---------------------+------+-------+---------|
|Total State and | | 8.96%|$24,855 |
|Local | | | |
| | | | |
| | | | |
----------------------------------------------
COMMENTS:
1. Purpose of the Bill
The Committee provides the following statement for the
bill:
Revenue streams used to be through the county. Hence,
the original disabled veterans' exemption acts were in
county organization codes.
In 1892 the Committee on County and Township Governments
passed the following law - "every honorable discharged,
soldier, sailor, or marine of the United States, who is
unable to obtain a livelihood by manual labor, shall have
the right to hawk, peddle, vend any goods, wares or
merchandise?without payment of any license, tax, or fee
whatsoever, whether municipal, county, or State"
In the 1930s Sales and Use Taxes were implemented and
in 1937 the Business and Professions Code was created The
veterans' exemption was moved into B&P sections 16001 and
16001.5 which now read that a veteran "who is unable to
make a living by manual labor, and who is a voter of this
state?without payment of any license tax or fee whatsoever,
whether municipal, county or state." "who is unable to make
a living by manual labor, and who is a resident of this
state? without payment of any license tax or fee
whatsoever, whether municipal, county or state?"
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respectively.
After working with the BOE we have found a solution to
return to the original intent of the veterans' exemption
law as it was in the 1800s that will be of minimal impact
to the general fund ($21,000).
By returning to the 1800s language of "unable to make
a living by manual labor" and then strengthening that
language to clarify that the disability of the veteran must
be "service-connected," the BOE has determined that by
declaring these individuals as consumers they will only pay
taxes on the front end when they purchase products but will
not be required to collect taxes on the products they sell.
This law does not change from the 1800s version in the
fact that the sale of alcoholic beverages are not covered
under this exemption.
2. Tie a Yellow Ribbon
Proponents note, "In recent years, we have seen large
numbers of veterans return home from two major foreign
conflicts in which the United States Armed Forces are
actively engaged. Many of these returning veterans face
continuing challenges from physical or psychological
disabilities directly related to their military service.
The BOE has been advised in public hearings that some of
these veterans seek to make a modest living from the
itinerant sales of food and beverages."
BOE's support letter states that this bill represents
one small step towards recognizing our disabled veterans
who have already made, or are making the transition from
military to civilian employment. Enactment of this bill
would assist in this transition by simplifying reporting
requirements under the Sales and Use Tax Law for those
qualifying disabled veterans that are honorably discharged
or released from service that desire to engage in the
business of selling goods they own. For qualifying
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disabled veterans without employees or a permanent place of
business, this bill would eliminate the need for them to
hold a seller's permit, file sales tax returns, and remit
sales tax on their sales.
4. I'll give you $2 if you give me a hot dog
This bill would only apply to a narrow number of
veterans who sell food such as hot dogs from mobile food
carts. If the goal is to provide relief to itinerant
veterans who have served their country with honor, why does
this bill only apply to sales of food products and
beverages? Under this bill, other itinerant veterans who
sell non-edible tangible personal property would still be
considered retailers and would still be required to obtain
a seller's permit.
Support and Opposition
Support:Board of Equalization
Oppose:None Received
---------------------------------
Consultant: Gayle Miller
>
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