BILL ANALYSIS
SB 809
Page 1
Date of Hearing: July 6, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
SB 809 (Veterans Affairs Committee) - As Amended: April 23,
2009
Majority vote. Tax levy. Fiscal committee.
SENATE VOTE : 39-0
SUBJECT : Sales and use taxes: consumer status: qualified
itinerant vendors
SUMMARY : Provides that a "qualified itinerant vendor" (QIV) is
a consumer, and not a retailer, of tangible personal property
(TPP) the QIV owns, except alcoholic beverages. Specifically,
this bill :
1) Provides that a person is a QIV when all of the
following apply:
a) 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;
b) The person is unable to obtain a livelihood by manual
labor due to a service-connected disability;
c) For the purposes of selling TPP, the person is a sole
proprietor with no employees; and,
d) The person has no "permanent place of business" in this
state.
2) Defines "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, [TPP]." Provides that a permanent place of
SB 809
Page 2
business does not include any building or other permanently
affixed structure, including a residence, used for any of
the following:
a) The storage of TPP; and,
b) The cleaning or storage of equipment or other property
used in connection with the manufacture or sale of TPP.
3) Provides that the preferential classification shall not
apply to a person:
a) Engaged in the business of serving meals, food, or
drinks to a customer at a location owned, rented, or
otherwise supplied by the customer (i.e., a caterer); or,
b) Operating a vending machine.
4) Provides that, notwithstanding existing law, the state
shall not reimburse any local agency for sales and use tax
revenues lost under this bill.
5) Takes immediate effect as a tax levy, but becomes
operative on the first day of the first calendar quarter
beginning more than 90 days after its effective date.
EXISTING LAW :
1)Imposes a 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)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.
SB 809
Page 3
3)Designates the following entities as consumers, and not
retailers, of specified TPP they use or furnish in the
performance of their professional services:
a) Licensed optometrists, physicians, pharmacists, and
registered dispensing opticians;
b) Licensed veterinarians;
c) Licensed chiropractors;
d) Specified garment cleaning establishments that received
no more than 20% of their total gross receipts from the
alteration of garments during the preceding calendar year;
e) Licensed hearing aid dispensers; and,
f) Producers of X-ray films or photographs used to diagnose
human medical or dental conditions.
FISCAL EFFECT : The Board of Equalization (BOE) estimates that
this bill would reduce state and local revenues by $24,855
annually.
COMMENTS :
1)The Senate Committee on Veterans Affairs states that, "Since
at least 1892 California has exempted its disabled veterans
from taxation due to the inability to earn a living. This
bill updates that exemption." The Senate Committee on
Veterans Affairs also notes, "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."
2)BOE notes the following in its staff analysis of this bill:
a) What would a qualifying veteran's tax obligations be ?
"Under this bill, a qualifying itinerant disabled veteran
making taxable sales of goods, wares or merchandise owned
by him or her would not be required to report sales tax on
his or her sales of these items. Instead, those veterans
would only be required to pay tax on their cost of any
taxable purchases of the items or the component parts of
SB 809
Page 4
the items he or she sells. For example, if a veteran were
selling his or her own paintings, the veteran would pay tax
on his or her purchase of the paint, brushes, and canvas
used to make the painting. The sale of the painting,
itself, would thereafter be exempt from tax. Under this
bill, if the qualifying veteran makes no sales of alcoholic
beverages, the veteran would not be required to obtain a
seller's permit, file sales tax returns, or remit sales tax
on his or her sales of the goods he or she sells. This
essentially eliminates the sales tax compliance costs and
associated recordkeeping that can be unduly burdensome for
disabled veterans."
b) Qualifying veterans would need to provide evidence of
disability to qualify . "Up until January 1, 2009, Business
and Professions Code Section 16001.5 authorized cities to
issue business licenses to honorably discharged or
honorably relieved United States veterans without payment
of any business license tax or fee for their sales of goods
they own. To qualify, the law required, among other
things, that the veteran be physically unable to obtain a
livelihood through manual labor (however, the law did not
require that the veteran have a service-connected
disability). Although this qualification is no longer
necessary through enactment of AB 1952 (Stats. 2008, Ch.
435), we contacted several cities to determine how they
administered Section 16001.5 prior to January 1, 2009. The
cities that we contacted indicated that they required the
veteran to provide confirmation from a physician that he or
she had such a physical impairment. If this bill becomes
law, we expect that we would require a similar physician
confirmation of the veteran's disability. Also, since the
bill would require that the disability be service-related,
we would require that a qualifying veteran also provide
written confirmation of that disability from the Department
of Veteran Affairs."
3)Committee Staff Notes:
a) What is "consumer" status? : "Consumer" status is
conferred on specified entities to alleviate the burden of
registering with BOE as a retailer of TPP. At the same
time, consumer status minimizes the revenue losses often
associated with outright exemptions from tax. As noted
above, consumer status has been conferred on a wide range
SB 809
Page 5
of entities, including optometrists, veterinarians,
licensed hearing aid dispensers, and others with respect to
certain TPP sales.
b) How did we get here? : For several years, certain
veterans have argued that Business and Professions Code
(B&PC) Section 16102 exempts honorably discharged veterans
from sales tax on sales of food and carbonated beverages
from a mobile cart. B&PC Section 16102 provides in its
entirety:
Every soldier, sailor or marine of the United States
who has received an
honorable discharge or a release from active duty
under honorable conditions
from such service may hawk, peddle and vend any goods,
wares or
merchandise owned by him, except spirituous, malt,
vinous or other
intoxicating liquor, without payment of any license,
tax or fee whatsoever,
whether municipal, county or State, and the board of
supervisors shall issue
to such soldier, sailor or marine, without cost, a
license therefore.
This provision was enacted in 1893 [long before enactment
of the Sales and Use Tax (SUT) Law], and was described in
the chaptered bill as "An act to establish a uniform system
of county and township government." Moreover, this statute
is contained in Chapter 2 of Part 1 of Division 7 of the
B&PC, entitled Licensing by Counties. As such, BOE has
taken the position that this statute exempts honorably
discharged veterans from locally imposed license taxes and
fees, and does not provide an exemption from SUT. BOE
notes that its determination was challenged unsuccessfully
in Los Angeles County Superior Court, and is consistent
with two opinions provided by the Office of Legislative
Counsel.
This bill seeks to address the issue by explicitly granting
preferential treatment to honorably discharged itinerant
veterans under the SUT Law. It should be noted that this
SB 809
Page 6
bill is similar to AB 3009 (Brownley) of the 2007-08
Legislative Session, which would have conferred consumer
status to similarly situated QIVs, but only with respect to
food products and nonalcoholic beverages. AB 3009 was held
in this Committee.
c) Related legislation : Committee staff note the following
related bills also introduced in the current Legislative
Session:
i) AB 659 (Hayashi): Provides that specified garment
cleaning businesses shall be regarded as consumers,
rather than retailers, of TPP they sell, provided those
sales do not exceed 0.5% of their total gross receipts
for the preceding calendar year. AB 659 (Hayashi) has
been referred to the Senate Committee on Revenue and
Taxation.
ii) AB 676 (Jeffries): Provides that qualified
destination management companies shall be regarded as
consumers, rather than retailers, of TPP they sell. AB
676 (Jeffries) was held in the Assembly Appropriations
Committee.
iii) AB 1265 (Ma): Contains provisions nearly identical
to this bill. Specifically, AB 1265 (Ma) provides that,
until January 1, 2012, a QIV is a consumer, and not a
retailer, of TPP the QIV owns and sells for less than
$100, except alcoholic beverages. AB 1265 (Ma) has been
referred to the Senate Committee on Revenue and Taxation.
iv) AB 1486 (Furutani): Provides that specified
non-profit organizations shall be regarded as consumers,
rather than retailers, of TPP they purchase and resell,
at cost, to their members. AB 1486 (Furutani) has been
referred to the Senate Committee on Revenue and Taxation.
d) Potential amendments :
SB 809
Page 7
i) Committee staff suggests a technical amendment to
insert "and sold" after "owned" on page 3, line 3.
ii) As noted above, this bill is nearly identical to AB
1265 (Ma), also introduced in the current Legislative
Session. In fact, this bill is identical to the version
of AB 1265 (Ma) heard by this Committee on May 18, 2009.
AB 1265 (Ma) passed out of this Committee on a unanimous
vote, but only after being amended to include a January
1, 2012 sunset date. In addition, the bill was further
amended by the Assembly Appropriations Committee to not
apply to items sold for more than $100. The author may
wish to take similar amendments to this bill.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098