BILL ANALYSIS
SB 809
Page 1
SENATE THIRD READING
SB 809 (Veterans Affairs Committee)
As Amended July 15, 2009
Majority vote. Tax levy
SENATE VOTE :39-0
REVENUE & TAXATION 8-0 APPROPRIATIONS 17-0
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|Ayes:|Charles Calderon, Beall, |Ayes:|De Leon, Conway, Ammiano, |
| |Coto, Harkey, Ma, Hagman, | | |
| |Portantino, Saldana | |Charles Calderon, Coto, |
| | | |Davis, Duvall, Fuentes, |
| | | |Hall, Harkey, Miller, |
| | | |John A. Perez, Skinner, |
| | | |Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Hill |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Provides that a "qualified itinerant vendor" (QIV) is
a consumer, and not a retailer, of tangible personal property
(TPP) the QIV owns and sells, except alcoholic beverages or TPP
sold for more than $100. 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
SB 809
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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 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.
6) Sunsets on January 1, 2012.
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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.
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 this
bill would reduce state and local revenues by $24,855 annually.
COMMENTS : 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."
SB 809
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BOE notes the following in its staff analysis of this bill:
1)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 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."
2)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 (Berg), Chapter 435, Statutes of 2008, 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."
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Committee Staff Notes:
1)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 of entities, including optometrists,
veterinarians, licensed hearing aid dispensers, and others
with respect to certain TPP sales.
2)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
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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 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.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0002527