BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 28X1|
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THIRD READING
Bill No: AB 28X1
Author: Blumenfield (D)
Amended: 6/15/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : 2011-12 Budget Trailer Bill: Use Tax
Collection
SOURCE : Author
DIGEST : This bill clarifies the obligations under
existing law for out-of-state retailers to collect and
remit use tax on sales of tangible personal property to
California residents. Specifically, this bill expands the
statutory definition of "retailer engaged in business in
this state" under Revenue and Taxation Code Section 6203 to
include any retailer entering into an agreement with a
California resident under which the resident, for a
commission or other consideration, directly or indirectly
refers potential customers, whether by a link or an
Internet Web site or otherwise, provided that: (1) the
retailer's cumulative sales within the preceding 12 months
to customers in California that were referred pursuant to
affiliate agreements are in excess $10,000 and (2) the
retailer in the preceding 12 months had sales of tangible
personal property in the State in excess of $500,000. This
provision requires an out-of-state retailer that has
business relationships with affiliates in California to
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collect use tax on sales to California residents, and is
included in SB 153 (Skinner).
Senate Floor Amendments of 6/15/11 improve the collection
of use tax liabilities of California taxpayers by
clarifying the collection responsibilities of out-of-state
retailers.
ANALYSIS : The amendments in this bill incorporates the
provisions of SB 234 (Hancock); AB 153 (Skinner) and AB 155
(Calderon). Each of these bills passed by its house of
origin in 2011.
California law imposes a use tax on the storage, use, or
other consumption in this state of tangible personal
property (i.e., "goods") purchased from any retailer. The
use tax is imposed on the purchaser at the same rate as the
sales tax and is required to be remitted to the Board of
Equalization (BOE). The most practical way for a state to
enforce its use tax is to have retailers collect the tax at
the time of sale. It simply is not cost-effective for the
BOE to pursue individual taxpayers for their use tax
liabilities.
The Commerce Clause of the United States Constitution
(Article I, Section 8, Clause 3) states that Congress has
the exclusive authority to manage trade activities between
the states, with foreign nations, and Indian tribes. The
"Dormant" Commerce Clause, implied from the Commerce
Clause, is that states are prohibited from enacting
legislation that improperly burdens or discriminates
against interstate commerce. The courts have determined
that an out-of-state retailer must have a physical presence
or "substantial nexus" in a state in order to compel the
retailer to collect use tax on sales to in-state residents.
This bill clarifies circumstances under which out-of-state
retailers have substantial nexus in California and can be
compelled to collect use tax.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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DLW:do 6/15/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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