BILL ANALYSIS                                                                                                                                                                                                    �




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 289                      HEARING:  6/29/11
          AUTHOR:  Cedillo                      FISCAL:  Yes
          VERSION:  5/24/11                     TAX LEVY:  Yes
          CONSULTANT:  Miller                   

             SALES AND USE TAX EXEMPTION: CHARITABLE THRIFT STORES
          

             Extends the sales and use tax exemption for charitable 
                           thrift stores until 2019.


                           Background and Existing Law  

          Existing law imposes a sales tax on retailers for the 
          privilege of selling tangible personal property.  The tax 
          is based upon the retailer's gross receipts from sales in 
          this state.  Existing law imposes a complementary use tax 
          on the storage, use, or other consumption in this state of 
          tangible personal property purchased from any retailer.  
          The use tax is imposed on the purchaser, and unless the 
          purchaser pays the use tax to a retailer registered to 
          collect the California use tax, the purchaser remains 
          liable for the tax, unless the use is exempted.  The use 
          tax is set at the same rate as the state's sales tax and 
          must be remitted to the State Board of Equalization (BOE).  


          State law provides a sales and use tax exemption for used 
          pieces of clothing, household items, or other retail items 
          sold by specified thrift stores operated by a "nonprofit 
          organization."  To qualify for the exemption, the thrift 
          store's purpose must be to generate revenue for the funding 
          of medical, hospice, or social services for chronically ill 
          individuals, and at least 75% of the thrift store's net 
          income must be so used.  Existing law defines a "nonprofit 
          organization," for purposes of the exemption, as a 
          nonprofit organization that provides medical, hospice, or 
          social services to individuals with a chronic, 
          life-threatening illness, including HIV disease or AIDS.  


                                   Proposed Law  





          AB 289 -- 5/24/11 -- Page 2



          Assembly Bill 289 repeals the current January 1, 2012 
          sunset date for the current sales and use tax exemption for 
          retail items sold by thrift stores operated by nonprofit 
          organizations to assist individuals with human 
          immunodeficiency virus (HIV) or acquired immune deficiency 
          syndrome (AIDS) and extends it to January 1, 2019.   

          This bill provides that the state shall not reimburse any 
          local agency for lost sales and use tax revenues.


                               State Revenue Impact
           
          The BOE estimates that this bill would result in annual 
          state and local revenue losses of approximately $1 million.


                                     Comments  

          1.   Purpose of the bill  .  The author introduced this bill 
          because the sales and use tax exemption will expire on 
          January 1, 2012 and this bill extends that sunset to 
          January 1, 2019 so that services may still be provided to 
          chronically ill patients regardless of their ability to 
          pay.  BOE, the sponsor of the bill further notes that this 
          sales and use tax exemption would demonstrate the 
          Legislature's recognition that these nonprofit thrift 
          stores should be treated similarly as the other thrift 
          stores currently qualifying for an existing exemption, such 
          as those operated by the Salvation Army, Goodwill 
          Industries and St. Vincent de Paul.

          2.   Every dollar counts  .  Opponents of tax exemptions in 
          general argue that the state's revenue would be more 
          effectively spent through direct expenditures, such as 
          hospice programs or MediCal, instead of sales and use tax 
          exemptions such as this one. 

          3.   Making a difference  .  Proponents of the measure state, 
          "Thrift stores rely entirely upon donations to stock their 
          shelves.  They offer a customer a variety of merchandise at 
          affordable prices.  In today's economy more people are 
          shopping for better deals.  The merchandise sales at these 
          thrift stores assists �sic] the nonprofit organizations to 
          provide free or low cost legal assistance, counseling, 
          referral services or direct benefits.  Some organizations 





          AB 289 -- 5/24/11 -- Page 3



          specialize in specific issue areas, or direct services to 
          specific communities.  Every sale helps fund vital 
          community resource programs."


                                 Assembly Actions  

          Assembly Revenue & Taxation Committee:  8-0
          Assembly Appropriations Committee:17-0
          Assembly Floor:                    79-0









































          AB 289 -- 5/24/11 -- Page 4




                         Support and Opposition  (6/23/11)

           Support  :  State Board of Equalization (sponsor); AIDS 
          Healthcare Foundation; California Communities Untied 
          Institute; California Hospice and Palliative Care 
          Association; California Catholic Conference; Goodwill.

           Opposition  :  Unknown.