BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1352 HEARING: 6/29/11
AUTHOR: Logue FISCAL: Yes
VERSION: 3/22/11 TAX LEVY: No
CONSULTANT: Miller
SALES AND USE TAX INTEREST
Allows the BOE to relieve interest in extraordinary
circumstances.
Background and Existing Law
Existing state law requires any person desiring to engage
in business as a seller in California to apply for a
seller's permit with the Board of Equalization (BOE). A
seller's permit is valid for as long at the seller
maintains a business and remains in good standing with the
BOE.
A person who fails to comply with any provision of the
sales and use tax law, including payments of amounts due,
may have their seller's permit revoked by the BOE. Prior
to revocation of a seller's permit, however, the BOE must
provide advanced written notice of the time and place of a
hearing to be held which will afford the person the
opportunity to show why their seller's permit should not be
revoked.
A seller whose permit has been revoked or suspended may
renew their permit after paying a $100 reinstatement fee to
the BOE.
The BOE may require a person to file a security deposit
with the BOE to ensure compliance with the sales and use
tax law. The security deposit may not exceed $50,000 and
it must be released by the BOE after a three-year period in
which the person has filed all tax returns and paid all
taxes to the state.
Taxpayers who are late in payment of their sales and use
tax obligations are must pay a penalty, plus monthly,
simple interest on those unpaid taxes from the date the tax
SB 1352 -- 3/22/11 -- Page 2
is due to the date upon which they are paid. The rate of
interest for late payments is 7% annually.
Proposed Law
Assembly Bill 1307 would allow Members of the BOE to
relieve all or any part of the interest imposed, not to
exceed $50,000 during a 12-month period, on a late payment
if Members find, in their discretion, that a person's late
payment was due to extraordinary circumstances and that it
is inequitable to compute interest as current law requires.
All of the following must apply in order for the relief to
be granted:
1. The person was granted relief from all penalties
that applied to the late payment.
2. The person has paid the tax on which the interest
is imposed, or, in the case of an unpaid tax liability
for which a petition for redetermination is pending,
the person pays the tax on which the interest is
imposed within 30 days from the date the final
decision of the BOE on that petition was issued.
3. The person files a request for an oral hearing
before the Members of the BOE.
4. The person files a statement with the BOE under
penalty of perjury setting forth the facts upon which
the claim for relief is based and any other
information the BOE may require.
The bill defines "extraordinary circumstances" to mean any
of the following:
1. The occurrence of a death or medical incapacity of
the person or the person's next of kin that caused the
person's failure to make a timely payment.
2. The occurrence of an emergency, as defined in
Section 8558 of the Government Code, that caused the
person's failure to make a timely remittance.
3. Criminal misconduct by a person, other than the
person that failed to make a timely payment, that
caused the person's failure to make a timely payment.
SB 1352 -- 3/22/11 -- Page 3
If the person fails to pay the tax, the interest liability
would be reestablished.
State Revenue Impact
According to the BOE, the exact revenue loss associated
with the bill is undeterminable but by the bills terms, the
revenue loss cannot exceed $50,000.
Comments
1. Purpose of the bill . This bill is sponsored by the BOE
and was prompted by a sales and use tax case from a
December 2009 public hearing. In this case, the taxpayer's
bookkeeper revised the taxpayer's computerized accounting
records and embezzled a substantial amount of sales tax
reimbursement collected from the taxpayer's customers.
Although the bookkeeper was fired and prosecuted and is
currently serving a prison sentence, the taxpayer remains
liable for the tax and interest. And, even though the
taxpayer had previously an excellent record of payment of
sales and use taxes, and acted swiftly and appropriately
upon discovery of the embezzlement, the fact that the
taxpayer was a victim of such a crime is not a basis for
relief. The law does not provide relief from tax or
interest based on a loss of the funds after the sale, by
embezzlement or otherwise.
2. Public disasters are already excluded . Existing law
holds taxpayers harmless after a natural disaster for late
taxes. This bill offers identical relief to taxpayers that
suffer personal tragedies such as a death in the family
with specific requirements that the taxpayer make to the
BOE directly. The state also allows excess disaster loss
treatment and property tax disaster relief after a natural
disaster; would this bill create a slippery slope of
exceptions for personal tragedies? The Committee may wish
to consider whether it is fair to offer the same relief for
personal tragedies as the state already does for natural
disasters.
SB 1352 -- 3/22/11 -- Page 4
Assembly Actions
Assembly Revenue & Taxation Committee: 9-0
Assembly Appropriations Committee:16-0
Assembly Floor: 78-0
Support and Opposition (6/23/11)
Support : Board of Equalization (sponsor).
Opposition : Unknown.