BILL ANALYSIS �
AB 2270
Page A
Date of Hearing: April 9, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 2270 (Harkey) - As Introduced: February 24, 2012
Majority vote. Fiscal committee.
SUBJECT : Sales and Use Tax Law: use tax: administration
SUMMARY : Provides that, for reporting periods beginning on or
after January 1, 2012, the "qualified use tax" of an "eligible
purchaser" shall be due and payable to the State Board of
Equalization (BOE) on or before April 15 following the close of
the calendar year in which the use tax liability was incurred.
Specifically, this bill :
1)Defines "qualified use tax" as the amount of use tax imposed
under any of the following laws that has not been paid to a
retailer holding a seller's permit or certificate of
registration-use tax:
a) The Sales and Use Tax (SUT) Law;
b) Article XIII of the California Constitution;
c) The Bradley-Burns Uniform Local SUT Law; or,
d) The Transactions and Use Tax Law.
2)Specifies that "qualified use tax" does not include the use
tax described in Revenue and Taxation Code (R&TC) Section
6452.1(d)(2)(B) (e.g., use tax imposed on specified mobile
homes, vehicles, leases, etc.).
3)Defines an "eligible purchaser" as a person that purchases
tangible personal property (TPP), the storage, use, or other
consumption of which is subject to "qualified use tax" and
that is either of the following:
a) Eligible to report use tax on an "acceptable tax return"
but does not elect to do so; or,
b) Not required to file an "acceptable tax return" under
either the Personal Income Tax (PIT) Law or the Corporation
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Tax (CT) Law, and that is not a holder of a use tax direct
payment permit or is not otherwise registered or required
to be registered with the BOE to report SUT.
4)Defines an "acceptable tax return" by reference to R&TC
Section 6452.1(d)(1).
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
retailer's gross receipts from TPP sales in this state.
2)Imposes, on transactions not subject to sales tax, a
complementary use tax on the storage, use, or other
consumption in this state of TPP 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
California's 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
BOE.
3)Authorizes an eligible person to make an irrevocable election
to report qualified use tax, as defined, on that person's
income tax return.
FISCAL EFFECT : The BOE estimates that this bill would have a
negligible impact on state and local revenues (i.e., under
$10,000 annually).
COMMENTS :
1)The author has provided the following statement in support of
this bill:
Currently, if an individual elects to report his or her use
tax liability on the state income tax return, as long as
the state income tax return is filed timely (generally
April 15 for personal income tax), the use tax payment is
considered timely and no penalty or interest �charges]
apply. However, if, instead, that same individual paid the
use tax directly to the Board of Equalization on the same
day using a BOE use tax return, the payment would be
considered late, and the individual would be subjected to
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the late payment penalty and interest. The current due
date for eligible purchasers to pay their use tax liability
with the BOE is January 31st.
This legislation would designate April 15 as the due date
for use tax payments to the BOE by eligible purchasers
during the preceding calendar year. April 15th is the
regular due date for income taxes for individuals, and
providing some consistency in the due dates for purchasers
incurring a use tax liability provides a commonsense
approach in administering a law for which many California
purchasers are unaware.
2)The BOE, which is sponsoring this bill, notes the following in
its staff analysis:
a) Sponsor and purpose : This bill is sponsored by the BOE
and is intended to provide consistency in the due dates for
use tax payments by purchasers that are not registered or .
. . required to be registered with the BOE. Currently, if
an individual elects to report his or her use tax liability
on the state income tax return, as long as the state income
tax return is filed timely (generally April 15 for personal
income tax), the use tax payment is considered timely and
no penalty or interest apply. However, if, instead, that
same individual paid the use tax directly to the BOE on the
same day using a BOE use tax return, the payment would be
considered late, and the individual would be subjected to
the late payment penalty and interest.
b) The bill just makes sense : April 15th is the regular
due date for income taxes for individuals, and providing
some consistency in the due dates for purchasers incurring
a use tax liability provides a commonsense approach in
administering a law for which many California purchasers
are unaware.
3)Committee Staff Comments:
a) Overview of existing law : As a general rule, taxes
imposed under the SUT Law are due and payable to the BOE
quarterly on or before the last day of the month following
each quarterly period. (R&TC Section 6451). R&TC Section
6455, however, permits the BOE to require SUT returns and
payments on a non-quarterly basis (i.e., monthly or
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annually) if deemed necessary to insure payment or
facilitate collection. In such cases, returns must be
filed on or before the last day of the month following each
designated reporting period. �R&TC Section 6455(b)].
Currently, the law provides two exceptions to the general
due date rules described above. The first exception
applies to "qualified purchasers". Under the first
exception, "qualified purchasers" must register with the
BOE and report and pay by April 15 use taxes owed for
purchases made during the preceding calendar year. A
"qualified purchaser", in turn, is defined as a person not
otherwise required to be registered that receives at least
$100,000 in gross receipts from business operations per
calendar year (e.g., accounting firms, law offices, real
estate firms, etc.). �R&TC Section 6225(c)].
Under the second exception, any person who purchases TPP
subject to "qualified use tax" may elect to report and
remit that qualified use tax on an acceptable PIT or CT
return. (R&TC Section 6452.1). Thus, non-registered<1>
purchasers may either report their qualified use tax
liabilities directly to the BOE or on their Franchise Tax
Board return. Moreover, when a purchaser reports his/her
use tax on a timely-filed FTB return, that payment is
considered timely and no late charges are incurred.
This set of rules has created an anomaly whereby, if a
person were to report his/her use taxes for calendar year
2011 on a PIT return filed April 15th, 2012, those use
taxes would be considered timely reported. However, if the
very same person were to report his/her use taxes directly
to the BOE on April 15th, the same taxes would be
considered late. This is because, under current law, SUT
must be reported to the BOE on the last day of the month
immediately following the reporting period (i.e., January
31, 2012 for calendar year 2011).
b) This proposal : This bill seeks to address this anomaly
by adding R&TC Section 6452.2 to the SUT Law to designate
April 15th as the use tax due date for "eligible
purchasers" who have made taxable purchases during the
--------------------------
<1> R&TC Section 6452.1 does not apply to any person who is
otherwise required to hold a seller's permit or to register with
the BOE.
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preceding calendar year. This bill defines an "eligible
purchaser" as a person that incurred a use tax liability
and that is either (1) eligible to report the use tax on
his/her FTB return, but did not elect to do so, or (2) a
person that is not required to file a return with the FTB,
and is not otherwise registered or required to be
registered with the BOE to report SUT.
c) Suggested technical amendments :
i) On page 2, line 5, replace "person" with
"purchaser"; and,
ii) On page 2, line 15, replace "A person that is not"
with "Not".
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (sponsor)
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098