BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 805 HEARING: 4/27/11
AUTHOR: Comm. On Veterans Affairs FISCAL: Yes
VERSION: 2/18/11 TAX LEVY: Yes
CONSULTANT: Miller
INTINERANT VETERANS SALES AND USE TAX EXEMPTION
Exempts itinerant veterans from specific provisions of the
sales and use tax.
Background and Existing Law
Current state law imposes the sales and use tax on the
gross receipts on tangible personal property unless
statutorily exempted. The law does not contain a general
sales and use tax exemption for products sold by veterans.
Under the law, every retailer or any other person engaged
in the business of selling tangible personal property which
is taxable in this state is required to obtain a seller's
permit and report the tax on his or her sales on a return
prescribed by the Board. However, California's Sales and
Use Tax Law places a variety of retailers making taxable
sales of tangible personal property under a "consumer"
reporting status. Under a "consumer" reporting status, a
qualifying retailer making otherwise taxable sales is not
required to obtain a seller's permit or report tax on those
sales. Rather, the qualifying retailer is only required to
pay tax on his or her cost of the taxable components of the
products he or she sells.
The "consumer" reporting status is primarily intended to
minimize reporting burdens placed on smaller businesses and
entities, while minimizing the associated revenue loss that
can accompany a complete exemption from the tax. The law
has extended this consumer reporting status to certain
sales by such entities as nonprofit youth groups, PTAs,
nonprofit veterans' organizations, various charitable
organizations, schools and school districts, optometrists,
veterinarians, podiatrists, licensed hearing aid
dispensers, and others with respect to certain products
SB 805 -- 2/18/11 -- Page 2
they sell.
With respect to certain veterans that sell goods, current
law provides that, until January 1, 2012, a "qualified
itinerant vendor" is a consumer of tangible personal
property owned and sold by the qualified itinerant vendor,
except alcoholic beverages and tangible personal property
sold for more than $100.
This provision specifies that a person is a "qualified
itinerant vendor" when all of the following apply:
1. 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 from
service,
2. The person is unable to obtain a livelihood by manual
labor due to a service-connected disability.
3. For the purposes of selling tangible personal property,
the person is a sole proprietor with no employees, and
4. The person has no permanent place of business in this
state.
The law also 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, tangible personal property, and excludes
from that term, any building or other permanently affixed
structure, including a residence, used for any of the
following:
1. The storage of tangible personal property.
2. The cleaning or the storage of equipment or other
property used in connection with the manufacture or
sale of tangible personal property.
These provisions, however, do not apply caterers or
vending machine operators.
Proposed Law
SB 805 -- 2/18/11 -- Page 3
Senate Bill 805 deletes the January 1, 2012 sunset, so that
qualified itinerant veteran vendors would remain
"consumers" indefinitely with respect to tangible personal
property they sell for $100 or less under the specified
conditions.
This bill would become effective immediately.
State Revenue Impact
According to the BOE, this bill would result in an annual
state and local revenue loss of about $22,000.
Comments
1. Purpose of the bill . This bill is sponsored by the BOE
in order to enable qualifying veterans to retain their
consumer status with respect to their itinerant sales.
This provision represents one small step towards
recognizing our disabled veterans who have already made, or
are making the transition from military to civilian
employment, and it should not be allowed to sunset. This
provision assists in this transition by simplifying
reporting requirements under the Sales and Use Tax Law for
those qualifying disabled veterans that are honorably
discharged or released from service that desire to engage
in the business of selling goods they own. For qualifying
disabled veterans without employees or a permanent place of
business, this provision eliminates the need for them to
hold a seller's permit, file sales tax returns, and remit
sales tax on their sales.
2. I'll be back for more than a hot dog. Senate Bill 809
(Committee on Veteran's Affairs, 2009) added this exemption
and became operative on April 1, 2009. The bill passed the
Legislature unanimously. For several years prior to the
enactment of SB 809, veterans argued that they qualified
for a sales and use tax exemption under a Business and
Professions Code section which exempts honorably discharged
veterans from locally-imposed license taxes and fees.
Veterans groups argued that they were specifically exempt
from the application of the sales and use tax on sales of
food products and carbonated beverages from a mobile food
cart. According to the courts and Legislative Counsel,
SB 805 -- 2/18/11 -- Page 4
that law did not exempt qualified veterans from the sales
and use tax which prompted the need for additional
legislation.
3. Tie a yellow ribbon. Under these provisions, a
qualifying itinerant disabled veteran making taxable sales
of goods, wares or merchandise owned by him or her is not
required to report sales tax on his or her sales of these
items. Instead, the veteran is only required to pay tax on
his or her cost of any taxable purchases of the items or
the component parts of the items he or she sells. For
example, when a veteran is 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 provision, if
the qualifying veteran makes no sales of alcoholic
beverages or sales that exceed the $100 cap, the veteran is
not 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.
4. To become a seller again. These provisions apply to a
small group of itinerant disabled veteran vendors, and if
the sunset date were not repealed, the BOE argues that it
would create an administrative burden on them because it
would have to re-register these individuals, re-issue a
seller's permit to them, and ensure that they are in
compliance with the law.
Support and Opposition (4/21/11)
Support : State Board of Equalization (sponsor).
Opposition : Unknown.