BILL ANALYSIS �
AB 919
Page 1
Date of Hearing: January 23, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 919 (Williams) - As Amended: January 17, 2014
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows a qualified veteran to receive from the state a
repayment of state and local sales taxes paid to the State Board
of Equalization (BOE) during the eight-year period beginning on
and after April 1, 2002, and before April 1, 2010, as specified.
The bill lays out an administrative process for filing and
processing of repayments and provides the amount of total
authorized repayment shall not exceed $50,000 for all taxpayers,
and is subject to appropriation by the Legislature.
FISCAL EFFECT
This bill limits the allowable repayment amount to $50,000 (GF),
upon appropriation by the Legislature. The BOE will have minor
and absorbable administrative costs for receiving and processing
the reimbursement filings.
COMMENTS
1)Purpose . According to the author, disabled veterans
transitioning from military to civilian life can struggle to
reintegrate. Frequently they are unable to find a job and
many veterans become vendors selling art, food, books among
other items. The author argues this bill targets a small
group of itinerant disabled veteran vendors who live on the
fringe of our economy often as a direct result of their
military service. The author contends that, to the extent the
Legislature can offer financial relief in recognizing the
sacrifices made by our veterans, it should take the
opportunity to do so. The author states that AB 919 provides
modest assistance to veterans who have been required to remit
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sales tax, interest, and penalties to the BOE, and who lack
significant assets.
2)Sponsor . The bill's sponsor, the BOE, notes the Legislature
unanimously voted to specify that honorably discharged
veterans with service-related disabilities who have no
permanent place of business are consumers, not retailers of
certain goods they sell. The purpose of that legislation was
to ease the economic burdens of veterans who sustained
permanent injuries in foreign conflicts. BOE argues that some
itinerant veterans acted on the belief they could make sales
of small items without responsibility for the tax. These
itinerant veterans lack substantial assets and many
experienced forced collection action by BOE. The sponsor
believes a small number of these veterans are in need of
relief for prior periods; specifically to allow qualified
veteran vendors to submit a claim for reimbursement of the
monies paid during the years when the law was unclear.
3)Background-sales and use tax. A sales tax is imposed on
retailers for the privilege of selling tangible personal
property (TPP), absent a specific exemption. The tax is based
upon the retailer's gross receipts from TPP sales in this
state. Retailers of TPP must generally obtain a seller's
permit and report and remit the tax to the BOE. Existing law,
however, classifies a variety of retailers as consumers, and
not retailers, of specified TPP they sell. These retailers
are not required to obtain seller's permits or to report tax
on their qualifying sales. Instead, these retailers are only
required to pay tax on the taxable goods used to produce the
property they sell. This consumer reporting status is
primarily designed to alleviate reporting burdens for small
businesses, while minimizing the revenue losses associated
with complete SUT exemptions.
4)Background . This bill, and a number of related bills
preceding it, stem from the efforts of veteran William M.
Connell. Since at least June 25, 1993, Mr. Connell has
operated a mobile food business known as "All American Surf
Dog." For years, Mr. Connell has asserted that, under a law
originally enacted in the 19th century, he has no obligation
to collect or remit SUT on his retail sales. Mr. Connell has
brought litigation against the state over the collection of
sales tax on four separate occasions. While Mr. Connell met
with failure in the courts on the first three occasions, the
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fourth case was settled. The BOE agreed to refund Mr. Connell
an undisclosed amount of money in full consideration for the
settlement and releases contained in the settlement contract.
In addition to requiring the dismissal of Mr. Connell's
appeal, the settlement contract required Mr. Connell to
refrain from further litigation or administrative claims
against the BOE, and furthermore, Mr. Connell agreed to waive
any known or unknown claims.
Apparently unsatisfied with his legislative victory, which
relieves him of the obligation to either collect or remit
sales tax and unconcerned with the settlement he voluntarily
reached with the state, Mr. Connell is now seeking
retroactive relief for sales tax payments made to the BOE
between April 1, 2002, and April 1, 2010. Essentially, this
bill is asking the Legislature to retroactively conform the
law to support Mr. Connell's position that he was never under
a legal obligation to collect sales tax; this, despite the
fact that Mr. Connell's position was repeatedly rejected as
lacking merit by the courts, by the BOE itself, and by the
Legislature's own Office of Legislative Counsel.
5)Small bill, big issues. This bill raises significant issues:
a) The bill could be seen as special legislation that gifts
public funds, despite the findings specifically stating it
is not such a gift. BOE has informed the committee there
are at least several vendors who failed to collect sales
tax based on their understanding of the 1893 statute and
would be affected by this bill.
b) This bill provides retroactive relief to conform the law
to one individual's repeatedly rejected legal
interpretation.
c) This bill would seem to ignore the existing settlement.
It is not clear how the BOE would be in a position to pay
Mr. Connell, given that he signed a settlement contract
with the BOE forever releasing his claims for this period
in exchange for an unspecified settlement payment. BOE
would have to ignore the settlement contract to pay him,
although the author has taken amendments to eliminate the
possibility of double payment.
d) The Legislature in considering this bill ignores the
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settlement contract voluntarily entered into by the
taxpayer and the BOE.
7)Related legislation .
a) SB 805 (Committee on Veterans Affairs), Chapter 246,
Statutes of 2011, extended the sunset date for the
preferential consumer status provisions from January 1,
2012, until January 1, 2022.
b) SB 809 (Committee on Veterans Affairs), Chapter 621,
Statutes of 2009 provided that a qualified veteran, as
specified, is a consumer, and not a retailer, of TPP, with
certain limitations.
8)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081