BILL ANALYSIS �
AB 919
Page A
ASSEMBLY THIRD READING
AB 919 (Williams)
As Amended January 17, 2014
Majority vote
REVENUE & TAXATION 9-0 APPROPRIATIONS 16-0
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|Ayes:|Bocanegra, Dahle, Gordon, |Ayes:|Gatto, Bigelow, Allen, |
| |Harkey, Mullin, Nestande, | |Bocanegra, Bradford, Ian |
| |Pan, | |Calderon, Campos, Eggman, |
| |V. Manuel P�rez, Ting | |Gomez, Holden, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Enables a "qualified veteran" to receive from the state a
"qualified 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. Specifically, this
bill :
1)Defines a "qualified veteran" as a person who:
a) Met the requirements of a "qualified itinerant vendor" (QIV)
as set forth in Revenue and Taxation Code (R&TC) Section 6018.3
during the period in which the sales were made; and,
b) Paid to the BOE state and local sales taxes during the period
beginning April 1, 2002, and before April 1, 2010, for which no
sales tax reimbursement was collected from customers, and also
paid any interest or penalties associated with those tax
liabilities.
2)Defines a "qualified repayment" as an amount equal to the state and
local sales taxes paid during the period beginning April 1, 2002,
and before April 1, 2010, less any amount previously refunded to a
qualified veteran, as specified.
3)Provides that a qualified veteran may file a claim for a qualified
repayment with the BOE before January 1, 2016. Claims shall be in
writing and shall be completed in accordance with applicable
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instructions.
4)Requires the BOE, on or before March 1, 2016, to certify to the
State Controller the amount of qualified repayments to be paid to
each qualified veteran. The total amount of money available to make
qualified repayments shall not exceed $50,000. If the total amount
of claims filed exceeds $50,000, the BOE shall determine the pro
rata share due to each qualified veteran.
5)Provides that, upon appropriation by the Legislature, the State
Controller shall make the qualified repayments to qualified
veterans.
6)Provides that no interest shall be paid on any qualified repayment
made under this bill.
7)Declares that this act serves a public purpose, and does not
constitute a gift of public funds within the meaning of California
Constitution Article XVI, Section 6.
EXISTING LAW :
1)Imposes a sales tax 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.
2)Imposes 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 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 BOE.
3)Classifies a QIV as a consumer, and not a retailer, of TPP owned and
sold by the QIV, except for alcoholic beverages or TPP sold for more
than $100.
4)Specifies that a person is a QIV when all the following conditions
apply:
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a) The person was a member of the Armed Forces of the United
States (U.S.), who received an honorable discharge or release
from active duty under honorable conditions;
b) The person is unable to obtain a livelihood by manual labor
due to a service-connected disability;
c) For purposes of selling TPP, the person is a sole proprietor
with no employees; and,
d) The person has no permanent place of business in this state.
5)Specifies that this preferential tax treatment does not apply to a
person:
a) Engaged in the business of serving meals, food, or drinks to a
customer at a location owned, rented, or otherwise supplied by
the customer (i.e., a caterer); or,
b) Operating a vending machine.
FISCAL EFFECT : According to the Assembly Appropriations Committee,
this bill limits the allowable repayment amount to $50,000 (General
Fund), upon appropriation by the Legislature. The BOE will have minor
and absorbable administrative costs for receiving and processing the
reimbursement filings.
COMMENTS : The author has provided the following statement in support
of this bill:
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.
As a result of previous misinterpretations of the law
governing the collection of sales tax on the part of
certain disabled veteran vendors, the Legislature passed
and the Governor signed Senate Bill 809 in 2009. That bill
granted certain qualified vendors an exemption from
collecting sales tax from consumers through [January] 1,
2012. Senate Bill 805 (2011) extended these provisions to
2022.
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While SB 809 and SB 805 benefit those qualified disabled
veterans returning to the civilian workforce from 2010 and
moving forward, disabled veteran vendors who operated
before the adoption of [SB 809] still paid several years'
worth of sales tax, interest and penalties to the BOE.
This bill targets a small group of itinerant disabled
veteran vendors. These veterans live on the fringe of our
economy often as a direct result of their military service.
To the extent that the Legislature can offer a little
financial relief in recognizing the sacrifices our veterans
made, it should take the opportunity to do so. AB 919
provides modest assistance to those veterans who have been
required to remit sales tax, interest, and penalties to the
BOE, and who lack significant assets.
The Assembly Revenue and Taxation Committee staff comments:
Retailers and consumers: The sales tax is imposed on retailers for
the privilege of selling TPP. As such, 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 sales and use tax (SUT)
exemptions.
One man's personal cause: This bill, and the four 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.
Specifically, Mr. Connell has relied on B&PC Section 16102, which
provides in its entirety:
Every soldier, sailor or marine of the United States who
has received an honorable discharge or a release from
active duty under honorable conditions from such service
may hawk, peddle and vend any goods, wares or merchandise
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owned by him, except spirituous, malt, vinous or other
intoxicating liquor, without payment of any license, tax or
fee whatsoever, whether municipal, county or State, and the
board of supervisors shall issue to such soldier, sailor or
marine, without cost, a license therefor.
This provision was added in 1893 (long before enactment of the SUT
Law), and was described in the chaptering bill as "An act to establish
a uniform system of county and township government." Moreover, this
statute is contained in Chapter 2 of Part 1 of Division 7 of the
Business and Professions Code (B&PC), entitled Licensing by Counties.
As such, in 1999, the BOE held that, while this statute exempts
honorably discharged veterans from locally imposed license taxes and
fees, it does not provide an exemption from SUT.<1>
Mr. Connell, however, was not satisfied with this interpretation.
Thus, on May 12, 1999, Mr. Connell filed a Superior Court complaint
against the BOE seeking a refund of SUT for the period of July 1,
1993, through June 30, 1997. The BOE filed a motion for judgment on
the pleadings, which the court granted. Mr. Connell did not appeal
this judgment.
On June 2, 2004, Mr. Connell filed a second lawsuit against the BOE
seeking a SUT refund for the period beginning on July 1, 1993, to
which the BOE demurred. The court sustained the BOE's demurrer,
without leave to amend, and notice of entry of judgment was served by
mail on September 13, 2004. Again, Mr. Connell did not appeal this
judgment.
On June 4, 2008, Mr. Connell filed his third lawsuit against the BOE,
again seeking a SUT refund for the period "1993 to present." Once
again, the BOE demurred to Mr. Connell's complaint, and once again,
the court sustained the BOE's demurrer without leave to amend. Mr.
Connell then appealed this case to the Court of Appeal.
Thereafter, on April 29, 2010, Mr. Connell signed a "Settlement
Agreement and Mutual Release of all Claims" (Settlement Contract)
--------------------------------
<1> The BOE notes that its interpretation was also supported by two
separate opinions issued by the Office of Legislative Counsel in 1998
and 2006. Specifically, the Office of Legislative Counsel concluded
that the B&PC exemption only applies to county license taxes and
license fees, and does not apply to SUT.
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covering the entire period from June 25, 1993 through March 31, 2009.
The BOE agreed to refund Mr. Connell an undisclosed amount of money
"[i]n 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."
At the same time that Mr. Connell was litigating his dispute in the
courts, he was also advocating for legislation to amend the SUT Law to
conform to his personal interpretation of the law. The 2007-08
Regular Session saw the first such legislative effort in the form of
AB 3009 (Brownley), which sought to classify certain veterans as
consumers, and not retailers, of food products and nonalcoholic
beverages they sell. AB 3009 was held in the Assembly Revenue and
Taxation Committee. In 2009, however, Mr. Connell was successful in
his efforts to pass SB 809 (Committee on Veterans Affairs), Chapter
621, Statutes of 2009, which granted consumer reporting status to QIVs
until January 1, 2012. In 2011, SB 805 (Committee on Veterans
Affairs), Chapter 246, Statutes of 2011, was introduced to delete this
sunset date outright, making the preferential provisions permanent.
SB 805 was amended, however, to instead provide a sunset extension to
January 1, 2022. Thus, until that date, Mr. Connell can continue to
operate his business without collecting or remitting sales tax.
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.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098
FN: 0002979
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