BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 919 HEARING: 6/11/14
AUTHOR: Williams FISCAL: Yes
VERSION: 5/23/14 TAX LEVY: No
CONSULTANT: Bouaziz
SALES AND USE TAX: ITINERANT VENDORS: REPAYMENT
Enables a "qualified veteran" to receive from the state a
"qualified repayment" of state and local sales taxes paid
between April 1, 2002, and April 1, 2010.
Background and Existing Law
State law 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.
State law 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 purchaser is liable for
the tax. The use tax is set at the same rate as the
state's sales tax and must be remitted to the Board of
Equalization (BOE).
Generally, retailers must obtain a seller's permit and
report the sales and use tax on a BOE prescribed return,
unless designated as "consumers." In which case, they
neither obtain a seller's permit nor report the tax on
sales. Instead, consumers pay tax when they purchase
taxable products intended for sale. Various classes of
retailers are classified as consumers, including qualified
itinerant vendors. A qualified itinerant vendor (QIV) is a
person that:
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;
Is unable to obtain a livelihood by manual labor
due to a service-connected disability;
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Is a sole proprietor with no employees; and,
Has no permanent place of business in this state.
Proposed Law
Assembly Bill 919 enables a "qualified veteran" to receive
from the state a "qualified repayment" of state and local
sales taxes paid to the BOE during the eight-year period
beginning on and after April 1, 2002, and before April 1,
2010.
The bill defines a "qualified veteran" as a person who met
the requirements of a QIV during the period in which the
sales were made, and paid to the BOE state and local sales
taxes during the period beginning April 1, 2002, and before
April 1, 2010. To qualify, the QIV must also not have
collected sales tax from customers.
AB 919 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
amounts previously refunded, credited or paid through any
means.
The bill limits the allowable repayment amount to $50,000,
upon appropriation by the Legislature.
State Revenue Impact
Upon appropriation by the Legislature, the maximum
allowable repayment amount is $50,000.
Comments
1. Purpose of the bill . According to the author,
"Disabled veterans transitioning from military to civilian
life can struggle to re-integrate. 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
AB 919 -- 05/23/14 -- Page 3
qualified vendors an exemption from collecting sales tax
from consumers through Jan 1, 2012. Senate Bill 805 (2011)
extended these provisions to 2022. 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 AB 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."
2. 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." Mr. Connell asserts that, under a
law originally enacted in the 19th Century, he has no
obligation to collect or remit sales and tax on his retail
sales. Specifically, Mr. Connell has relied on Business &
Professions Code 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
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 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 & Professions Code, entitled Licensing by
Counties.
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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 sales
and use tax.
However, Mr. Connell was not satisfied with this
interpretation. Thus, on May 12, 1999, June 2, 2004, and
on June 4, 2008, Mr. Connell filed three separate lawsuits
against the BOE seeking a sales and use tax refund for the
period "1993 to present." He failed each time.
On April 29, 2010, Mr. Connell signed a "Settlement
Agreement and Mutual Release of all Claims" (Settlement
Contract) covering the entire period from June 25, 1993
through March 31, 2009. The BOE agreed to refund Mr.
Connell an undisclosed amount of money. 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 Sales and Use tax Law. In 2008,
AB 3009 (Brownley) was introduced. The bill classified
certain veterans as consumers and not retailers, of the
food products and nonalcoholic beverages they sell. AB
3009 was held in the Assembly Committee on Revenue and
Taxation. 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 in the Assembly Committee on Revenue and
Taxation to 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.
Although there may be other similarly situated individuals,
Committee staff has not been made aware of anyone other
than Mr. Connell who failed to collect sales tax based on
their understanding of the 1893 statute.
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3. Related Legislation.
AB 855 (Ma) of the 2011-12 Regular Session: AB 855
would have retroactively applied preferential consumer
status to QIVs as of January 1, 1986. AB 855 was
never heard in this Committee.
SB 805 (Committee on Veterans Affairs), Chapter
246, Statutes of 2011: As originally introduced, SB
805 would have deleted outright the sunset date for
the provisions of the SUT Law that currently classify
a QIV as a consumer, and not a retailer, of specified
TPP the QIV sells. SB 805 was instead amended in this
Committee to extend the sunset date for the
preferential consumer status provisions from January
1, 2012, until January 1, 2022.
SB 809 (Committee on Veterans Affairs), Chapter
621, Statutes of 2009: SB 809 provided that a QIV is
a consumer, and not a retailer, of TPP the QIV owns
and sells, except alcoholic beverages or TPP sold for
more than $100.
AB 3009 (Brownley), of the 2007-08 Regular Session:
AB 3009 would have provided that, for purposes of the
SUT Law, certain U.S. veterans shall be considered
consumers of, and not retailers of, food products and
nonalcoholic beverages they sell. AB 3009 was held in
the Assembly Committee on Revenue and Taxation.
Assembly Actions
Assembly Committee on Revenue and Taxation:9-0
Assembly Appropriations Committee: 16-0
Assembly Floor: 78-0
Support and Opposition (06/05/14)
Support : American Legion Auxiliary, Unit 49; California
Association of County Veterans Services Officer; California
Board of Equalization; California Council of Chapter
Military Officers Association of America; California State
Commanders Veterans Council; California State Council
Vietnam Veterans of America; California Taxpayers
AB 919 -- 05/23/14 -- Page 6
Association; Carpinteria Valley Chamber of Commerce; City
of Carpinteria; County of Santa Barbara; Department of
California American Legion; Department of California
AMVETS; Department of California Veterans of Foreign Wars;
Military Order of the Purple Heart, Chapter 750; Veterans
Caucus of the California Democratic Party; Veterans
Coordinating Council of Santa Barbara; 1 individual letter.
Opposition : None Received.