BILL ANALYSIS �
AB 919
Page A
CONCURRENCE IN SENATE AMENDMENTS
AB 919 (Williams)
As Amended August 4, 2014
2/3 vote
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|ASSEMBLY: |78-0 |(January 30, |SENATE: |35-0 |(August 21, |
| | |2014) | | |2014) |
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Original Committee Reference: REV. & TAX.
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.
The Senate amendments :
1)Appropriate $50,000 from the General Fund (GF) to the BOE to
make the qualified repayments to qualified veterans.
2)Require the BOE, on or before May 1, 2016, to report to the
Joint Legislative Budget Committee, the Assembly Revenue and
Taxation Committee, and the Senate Governance and Finance
Committee, the name of each qualified veteran who was issued a
qualified repayment and the amount of the qualified repayment.
3)Provide that the report submission requirement shall be
inoperative on May 1, 2020, pursuant to Government Code (GC)
Section 10231.5.
4)Provide that the report shall be submitted in compliance with
GC Section 9795.
5)Provide that, upon notification by the BOE, the State
Controller shall transfer any balance remaining from the
amount appropriated back to the GF.
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
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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 qualified itinerant veteran (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:
a) The person was a member of the Armed Forces of the
United States, 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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Defined a "qualified veteran" as a person who:
a) Met the requirements of a QIV as set forth in Revenue
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and Taxation Code 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)Defined 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 to a qualified veteran
through any means whatsoever.
3)Provided 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 instructions.
4)Required 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)Provided that, upon appropriation by the Legislature, the
State Controller shall make the qualified repayments to
qualified veterans.
6)Provided that no interest shall be paid on any qualified
repayment made under this bill.
7)Declared 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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, this bill contains a one-time $50,000 GF
appropriation for qualified repayments, as specified. A cost
pressure could result to the extent that total repayment claims
exceed $50,000.
COMMENTS : The author has provided the following statement in
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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
[(Veteran Affairs Committee), Chapter 621] in 2009.
That bill granted certain qualified vendors an
exemption from collecting sales tax from consumers
through [January] 1, 2012. Senate Bill 805
[(Veterans Affairs Committee), Chapter 246]
([Statutes of] 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 [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.
Assembly Revenue and Taxation Committee comments:
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
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enacted in the 19th Century, he has no obligation to collect or
remit sales tax on his retail sales. Specifically, Mr. Connell
has relied on Business and Professions Code (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 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
Sales and Use Tax 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,
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 sales tax.<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
sales tax 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 sales tax 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.
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<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 sales tax.
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Connell did not appeal this judgment.
On June 4, 2008, Mr. Connell filed his third lawsuit against the
BOE, again seeking a 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) 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
Sales and Use Tax 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 (Veterans Affairs Committee), Chapter
621, Statutes of 2009, which granted consumer reporting status
to QIVs until January 1, 2012. In 2011, SB 805 (Veterans
Affairs Committee), 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;
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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: 0004899