BILL ANALYSIS �
AB 2031
Page 1
Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 2031 (Dahle) - As Amended: April 21, 2014
Majority vote. Fiscal committee.
SUBJECT : The Lumber Products Assessment: small seller
exemption
SUMMARY : Relieves small retailers from liability to collect
the Lumber Products Assessment (LPA) and to report to the State
Board of Equalization (BOE), as provided. Specifically, this
bill :
1)Excludes from the definition of a "retailer" a retailer with
de minimis sales of qualified lumber products and engineered
wood products of less than $5,000 during the previous calendar
year.
2)Clarifies that the references to "feepayer" under the Fee
Collection Procedures Law shall include a person required to
pay the LPA, which includes the retailer.
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.
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3)Imposes an LPA at the rate of 1% on a purchaser of lumber
products and engineered wood products to be collected by the
retailer at the time of sale. Applies to sales occurring on
or after January 1, 2013.
4)Defines a "retailer" by reference to Revenue and Taxation Code
(R&TC) Section 6015 as:
a) Every seller who makes any retail sale or sales of
tangible personal property, and every person engaged in the
business of making retail sales at auction of tangible
personal property owned by the person or others.
b) Every person engaged in the business of making sales for
storage, use, or other consumption or in the business of
making sales at auction of tangible personal property owned
by the person or others for storage, use, or other
consumption.
c) Any person conducting a race meeting under Chapter 4 of
Division 8 of the Business and Professions Code, with
respect to horses which are claimed during such meeting.
5)Provides that the LPA is due and payable to the BOE quarterly
on or before the last day of the month next succeeding each
quarterly period and requires a retailer to file a return with
the BOE on or before the last day of the month following each
quarterly period, as prescribed by the BOE.
6)Does not provide any type of exemption from the collection of
the LPA for otherwise qualified retailers that have few or no
sales of lumber products or engineering wood. These retailers
must file zero or small dollar returns.
FISCAL EFFECT : The BOE staff estimates that this bill would
result in an annual revenue loss of approximately $6,000 to
$8,000. The BOE staff notes, however, that purchasers would
still be required to report the LPA to the BOE.
COMMENTS :
1)The Purpose of the Bill . According to the author, this bill
is needed to provide relief to small sellers of lumber
products by eliminating the expense of collecting and
reporting the LPA. The author states that, regardless of
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whether a retailer has $0.01 or $100,000 in annual sales of
qualified lumber products, they are required to register with
the BOE and report the LPA on all those sales. AB 2031 would
exempt retailers with de minimis annual sales of qualified
lumber products and engineered wood products of less than
$5,000 from the obligation to collect the LPA fee and report
to the BOE. However, purchasers would still be required to
report the LPA on these products directly to the BOE.
2)The LPA Program . In 2012, the Legislature established a new
assessment on the sales of lumber products and engineered wood
products at a rate of 1% of gross receipts, on or after
January 1, 2013 [AB 1492 (Budget Committee), Chapter 289,
Statutes of 2012]. The LPA was one of the provisions in AB
1492 that were proposed by the timber industry and
incorporated by the Governor in the May Revise to reform
wildfire liability damages, extend the life of Timber Harvest
Plans (THP), and fund the timber harvest review.
The LPA is imposed on a purchaser of a lumber product or an
engineered wood product for the storage, use, or other
consumption in California. While the legal incident of this
assessment fee is placed on the purchaser, the retailers are
the ones required to collect the LPA at the time of sale,
itemizing the amount of the LPA on the sales receipts. The
law allows a retailer to be reimbursed for the costs of
setting up the collection system from the assessment amounts
collected by the retailer.
It was estimated that AB 1492 will generate $30 million
annually. As of April 11, 2013, the BOE collected a total of
$31,943 in LPAs. The revenues are expected to fund timber
harvest review, offset $15.5 million in General Fund
expenditures, offset timber harvest permitting fees to lower
the timber operator's cost of preparing a THP, pay for related
administrative costs, and fund forest restoration projects in
the state. Funds are available, upon appropriation, for
administrative costs, and for purposes relating to the
regulatory activities of the Department of Forestry and Fire
Protection, and other state and local agencies involved in the
management of forest lands. Funds may also be available for
certain grants to state and local public agencies for fire
protection, fire suppression and restoration activities.
3)LPA Collections. Under existing law, all retailers that sell
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or may sell lumber products or engineered wood products are
required to register with the BOE and report the LPA on those
sales, regardless of the sales amount. The LPA amount must be
separately stated on the sales receipt as a charge separate
from, and not included in, any other fee, charge, or other
amount paid by the purchaser. According to the BOE staff,
during 2013 calendar year, about 29,640 businesses, with
approximately 39,609 retail locations, were registered with
the BOE as retailers required to collect the LPA. However,
over 33,000 of these accounts have been closed by the BOE
because those retailers filed zero returns and/or were not
making qualified sales of wood products. Of the remaining
registered accounts, approximately 605 retail locations
reported LPA sales of less than $5,000 for calendar year 2013.
According to the BOE staff, retailers that reported zero
sales of lumber products during 2013 calendar year will be
de-registered by the BOE.
4)The "Small Retailer" Exemption: a Slippery Slope? According
to the BOE staff, in 2013, the BOE collected less than $7,000
in LPAs from retailers whose total sales of qualified lumber
and engineered wood products were $5,000 or less ("small
retailers"). This bill proposes to exempt small retailers of
that size from the requirement to collect and report the LPA
to the BOE. The small retailers would, nonetheless, have to
track their sales of lumber products to ensure that they
qualify for the exemption. It should be noted that AB 2031
does not waive the imposition of the LPA, since it is legally
levied on the purchaser of qualified lumber products. Thus,
the purchaser would be required to remit the LPA to the BOE,
even if the retailer is legally exempt from the requirement to
collect an LPA. However, this bill would create an
unprecedented type of relief in tax law - a relief where one's
tax collection obligation is waived depending on one's gross
sales amount. While BOE regulations promulgated under the
Sales and Use Tax Law excludes from the definition of
"retailer" a seller who has two or fewer sales of tangible
personal property during any 12-month period, that exclusion
is not based on the total amount of the seller's gross
receipts. The Committee may wish to consider whether the
benefits of relieving small retailers from the LPA collection
obligation outweigh the downside of creating a questionable
legal precedent for other than tax and fee programs. The
Committee may also wish to consider whether small retailers,
if relieved from the collection obligation, should be required
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to notify their purchasers of the responsibility to remit the
LPA to the BOE.
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (Sponsor)
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098