BILL ANALYSIS �
AB 2031
Page 1
ASSEMBLY THIRD READING
AB 2031 (Dahle)
As Amended May 6, 2014
Majority vote
REVENUE & TAXATION 8-1 APPROPRIATIONS 17-0
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|Ayes:|Bocanegra, Harkey, Beth |Ayes:|Gatto, Bigelow, |
| |Gaines, Gordon, Mullin, | |Bocanegra, Bradford, Ian |
| |Nestande, Pan, | |Calderon, Campos, |
| |V. Manuel P�rez | |Donnelly, Eggman, Gomez, |
| | | |Holden, Jones, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Ting | | |
| | | | |
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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 $25,000 during the previous
calendar year.
2)Requires retailers with de minimis sales to notify their
customers who purchase qualified lumber or engineered wood
products of their obligation to remit the LPA directly to the
BOE.
3)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.
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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)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
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
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must file zero or small dollar returns.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Minor and absorbable costs to the BOE to administer changes to
the LPA, likely offset, at least in part, by minor efficiency
savings.
2)Estimated decrease in annual General Fund revenues of up to
$38,000 from relieving small retailers from LPA collection
liability.
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
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. This bill
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,
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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 who sell,
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. 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? This bill
proposes to exempt small retailers from the requirement to
collect and report the LPA to the BOE. Those retailers would,
nonetheless, have to track their sales of lumber products to
ensure that they qualify for the exemption. It should be
noted that this bill 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
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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.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0003498