BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 983|
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THIRD READING
Bill No: SB 983
Author: Hernandez (D)
Amended: 5/21/14
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-2, 4/30/14
AYES: Wolk, DeSaulnier, Hernandez, Liu
NOES: Knight, Walters
NO VOTE RECORDED: Beall
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 5/28/14 (Pursuant
to Senate Rule 29.10)
AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu
NOES: Knight, Walters
SUBJECT : Cities and counties: sales and use taxes: revenue
sharing agreement: card lock system
SOURCE : City of South El Monte
DIGEST : This bill, beginning January 1, 2015, provides that a
buying company, as defined, does not include a retailer that
contracts to sell fuel through a card lock system.
ANALYSIS : Existing law authorizes counties, under the
Bradley-Burns law, to impose a local sales and use tax of up to
CONTINUED
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1% on tangible personal property sold at retail in the county,
or purchased outside the county for use in the county. All
cities and counties within California have adopted ordinances
under the terms of the Bradley-Burns Law and levy the 1% local
tax. Cities can impose a sales and use tax rate of up to 1%,
credited against the county rate so that the combined rate does
not exceed 1%. The State Board of Equalization (BOE)
administers these taxes. Of the 1% tax, 0.75% is used to
support general operations and the remaining 0.25% is designated
by statute for county transportation purposes.
This bill removes card lock systems from the definition of a
buying company under existing law, which prohibits card lock
systems from entering into agreements that result in the payment
of tax revenue to a retailer. This bill's provisions apply to
contracts entered into after May 1, 2014, and become effective
January 1, 2015.
This bill defines "card lock system" as a system where owners of
unattended card lock fueling stations form a network whereby
customers may purchase fuel at any of the network's
participating fueling stations by use of a card issued to the
customer, and where prices are not posted at the pump and no
receipt is given at the time of delivery.
Prior legislation . AB 451 (Yee, Chapter 391, Statutes of 2005)
designated that the point of sale of jet fuel is the point of
delivery of that jet fuel to the aircraft.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 5/28/14)
City of South El Monte (source)
Cities of Atascadero, Azusa, Baldwin Park, Carson, Downey, El
Monte, Huntington Park, Industry, Irwindale, La Mirada, La
Puente, Rancho Cucamonga, Rosemead, Upland, and Vacaville
OPPOSITION : (Verified 5/28/14)
California Independent Oil Marketers Association
Downs Energy
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ARGUMENTS IN SUPPORT : According to the author:
The Bradley Burns portion of sales and use tax revenue go to
the city where the sales office of the card lock fuel system
company is located, instead of cities that actually house the
fueling stations.
The allocation of the Bradley Burns portion of sales and use
tax revenue from these transactions pose a problem for local
governments with these fueling stations in their jurisdiction
because there are a significant number of negative secondary
effects associated with their utilization. The vehicles that
utilize these stations are generally semi-trucks, which are
heavy in weight, therefore causing substantial wear and tear
to city streets as well as traffic congestion and reduced air
quality.
Vehicles are fueling up in over 1,000 locations in cities
throughout the state, but approximately only 30 cities are
receiving any of the estimated $137 million in statewide
Bradley Burns' portion of tax revenue generated from these
transactions. In a race to find new revenue sources, some
cities have become too willing to offer generous rebate
packages for these fuel companies to move their sales offices
into their city, rebating up to 65% of tax revenue, in some
instances, at the expense of other cities that actually
maintain the physical presence for these fueling stations.
Prohibiting these types of agreements ensures that cities will
not be able to give away public tax dollars to private oil
companies and should eliminate the incentive for card lock
fuel companies to be lured away by other cities.
ARGUMENTS IN OPPOSITION : Downs Energy states:
Even as amended, this measure arbitrarily singles out owners
of cardlock facilities from exercising legal and reasonable
agreements with local agencies.
This bill is singling out the cardlock industry for an
exception to what a 'buying company' is defined as. This
exception does not make sense as cardlock operators have no
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basis to form a buying group.
The Bradley-Burns sales tax law allocates local sales tax
either based on:
1. A consolidates sales office (which cardlock operators
can do), or
2. Creation of a buying company (for large purchasers of
taxable commodities, like United Airlines did previously).
Cardlock operators are NOT large purchasers of taxable
commodities, as most all of our purchases are tax-exempt for
purpose of resale to those end users who pay the sales tax. I
feel as if this law has not been researched enough in its
entirety, and its purpose is retaliatory to the cardlock
operators industry.
AB:k 5/28/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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