Government Finance and Operations 02/25/2011
Collecting the Use Tax
The Assembly Revenue and Taxation Committee, chaired by Assembly
Member Henry Perea, will hold a hearing at 2 p.m. this coming
Monday, February 28, titled “California’s Use Tax Gap: A $1
Billion Problem.” The hearing will feature presentations
from the Legislative Analyst’s Office and the Board of
Equalization about the difficulties of collecting the use tax and
ways to increase compliance.
The hearing agenda is available here and
a background paper is available here.
At their hearing on the following Monday, March 7, the committee
will consider bills attempting to close the use tax gap.
AB 153 (Skinner) – Support
As Introduced on January 18, 2011
AB 153, by Assembly Member Nancy Skinner, would change the
definition of the retailers that are required to collect sales
and use taxes from their customers to include out-of-state
retailers with commission-based associates in the state. It only
applies to retailers whose sales related to associates’ referrals
exceed $10,000.
The bill aims specifically at companies like Amazon.com. Under
current law, the liability for remitting these transactions rests
with the consumers, who are supposed to announce their
liabilities on their personal income tax filings, but who rarely
do.
As the number of purchases Californians make online continues to
increase, the tax collection gap grows. Use taxes, unlike sales
taxes, flow to local agencies through a county allocation pool,
not on a strict situs basis, so the county receives a portion of
all of these revenues regardless of whether the purchase within a
city’s boundaries.
The Assembly Revenue and Taxation Committee will consider AB 153
at their meeting on Monday, March 7.
AB 155 (Calderon) – Support
As Introduced on January 18, 2011
AB 155, by Assembly Member Charles Calderon, would make three
changes to improve collections of use tax owed on purchases made
from out-of-state retailers.
The first change would be to the definition of “retailer engaged
in business in this state,” to mean all retailers that the
commerce clause of the US Constitution allows the state to impose
a use tax collection duty. It would specifically include members
of commonly controlled groups where at least one of the members
of the group is engaged in business in California. The second
change would require retailers that do not fit that category to
remind consumers that they owe a use tax on their purchases. The
final change would require anyone who sells at least $500,000
worth of property subject to the use tax, but who is not required
to register with the Board of Equalization, to report to the
Board the names and sales amounts of the purchasers.
As with AB 153, these changes aim to reduce the use tax gap
caused by the increasing use of internet sales by Californians.
Assembly Member Calderon carried a similar bill last year, which
did not pass off the Senate floor.
The Assembly Revenue and Taxation Committee will consider AB 153
at their meeting on Monday, March 7.
