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Home My WebLink AboutAB1206 - Sales Tax ExemptionREQUEST: CITY OF PALM DESERT COMMUNITY SERVICES DEPARTMENT STAFF REPORT CONSIDERATION OF LEGISLATIVE REVIEW COMMITTEE ACTION ON AB12d A rgill llACI I i1NG OF MARCH 27, 2007 A' ROVED I DENIED RECEIVED OTHER DATE: April 12, 2007 METING DATE G,/-- / , -O r/ AYES : ,�715D4 Fe✓�USoni f'i e�47/ tr°at / f i -/� CONTENTS: AB1206 Language NOES: l or/��,,c. cell ABSENT: r)oa RECOMMENDATION: �Ir / e' VERIFIED BY: jY JJ)/ r- Original on File with CityClerk' s Office By Minute Motion, concur with the action taken by the Legislative Review Committee at its meeting of March 27, 2007, and direct staff to prepare a letter of opposition for the Mayor's signature with regard to AB1206 (Smyth) relative to Sales Tax Exemption. EXECUTIVE SUMMARY: Passage of AB1206 would exempt for a specified period of time sales tax from various components of conducting business with regard to research and development. BACKGROUND: The Sales and Use Tax Law imposes a tax on the gross receipts from the sale of, or the storage, use, or other consumption in this state of tangible property and provides various exemptions from the taxes imposed by that law. This bill would exempt from those taxes for calendar year beginning January 1, 2008, machinery equipment and replacement parts used in research and development. This bill would take effect immediately as a tax levy. Because the City of Palm Desert opposes any legislation enacted by the State which would remove local revenues, the Legislative Review Committee recommends that the City Council oppose AB1206 and direct staff to prepare a letter stating that position to appropriate Legislators for the Mayor's signature. PATRICIA SCULLY, CFEE SENI ' R MANAGEMENT ANALYST SHEILA R. GILLIGAN ACM/COMMUNITY SERV1 ES PAUL G ON DIRE DIREC O OF ANCE/ CITY TREASURER CARLOS L. ORTEGA CITY MANAGER State Net Bill Text 1 r-- Page 1 of 2 In bill text the following has special meaning underline denotes added text 2007 CA A 1206 AUTHOR: Smyth VERSION: Introduced VERSION DATE: 02/23/2007 ASSEMBLY BILL No. 1206 INTRODUCED BY Assembly Member Smyth FEBRUARY 23, 2007 An act to add Section 6377 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. LEGISLATIVE COUNSEL'S DIGEST AB 1206, as introduced, Smyth. Sales and use taxes exemption: research and development. The Sales and Use Tax Law imposes a tax on the gross receipts from the sale in this state of, or the storage, use, or other consumption in this state of, tangible personal property and provides various exemptions from the taxes imposed by that law. The bill would exempt from those taxes, for calendar years beginning on or after January 1, 2008, the gross receipts from the sale of, and the storage, use, or other consumption of, machinery, equipment, and replacement parts used in research and development, as specified. This bill would specify that this exemption does not apply to local sales or transactions and use taxes. This bill would take effect immediately as a tax levy. Vote: majority. Appropriation: no. Fiscal committee: yes. State -mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 6377 is added to the Revenue and Taxation Code, to read: 6377. (a) (1) For calendar years beginning on or after January 1, 2008, there are exempted from the taxes imposed by this part the gross receipts from the sale of, and the storage, use, or other consumption in this state of, machinery, equipment, and replacement parts used directly in research and development relating to inventions, products, or technologies that are exempt from sales and use taxes under this part. http://client. statenet. com/secure/pe/ts.cgi?mode=fetch&text_version=CA2007000A 1206_2... 2/26/2007 State Net Bill Text Page 2 of 2 (b) For purposes of this section, "research and development" has the same meaning ascribed to that term by Section 41(d)(1) of the Internal Revenue Code. (c) No exemption shall be allowed under this section unless the purchaser furnishes the retailer with an exemption certificate, completed in accordance with any instructions or regulations as the board may prescribe, and the retailer subsequently furnishes the board with a copy of the exemption certificate. The exemption certificate shall contain the sales price of the machinery or equipment that is exempt pursuant to subdivision (a). (d) Notwithstanding any provision of the Bradley -Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200)) or the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)), the exemption established by this section shall not apply with respect to any tax levied by a county, city, or district pursuant to, or in accordance with, either of those laws. (e) (1) Notwithstanding subdivision (a), the exemption provided by this section shall not apply to any sale or use of property which, within one year from the date of purchase, is either removed from California or converted from an exempt use under subdivision (a) to some other use not qualifying for the exemption. (2) Notwithstanding subdivision (a), the exemption established by this section shall not apply with respect to any tax levied pursuant to Sections 6051.2 and 6201.2, or pursuant to Section 35 of Article XIII of the California Constitution. (f) If a purchaser certifies in writing to the seller that the property purchased without payment of the tax will be used in a manner entitling the seller to regard the gross receipts from the sale as exempt from the sales tax, and within one year from the date of purchase, the purchaser (1) removes that property outside California, (2) converts that property for use in a manner not qualifying for the exemption, or (3) uses that property in a manner not qualifying for the exemption, the purchaser shall be liable for payment of sales tax, with applicable interest, as if the purchaser were a retailer making a retail sale of the property at the time the property is so removed, converted, or used, and the sales price of the property to the purchaser shall be deemed the gross receipts from that retail sale. (g) This section applies to leases of tangible personal property classified as "continuing sales" and "continuing purchases" in accordance with Sections 6006.1 and 6010.1. The exemption established by this section shall apply to the rentals payable pursuant to such a lease, provided the lessee is a qualified person and the property is used in an activity described in subdivision (a). Rentals that meet the foregoing requirements are eligible for the exemption for a period of six years from the date of commencement of the lease. At the close of the six -year period from the date of commencement of the lease, lease receipts are subject to tax without exemption. SEC. 2. This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect. Copyright 2007 State Net. All Rights Reser ved. http ://client. statenet. com/secure/pe/ts. cgi?mode=fetch&text_version=CA2007000A 1 206_2... 2/26/2007