1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 NOVEMBER 16, 2010 10 11 ITEM J1 12 PROPOSED AMENDMENTS TO REGULATION 1584 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Reported by: Kathleen Skidgel 27 CSR No. 9039 28 1 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 P R E S E N T 2 For the Board Betty Yee of Equalization: Chair 3 Jerome E. Horton 4 Vice-Chair 5 Barbara Alby Acting Member 6 Michelle Steel 7 Member 8 Marcy Jo Mandel Appearing for John 9 Chiang, State Controller (per Government Code 10 Section 7.9) 11 Diane G. Olson, 12 Chief Board Proceedings 13 Division 14 For Board of Bradley Heller 15 Equalization Staff: Staff Counsel 16 Jeff Lyle Business Taxes Committee 17 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 2 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 NOVEMBER 16, 2010 4 ---oOo--- 5 MS. YEE: Okay. We'll reconvene the meeting of the 6 Board. 7 Our next item, Ms. Olson. 8 MS. OLSON: Our next item is J1, Rulemaking, 9 Amendments to Regulation 1584, membership fees. 10 MS. YEE: Okay. 11 All right, Members, we're on item J1, Amendments to 12 Regulation 1584, relating to membership fees. Let's have 13 the staff introduce the issue. 14 Good morning, Mr. Heller. 15 MR. HELLER: Good morning, Madam Chair, Members of 16 the Board. I'm here with -- well, I'm Bradley Heller from 17 the Board's Legal Department. And I'm here with Jeff Lyle 18 from the Board's Business Taxes Committee. 19 And we're here to request the Board's authorization 20 to complete Rule 100 changes to Regulation 1584, membership 21 fees, to change the definition for a nominal amount from an 22 amount totaling $50 or less per year to an amount totaling 23 $55 or less per year due to changes in the California 24 consumer price index since 2005. And that change is per 25 the instructions in the regulation and would be effective 26 January 1, 2011. 27 MS. YEE: Okay. Very well. Thank you very much. 28 Questions, Members? 3 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MR. HORTON: Madam Chair. 2 MS. YEE: Mr. Horton, please. 3 MR. HORTON: I'm going to just ask this, even 4 though I think I know the answer. Proposition 26, I 5 believe, as it relates to fees, does this have -- would 6 this have a overall financial impact at all? 7 MR. HELLER: Overall financial impact on -- on this 8 particular membership fees regulation you mean? 9 MR. HORTON: Right. 10 MR. HELLER: Not in this one. What we're actually 11 talking about here is, it's basically where there's certain 12 retailers that charge membership fees basically to some 13 customer/members who are able to shop at that retailer, 14 right. 15 And so the Board adopted this regulation to 16 basically specify when the membership fee is basically a 17 nominal amount and not really -- a nominal amount to be a 18 member of that retailer's -- I don't know -- I guess a 19 consumer who could just shop there as opposed to actually 20 buying anything. Whereas, when it's over a nominal amount, 21 then the Board recognized that as really being 22 consideration for discounts in purchased tangible personal 23 property. 24 So the regulation, when it says "membership fees", 25 it's really discussing the membership fees to shop at these 26 types of retailers, and the definition we're changing just 27 increases the threshold for nominal amounts so that the 28 retailers know what threshold they can charge membership 4 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 fees to without having to treat that as a charge for 2 tangible personal property subject to sales or use tax. 3 MR. HORTON: Yeah, I'm supportive of the measure. 4 Reducing the threshold, in effect, shifts, theoretically -- 5 increases the number of individuals, on a number of 6 transactions, membership fee transactions that will not be 7 considered part of the measure. 8 MR. HELLER: That's correct. 9 MR. HORTON: And that has a financial consequences. 10 Just curious, as we go forward, if we're -- I don't 11 think we are. So it's -- I sort of hesitate to even ask 12 you to do this. It's kind of one of those things I think 13 we just do it until someone says otherwise. 14 But take a look at this for me, and let me know if 15 there is a financial impact. And in doing so, have we, in 16 effect, changed the burden of taxation, shifted the burden 17 of taxation in any way and thereby either increasing or 18 reducing the tax base, I would say. 19 MR. HELLER: Mr. Horton, would you like us to 20 report back for the December Board meeting? 21 MR. HORTON: Yes. 22 MR. HELLER: Thank you. 23 MR. HORTON: That'd be the will of the body, or you 24 can report back to me. But I think it would be interesting 25 discord for all of us. 26 MS. YEE: Okay. Ms. Mandel. 27 MS. MANDEL: No, I was just getting ready in case 28 we were done. 5 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MS. YEE: Okay. Other comments, Members, on this 2 issue? 3 Okay. Hearing none, is there a motion? 4 MR. HORTON: So moved. 5 MS. MANDEL: Second. 6 MS. YEE: Okay. Motion by Mr. Horton, second by 7 Ms. Mandel to adopt the section 100 changes. Without 8 objection, motion carries. 9 And then with follow-up with Mr. Horton. 10 (The matter concluded at 11:51 a.m.) 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 November 16, 2010 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the above-entitled 11 hearing; that I transcribed the shorthand writing into 12 typewriting; and that the preceding pages 1 through 6 13 constitute a complete and accurate transcription of the 14 shorthand writing. 15 16 Dated: December 14, 2010 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 7 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333