1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JUNE 26, 2012 10 11 12 13 14 15 LEGISLATIVE COMMITTEE 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Michelle Steel Member 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Chief Board Proceedings Division 16 17 For the Department: Robert Ingenito Chief, Legislative and 18 Research Division 19 Larry Bergkamp Business Taxes Administrator, 20 Legislative and Research Division 21 22 23 ---oOo--- 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JUNE 26, 2012 4 ---oOo--- 5 MR. HORTON: Good morning, Members and guests. 6 Let us reconvene the meeting of the Board of 7 Equalization. 8 Ms. Richmond, what is our first matter? 9 Oh, uh, one -- one sec -- as they come, Ms. 10 Richmond, what is our first matter? 11 MS. RICHMOND: Good morning, uh, Members. Our 12 first item on today's agenda is the Legislative 13 Committee. 14 MR. HORTON: Okay. 15 MS. RICHMOND: Mr. Horton is the Chair of that 16 committee. 17 MR. HORTON: As they come, we are fortunate to 18 have a distinguished guest among us. Ms. Steel will 19 introduce our guest. 20 MS. STEEL: Um, I have my intern from U-Penn, 21 uh, Jae Seon Choi here. And his major is finance, and 22 he wants to be CPA. He might going to be our future BOE 23 staff. Who knows? And welcome. 24 MR. HORTON: Yeah, let's make him nervous. 25 And thank you, Ms. Richmond. 26 Let's call the Legislative Committee to order. 27 Miss Ingenito -- Mr. Ingenito, will you please 28 introduce the issues in this case. 3 1 MR. INGENITO: Sure. My name is Robert 2 Ingenito. I'm the Acting Chief of the Legislative and 3 Research Division. To my left is Larry Bergkamp, also 4 from the Legislative and Research Division. 5 We are here to provide an update on the 6 Streamline Sales Tax Project and pending federal 7 legislation on remote sellers. 8 Our last update on this issue was about six 9 months ago, in December 2011. The bill comparison 10 document provided in the PAN has not changed since that 11 update because the bills are in the same format as they 12 were when they were first introduced. 13 Although that bill comparison identifies four 14 federal bills, only two of them are currently active in 15 Congress; they are HR 3179, known as the Marketplace 16 Equity Act of 2011, and S 1832, the Marketplace Fairness 17 Act. 18 These two bills provide simplification 19 components that will allow both streamline states -- 20 excuse me, streamline sales and use tax states and non 21 streamline states to require remote sellers to collect 22 and report use tax on sales made to consumers in 23 participating states. As written, however, the House 24 bill is less restrictive and has fewer conforming 25 compon -- requirements for California to participate. 26 The following is a summary of the primary 27 issues related to the bills, and there are four of them 28 that I'll highlight for you. 4 1 Number one, both bills require a uniform tax 2 base that would eliminate California's ability to 3 provide partial exemptions to the farm, motion picture, 4 timber harvesting, and horse breeding stock industries. 5 Number two, the Senate bill requires the use 6 and certification of consolidated providers by all 7 participating states. There is no such provision in the 8 House bill. 9 Number three, the Senate bill provides 10 release -- relief of liability for any errors and 11 omissions for a certified -- for a consolidated provider 12 and remote seller. The House bill appears to limit the 13 relief only to tax rate and boundary tables provided by 14 the state. And finally, both bills provide a small 15 seller exemption. However, the House bill allows 16 participating states to increase the thresholds. 17 Now, BOE staff has been in contact with other 18 non streamline states that share similar conforming 19 requirements. And together, we are working to express 20 those concerns to Congress via the Federation of Tax 21 Administrators. We are also working to narrow our 22 differences with the streamline sales tax states, but we 23 are uncertain if common ground will ultimately be found. 24 The streamline sales tax states, meanwhile, 25 continue to work on revising the streamline sales and 26 use tax agreement with their own member states. They 27 are also working with FTA and directly with 28 congressional staff to ensure their agreement components 5 1 are included in the federal legislation. 2 On July 24th, next month, an informational 3 hearing has been scheduled in the House Judiciary 4 Committee for HR 3179. And finally, it is very unlikely 5 that federal legislation will be enacted prior to July 6 31st, 2012. 7 Accordingly, it is very likely that Assembly 8 Bill 155's nexus expanding provisions for commonly 9 controlled group and affiliate programs will be 10 effective on September 15th, 2012. 11 This concludes our presentation. We're happy 12 to answer any questions. 13 MR. HORTON: Thank you very much for your 14 presentation. 15 Discussion, Members? 16 MS. STEEL: I have a question. 17 MR. HORTON: Member Steel. 18 MS. STEEL: There's, uh, three pending 19 legislations. Um, which one staff prefer? 20 And then, if all three passes, what happen? 21 MR. BERGKAMP: Um, at this point there's the -- 22 the Main Street Fairness Act bills, the S, uh, 1452 and 23 the HR 2701. My understanding is they are not moving at 24 this point in Congress. Those are basically the 25 streamline sales tax and acting legislation. 26 The two remaining bills, the HR 3179, as we 27 stated, that one has less restrictive requirements 28 and -- and would require California to -- to not modify 6 1 as many things to conform with that legislation. 2 Um, and I'm not sure what happens if both bill 3 passes. My understanding is that the -- the Senate and 4 the House staff are working together to maybe come up 5 with a combined bill at this point with some of the 6 concerns that FTA has provided with regard to some of 7 the issues for the states that are -- been in contact 8 with them. 9 MS. STEEL: Okay. 10 MR. HORTON: Thank you. 11 Further discussion, Members? 12 Hearing none, uh, thank you very much for your 13 presentation today. It's very helpful, uh, as we look 14 forward to the implementation of AB 55. The triggering 15 of AB 55 I think, uh, is July 31st, and then the 16 implementation in September. It helps us to plan by 17 knowing that the provision of providing federal 18 solution, uh, doesn't appear to be, uh, going to be 19 enacted in a -- in a timely fashion in order to prevent 20 that triggering. 21 Thank you. Appreciate it. 22 Members, this concludes the Legislative 23 Committee's, uh, presentation. Hereby adjourn. 24 ---oOo--- 25 26 27 28 7 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 June 26, 2012 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 7 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: July 9, 2012 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 8