1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 AUGUST 22, 2012 9 P OTHER ADMINISTRATIVE MATTERS 10 P5.2 2012/2013 BUDGET UPDATE 11 12 13 14 15 16 17 18 19 20 21 Reported by: Juli Price Jackson 22 No. CSR 5214 23 24 25 26 27 28 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per 13 Government Code Section 7.9) 14 15 Joann Richmond Chief, Board 16 Proceedings Division 17 18 For the Staff: Liz Houser Director 19 Administration 20 21 ---oOo--- 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 AUGUST 22, 2012 4 ---oOo--- 5 MR. HORTON: Please continue. 6 MS. HOUSER: My next item's an update on the 7 2012-13 budget. As you know, BOE received 13.3 8 positions and $1.9 million in the budget to implement a 9 proposal to impose a new sales and use tax on certain 10 types of lumber products. The proposal contemplated 11 that this tax was to be imposed on retailers and was to 12 be reported with their sales and use tax returns. 13 It was anticipated that the proposed tax would 14 be collected admin -- in a manner similar to the 15 additional sales and use tax currently imposed on diesel 16 fuel sales. However, the statutory authorization for 17 this proposal was not introduced or enacted at the time 18 of the adoption of the budget. 19 On August 7th, 2012, AB 1492 was revised to 20 incorporate this proposal but with a different approach. 21 AB 1492 adds Public Resources Code provisions to impose 22 a 1 percent lumber assessment beginning January 1st, 23 2013. This assessment is imposed on purchasers for the 24 storage, use or other consumption of lumber products in 25 the State. And retailers are required to collect the 26 assessment and remit it to BOE electronically. 27 AB 1492 requires BOE to administer and collect 28 the assessment pursuant to the Fee Collections 3 1 Procedures law. Under this bill, retailers will be 2 permitted to claim on their returns a reimbursement for 3 one-time startup costs. And the amount of reimbursement 4 will be determined by BOE, pursuant to emergency 5 regulations authorized by the bill. 6 The bill defines lumber products and requires 7 the Board of Forestry, by October 1st, to adopt 8 emergency regulations to specify which products are 9 subject to the assessment. Appeals of this assessment 10 will be heard by BOE. 11 Based on the current definition of lumber 12 products in the bill, we estimate there will be 13 approximately 19,500 retailers required to report the 14 assessment. To simplify filing for retailers and reduce 15 the cost of collection, staff is proposing that the 16 assessment be electronically filed, concomitantly with 17 the sales and use tax return. However, we do expect an 18 increase in one-time costs due to the additional IT 19 programming required. 20 We are currently recosting this proposed 21 assessment based on these recent changes. Once the 22 final language is adopted and approved, we will have ten 23 days to submit additional requests for funding via BCP. 24 Are there any questions on this '12-'13 budget 25 item? 26 MR. RUNNER: Yeah. 27 MS. STEEL: Mr. Chairman? 28 MR. HORTON: Member Steel. 4 1 MS. STEEL: You know, the BOE's -- this 13.3 2 positions are permanent jobs? 3 MS. HOUSER: Yes, they are. 4 MS. STEEL: And then if this bill doesn't pass, 5 then what happens? 6 MS. HOUSER: If the bill doesn't pass, if 7 they're not able to actually enact, the -- 8 MS. STEEL: So, this month, it's not coming 9 here? 10 MS. HOUSER: -- lumber fee, then we wouldn't 11 fill the positions. And we would do a negative BCP in 12 '13-'14 to remove those out of our budget. 13 MS. STEEL: Okay, thank you. 14 MR. HORTON: Further discussion, Members? 15 MR. HORTON: Member -- Mr. Runner. 16 MR. RUNNER: Yeah, just again, I -- this is an 17 issue I have actually had some conversation with some of 18 the folks down the street in the legislature on this 19 issue, along with proponents of the bill. 20 It's problematic for the BOE and, I mean, 21 besides the policy discussion, which I won't get into, 22 but the -- but the implementation process is fraught 23 with problems. 24 This is a regulation that is going -- this is a 25 set of regs that are going -- that are being done by the 26 Department of Forestry. We are going to be responsible 27 for -- then for the hearings and the appeals at that 28 point. 5 1 And it is one that has very unclear definition 2 to what an engineered lumber product is. And I even 3 wonder about our 19,000 because, I mean, you're are 4 talking about millwork around doors, you're talking 5 about all kinds of things that are online items that 6 are -- that are completely -- you know, that are -- and 7 that's the easy stuff. The hard part is going to be 8 whether a hammer is or not. 9 And because the other issue that it is -- is 10 because it's not just lumber product or lumber, if the 11 item or the lumber-type product contains 10 percent or 12 more wood fiber -- so, now you're not just talking about 13 wood, you're talking about somebody determining what the 14 content is and the percentage of that. 15 And, again, remember all those regs are not 16 done by us. And, so, those appeals are going to end up 17 being done with us and we're going to end up looking at 18 at people, I think literally hundreds of them will be 19 coming, and we're going to end up having to determine 20 exactly what it is, what it isn't and then we're going 21 to have to tell them, "Sorry, if you don't like it or 22 it's unclear, you're going to have to go with that to 23 the -- to the Board of Forestry to do it." 24 And the Board of Forestry has to do their regs 25 by October -- 26 MS. HOUSER: First. 27 MR. RUNNER: -- 1st. So, it's an issue fraught 28 with problem. I mean, we -- it's -- it's similar, to 6 1 me, in a lot of ways, where we're having to a clean up 2 and work with the issues with the fire fee notifications 3 and on those other issues. 4 And it's an indication to me why it is that we 5 need to figure out how to be more proactive in regards 6 to some of the issues and the language of issues that 7 take place over in the legislature, to help them 8 understand some of the complexities, which they are 9 about ready to give us. 10 And because I -- again, it's an issue -- I 11 don't know what the likelihood of this becoming law is. 12 It's going to be very difficult. But, at the same time, 13 we end up being the brunt of this and it's going to be 14 our taxpayers who are before us, confused. And we're 15 not going to be able to give them much help. 16 I'm done. 17 MR. HORTON: Mr. Runner. 18 MR. RUNNER: I'm done. 19 MR. HORTON: Okay. Further discussion, 20 Members? 21 Thank you very much. 22 ---o0o-- 23 24 25 26 27 28 7 1 . 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, JULI PRICE JACKSON, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 AUGUST 22, 2012 I recorded verbatim, in shorthand, to 11 the best of my ability, the proceedings in the 12 above-entitled hearing; that I transcribed the shorthand 13 writing into typewriting; and that the preceding pages 1 14 through 7 constitute a complete and accurate 15 transcription of the shorthand writing. 16 17 Dated: SEPTEMBER 24, 2012 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 8