Important Tax Law Changes

John Chiang, Chair, State Board of Equalization (BOE) remarked today that a number of changes were made to tax laws administered by the BOE during the 2002 legislative session. Legislative changes take effect on January 1, 2003, unless otherwise noted.

Highlights are as follows:

Assembly Bill 2065, effective September 12, 2002, authorizes the Board, for the period beginning October 1, 2002, and ending June 30, 2003, to identify eligible taxpayers with high-risk collection accounts and to notify them that they may satisfy an unpaid tax liability by paying the tax in full and receiving a waiver of interest and penalties. This provision applies to any final sales or use tax liability including tax, penalties, and interest that is owed by a taxpayer and is unpaid as of October 1, 2002.

Senate Bill 1766 provides that all retail sales of cigarettes to customers in the state must be vendor-assisted, face-to-face sales unless the seller meets certain specified conditions. A seller may engage in a non-face-to-face sale of cigarettes to a person in California provided the seller pays to the Board all taxes due on the sale or includes a prominent note on the package indicating that the purchaser is responsible for all California tax due on the cigarettes. These provisions, however, do not apply to vending machine sales.

Assembly Bill 81 transfers property tax assessment responsibility for certain electric generation facilities with a generating capacity of 50 megawatts or more from the local county assessor to the Board of Equalization. Annual property taxes paid on property assessed by the Board of Equalization are based on current fair market values. In contrast, property assessed by the local county assessor is subject to Proposition 13 value limitations, which generally means property taxes are based on the fair market value of property at the time of acquisition with annual increases thereafter limited to no more than 2 percent.

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