Source: http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB147
Timestamp: 2019-12-09 14:49:37
Document Index: 169310018

Matched Legal Cases: ['art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 1']

Bill Text - AB-147 Use taxes: collection: retailer engaged in business in this state: marketplace facilitators.
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AB-147 Use taxes: collection: retailer engaged in business in this state: marketplace facilitators.(2019-2020)
AB147:v93#DOCUMENT
An act to amend Section 7262 of, to amend, repeal, and add Section 6203 of, to add Section 6203.1 to, and to add Chapter 1.7 (commencing with Section 6040) to Part 1 of Division 2 of, the Revenue and Taxation Code, relating to taxation, and declaring the urgency thereof, to take effect immediately.
[ Approved by Governor April 25, 2019. Filed with Secretary of State April 25, 2019. ]
AB 147, Burke. Use taxes: collection: retailer engaged in business in this state: marketplace facilitators.
Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state.
The Sales and Use Tax Law requires every retailer engaged in business in this state and making sales of tangible personal property for storage, use, or other consumption in this state, not otherwise exempt, at the time of making the sales or at the time the storage, use, or other consumption becomes taxable, to collect the tax from the purchaser, file a return, and remit the tax to the California Department of Tax and Fee Administration. That law defines a retailer engaged in business in this state to mean any retailer that has substantial nexus with this state for purposes of the commerce clause of the United States Constitution and any retailer upon whom federal law permits this state to impose a use tax collection duty.
This bill would specify that, on and after April 1, 2019, a retailer engaged in business in this state includes any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property for delivery in this state by the retailer and all persons related to the retailer that exceed $500,000. The bill would allow the department to grant relief to certain retailers engaged in business in this state for specified interest or penalties imposed on use tax liabilities due and payable for tax reporting periods beginning April 1, 2019 and ending December 31, 2022.
The Sales and Use Tax Law specifically includes as a retailer engaged in business in this state, among others, (1) any retailer that is a member of a commonly controlled group and is a member of a combined reporting group that includes another member of the retailer’s commonly controlled group that, pursuant to an agreement with or in cooperation with the retailer, performs services in this state in connection with tangible personal property to be sold by the retailer and (2) any retailer entering into agreements under which persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an internet-based link or an internet website, or otherwise, provided that the retailer meets specified total cumulative sales thresholds including that the retailer has, during the preceding 12 months, total cumulative sales in this state of tangible personal property in excess of $1,000,000.
This bill would eliminate, on April 1, 2019, the specific inclusion of those retailers as a retailer engaged in business in this state.
The Sales and Use Tax Law requires every person desiring to engage in or conduct business as a seller within this state to file with the department an application for a permit for each place of business and requires every retailer selling tangible personal property for storage, use, or other consumption in this state to register with the department.
This bill, on and after October 1, 2019, would provide that a marketplace facilitator, as defined, is considered the seller and retailer for each sale facilitated through its marketplace, as defined, for purposes of determining whether that marketplace facilitator is required to register with the department under the Sales and Use Tax Law. The bill would provide that any marketplace facilitator that is registered or required to register with the department under the Sales and Use Tax law and who facilitates a retail sale of tangible personal property by a marketplace seller, as defined, is the retailer selling or making the sale of the tangible personal property sold through its marketplace for purposes of paying any sales taxes and collecting any use taxes. The bill, for purposes of determining whether a marketplace facilitator has total combined sales of tangible personal property for delivery in this state that would make it a retailer engaged in business in this state, would require the marketplace facilitator to include all sales made on its own behalf and by all related persons and sales facilitated on behalf of marketplace sellers. The bill would provide a marketplace facilitator relief from liability for the tax on a retail sale in specified circumstances.
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and other existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law.
In conformity with the Sales and Use Tax Law, existing local use tax ordinances adopted pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law require a retailer engaged in business in this state for purposes of the Sales and Use Tax Law to also collect a use tax adopted pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law. In modified conformity with the Sales and Use Tax Law, existing use district tax ordinances adopted in accordance with the Transactions and Use Tax Law generally require a retailer to collect a use tax adopted pursuant to the Transactions and Use Tax Law only if the retailer is engaged in business in that district.
The changes made to the Sales and Use Tax Law by this bill, by conformity, would be automatically incorporated into local use taxes ordinances adopted pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law. This bill would require districts that impose district use taxes in accordance with the Transactions and Use Tax Law to include a provision, to be operative on April 1, 2019, that provides that a retailer engaged in business in the district includes any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property in the state or for delivery in the state by the retailer and all persons related to the retailer that exceeds $500,000, thereby requiring those retailers to collect those district use taxes.
(a) On June 21, 2018, in South Dakota v. Wayfair, Inc. (2018) 585 U.S. ___ (hereafter Wayfair), the United States Supreme Court upheld SDCL Chapter 10-64, the South Dakota law that requires remote sellers that do not have a physical presence in that state to collect sales tax on all sales into South Dakota based on the seller’s level of economic activity in the state.
(b) SDCL Chapter 10-64-2 provides, in part, that remote sellers with no physical presence in South Dakota are required to collect and remit sales tax and follow all procedures of the law, as if they have a presence in the state, if they meet one of two criteria in the previous calendar year or the current calendar year: (1) the remote seller’s gross revenue from the sale of tangible personal property, any products transferred electronically, or services delivered into South Dakota exceeds $100,000; or (2) the remote seller has sold tangible personal property, any products transferred electronically, or services for delivery into South Dakota in 200 or more separate transactions.
(c) Wayfair overturned longstanding United States Supreme Court precedent, established in Quill Corp. v. North Dakota, (1992) 504 U.S. 298, which precluded states from imposing an obligation to collect sales or use tax on a seller unless the seller had a physical presence in the state.
(d) Current California law has a “long-arm” provision that imposes a duty to collect use tax on any retailer that has substantial nexus with this state for the purposes of the commerce clause of the United States Constitution and any retailer upon whom federal law permits this state to impose a use tax collection duty.
(e) In Wayfair, the Court found that South Dakota did not violate the commerce clause of the United States Constitution by imposing a sales tax collection duty on sellers whose economic activity in the state satisfies the sales thresholds in SDCL Chapter 10-64-2.
(f) It is the intent of the Legislature by enacting this act to modernize California law consistent with the holding of Wayfair, which allows this state to impose a use tax collection duty on retailers who have specified levels of economic activity in this state, even though they do not have a physical presence in this state. It is also the intent of the Legislature to ensure that small businesses are not unduly burdened by the expansion of the duty to collect use tax.
(g) The provisions of this act are intended to protect small businesses by modifying existing law to: (1) increase the level of economic activity a retailer must have in California for the state to impose a use tax collection obligation on the retailer; (2) define the term “retailer” to include marketplace facilitators and require marketplace facilitators that meet the higher economic activity threshold to collect and remit the use tax on behalf of their marketplace sellers; and (3) alleviate the burden of tracking economic activity in each individual district that imposes a district tax.
Chapter 1.7 (commencing with Section 6040) is added to Part 1 of Division 2 of the Revenue and Taxation Code, to read:
CHAPTER 1.7. Marketplace Facilitator Act
This chapter shall be known as and referred to as the Marketplace Facilitator Act.
(a) “Marketplace” means a physical or electronic place, including, but not limited to, a store, booth, internet website, catalog, television or radio broadcast, or a dedicated sales software application, where a marketplace seller sells or offers for sale tangible personal property for delivery in this state regardless of whether the tangible personal property, marketplace seller, or marketplace has a physical presence in this state.
(b) “Marketplace facilitator” means a person who contracts with marketplace sellers to facilitate for consideration, regardless of whether deducted as fees from the transaction, the sale of the marketplace seller’s products through a marketplace operated by the person or a related person and who does both of the following:
(1) Directly or indirectly, through one or more related persons, engages in any of the following:
(2) Directly or indirectly, through one or more related persons, engages in any of the following activities with respect to the marketplace seller’s products:
(c) “Marketplace seller” means a person who has an agreement with a marketplace facilitator and makes retail sales of tangible personal property through a marketplace owned, operated, or controlled by a marketplace facilitator, even if that person would not have been required to hold a seller’s permit or permits, or required to collect the tax imposed pursuant to Chapter 3 (commencing with Section 6201), had the sale not been made through that marketplace.
Newspapers, internet websites, and other entities that advertise tangible personal property for sale, that do not transmit or otherwise communicate the offer and acceptance for the sale of tangible personal property between the seller and purchaser, and do not process payments directly or indirectly through third parties for the tangible personal property sold, are not facilitating a sale under this chapter.
For purposes of this chapter, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of Title 26 of the United States Code and the regulations thereunder.
(2) “Delivery network courier” means an individual who provides delivery services through a delivery network company internet website or mobile application using a personal means of transportation, such as a passenger vehicle, as defined in Section 465 of the Vehicle Code, bicycle, scooter, or other similar means of transportation, using public transportation, or walking.
(3) “Delivery services” means the pickup of one or more local products from a local merchant and delivery of the local products to a customer. “Delivery services” do not include any delivery requiring over 75 miles of travel from the local merchant to the customer.
(4) “Local merchant” means a third-party merchant, including, but not limited to, a kitchen, restaurant, grocery store, retail store, convenience store, or business of another type, that is not under common ownership or control with the delivery network company.
(5) “Local product” means any item, including food, other than freight, mail, or a package to which postage has been affixed.
Article 2. Registration and Collection
A marketplace facilitator shall be considered the seller and retailer for each sale facilitated through its marketplace for purposes of determining whether the marketplace facilitator is required to register with the department under Chapter 2 (commencing with Section 6051) or Chapter 3 (commencing with Section 6201), in addition to each sale for which the marketplace facilitator is the seller or retailer or both under Chapter 1 (commencing with Section 6001).
A marketplace facilitator that is registered with the department or required to register with the department under Chapter 2 (commencing with Section 6051) or Chapter 3 (commencing with Section 6201) and that facilitates a retail sale of tangible personal property by a marketplace seller is the retailer selling or making the sale of the tangible personal property sold through its marketplace for purposes of this part.
For purposes of determining the total combined sales of tangible personal property for delivery in this state pursuant to Section 6203:
(a) A marketplace facilitator shall include all sales of tangible personal property for delivery in this state, including sales made on its own behalf and by all related persons and sales facilitated on behalf of marketplace sellers.
(b) A marketplace seller shall include all sales of tangible personal property for delivery in this state, including sales made on its own behalf and sales facilitated through any marketplace facilitator’s marketplace.
A marketplace seller shall register with the department under Chapter 2 (commencing with Section 6051) or Chapter 3 (commending with Section 6201), as required, for retail sales made on its own behalf and not facilitated through a registered marketplace facilitator.
Article 3. Marketplace Facilitator Relief
If the marketplace facilitator demonstrates to the satisfaction of the department that the marketplace facilitator has made a reasonable effort to obtain accurate and complete information from an unrelated marketplace seller about a retail sale and that the failure to remit the correct amount of tax imposed under this part was due to incorrect or incomplete information provided to the marketplace facilitator by the unrelated marketplace seller, then the marketplace facilitator shall be relieved of liability for the tax for that retail sale. This section does not apply with regard to a retail sale for which the marketplace facilitator is the retailer selling or making the sale of the tangible personal property on its own behalf or if the marketplace facilitator and marketplace seller are related. Where a marketplace facilitator is relieved of liability for the tax on a retail sale under this section, the marketplace seller is the retailer for that retail sale.
(a) A marketplace facilitator shall be relieved of the tax on retail sales facilitated through its marketplace as provided in subdivision (c) if the marketplace facilitator demonstrates to the satisfaction of the department all of the following:
(1) The retail sales were facilitated for a marketplace seller prior to January 1, 2023, through a marketplace of the marketplace facilitator.
(2) The marketplace facilitator is not the marketplace seller.
(3) The marketplace facilitator and the marketplace seller are not related.
(4) The failure to collect sales and use tax was due to a good faith error other than an error in sourcing the sale pursuant to the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251)).
(b) To the extent that a marketplace facilitator is relieved of liability for collection of sales and use tax under this section, the marketplace seller for whom the marketplace facilitator has facilitated the retail sale is also relieved of liability, unless the marketplace seller is the retailer for those retail sales pursuant to Section 6046. The department may determine the manner in which a marketplace facilitator or marketplace seller shall claim the liability relief provided in this section.
(c) The liability relief provided under this section shall not exceed the following percentage of the total sales and use tax due on sales facilitated by a marketplace facilitator for marketplace sellers, which sales shall not include sales by the marketplace facilitator or persons related to the marketplace facilitators:
(1) For sales facilitated during the fourth quarter of 2019 or during the 2020 calendar year, 7 percent.
(2) For sales facilitated during the 2021 calendar year, 5 percent.
(3) For sales facilitated during the 2022 calendar year, 3 percent.
(d) Nothing in this section shall be construed to relieve any person of liability for collecting but failing to remit to the department sales and use tax.
Article 4. Operative Date
6049.5.
(a) This chapter shall become operative on October 1, 2019.
Section 6203 of the Revenue and Taxation Code, as added by Section 3 of Chapter 313 of the Statutes of 2011, is amended to read:
(f) (1) The amendments made to this section by the act adding this subdivision shall become operative on April 1, 2019.
(2) If the amendments made to this section by the act adding this subdivision are held in a final decision of a court of competent jurisdiction to violate the substantial nexus standard of the commerce clause of the United States Constitution, this section shall become inoperative and shall be repealed on the date of that final decision.
Section 6203 is added to the Revenue and Taxation Code, to read:
(5) (A) Any retailer entering into an agreement or agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers of tangible personal property to the retailer, whether by an internet-based link or an internet website, or otherwise, provided that both of the following conditions are met:
(ii) The retailer, within the preceding 12 months, has total cumulative sales of tangible personal property to purchasers in this state in excess of one million dollars ($1,000,000).
(C) Notwithstanding subparagraph (B), an agreement under which a retailer engages a person in this state to place an advertisement on an internet website operated by that person, or operated by another person in this state, is not an agreement described in subparagraph (A), unless the person entering the agreement with the retailer also directly or indirectly solicits potential customers in this state through use of flyers, newsletters, telephone calls, electronic mail, blogs, microblogs, social networking sites, or other means of direct or indirect solicitation specifically targeted at potential customers in this state.
(f) If the amendments to Section 6203, as added by Section 3 of Chapter 313 of the Statutes of 2011, made by the act adding this section are held in a final decision of a court of competent jurisdiction to violate the substantial nexus standard of the commerce clause of the United States Constitution, this section shall become operative on the date of that final decision.
Section 6203.1 is added to the Revenue and Taxation Code, to read:
(c) For purposes of this section, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of Title 26 of the United States Code and the regulations thereunder.
(1) “A retailer engaged in business in the district” shall also include any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property in this state or for delivery in the state by the retailer and all persons related to the retailer that exceeds five hundred thousand dollars ($500,000). For purposes of this section, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of Title 26 of the United States Code and the regulations thereunder.
(g) Any provision in an ordinance that is required to be included pursuant to paragraph (1) of subdivision (a) shall become operative on April 1, 2019.
(a) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) shall not apply to any guidelines, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, which is a regulation as defined in Section 11342.600 of the Government Code, established or issued by the California Department of Tax and Fee Administration before January 1, 2021, to implement, interpret, or make specific the amendments made to Sections 6203 and 7262 of the Revenue and Taxation Code by this act. This subdivision shall not apply to any new regulation or amendment to an existing regulation as defined in Section 11342.600 of the Government Code established or issued on or after January 1, 2021.
(b) Implementation of Chapter 1.7 (commencing with Section 6040) of Part 1 of Division 2 of the Revenue and Taxation Code and Section 6203.1 of the Revenue and Taxation Code, as both proposed to be added by this act, for the 2019–20 fiscal year, is deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare and, therefore, the California Department of Tax and Fee Administration is hereby authorized to adopt emergency regulations to implement those provisions during the 2019–20 fiscal year, in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). Notwithstanding any other law, the emergency regulations adopted by the California Department of Tax and Fee Administration may remain in effect for two years from the date of adoption.
The amendments made to Sections 6203 and 7262 of the Revenue and Taxation Code by this act shall not have any retroactive effect.
In order to ensure that small businesses are not unduly burdened by the default expansion of the duty to collect use tax under state law due to the application of the holding in South Dakota v. Wayfair, Inc., (2018) 585 U.S. ___ and to ensure that the state and local governments timely receive tax revenues that have been previously undercollected to enable them to fund crucial programs and services, it is necessary for this act to take effect immediately.