The URL can be used to link to this page

Home My WebLink About1995-04-11 - AGENDA REPORTS - STATE LEGISTATION SB602 AB866 (2)CONSENT CALENDAR DATE: April 11, 1995 SUBJECT: State Legislation SB602/AB866 DEPARTMENT: Management Services BACKGROUND City Manager Item to be pre Michael P. Murphy N Aj Over the past several months, a number of cities throughout the state, including Santa Clarita, have been investigating the loss of sales tax revenue to cities from vehicles which are leased rather than sold. The cities have come together under the umbrella of Cities for Restoring Direct Allocation of Motor Vehicle Leasing Tax Revenue. Santa Clarita Finance Director, Steve Stark, serves as a member of the steering committee with Intergovernmental Relations Officer, Mike Murphy, serving as his alternate. Existing law returns one percent of the state sales tax to the point-of-sale jurisdiction. Current law also provides that the sales tax, or use tax, generated on motor vehicle lease transactions shall be allocated to the county tax pool in which the lease took place and be distributed by formula to all cities in the county. Therefore, almost every lease transaction negotiated at the Santa Clarita Auto Center results in sales tax leakage from the community. ` It is estimated that approximately 25% of all California automobile dealer transactions are leases. This figure is anticipated to reach the 50% mark by the year 2000. The number of leases generated in the Santa Clarita Auto Center are believed to exceed these percentages. The Santa Clarita Department of Finance estimates that the City is presently losing between $500,000 and $1,000,000 annually on leased vehicle use tax allocations. Two approaches are simultaneously being pursued. First, an effort is in progress to have the Board of Equalization administratively amend its policies to provide for leased vehicle use tax to be returned to the jurisdiction in which the lease takes place. Initial meetings with the Board of Equalization suggest that legislation may ultimately be the manner in PwROWED Agenda Item: �� which this issue is resolved. Senate Bill 602 (Wright) and Assembly Bill 866 (Aguiar) are the vehicles for implementing the second approach. While the bill language in both measures will certainly be subject to future amendment, the overall intent is to return revenue to the jurisdiction in which the lease was negotiated. To date, the Steering Committee cities have borne the burden of this effort in terms of meetings in both Southern and Northern California with affected cities, Board of Equalization, legislators and other interested organizations, phone calls and mailings. It is further anticipated that it may be necessary to retain professional legislative advocacy to further this issue as the League of California Cities has specifically taken no position on these bills. Therefore, approximately 100 cities statewide are being requested to provide $1,000 each to a fund which will be used exclusively for promoting this issue. Any unused finds will be returned on a proportional basis. • Support Senate Bill 602 and Assembly Bill 866. Transmit statements of support to the members of Santa Clarita's state legislative delegation and appropriate legislative committees. • Support efforts to change Board of Equalization administrative regulations. • Authorize the allocation of $1,000 to Cities for Restoring direct Allocation of Motor Vehicle Leasing Tax Revenue from Contingency Account 01-4101-290. Senate Bill 602 Assembly Bill 866 .MPM.autofeas.agd In bill text: brackets hove special meaning: [A> <A] contains added text, and [D> <01 conteins deleted text, LEGISLATIVE COUNSEL'S DIGEST AB 866, as introduced, Agu er„ Local use tax: lensed vehicles, Under regulations adopted by the State Board of Equalization pursuant to the Bradley -Burns Uniform Local Sales and Use Tax Law, lease transactions are subject to the use portion of that tax. This bill would provide that, with respect to the lease of a motor vehicle, it shell be conclusively presumed that the use of the motor vehicle by the lessee occurs in the taxing district where the lease was negotiated.. The bill would make that presumption applicable for the duration of the lease, and would specify that this provision does not apply to lease transactions between an out-of-state lessor and a lessee who is a California resident, Vote: majority„ Appropriation:, no. Fiscal committee: yes. State-mendated local program: no, THE PEOPLE OF THE STATE OF CALIFORNIA 00 ENACT AS FOLLOWS: SECTION I, Section 7204.1 is added to the Revenue and 'Taxation Code, to read: 7204,1. (a) Notwithstanding any other provision of law; for purposes of the collection and allocation of any use tax imposed pursuant to this part with respect to the lease of a motor vehicle (as defined in Section 415 of the Vehicle Code), it ehall be conclueively presumed that the use of the motor vehicle by the lessee occurs in the taxing district where the lease was negotiated.. (b) The presumption established in subdivision (a) shall be applicable for the duration of the lease. AMENDED IN SENATE MARCH 27, 1995 SENATE BILL No. 602 Introduced by Senator Wright (Coauthor: Assembly Member Takasugi) February 22, 1995 An act to add Section 7204.1 to the Revenue and Taxation Code, relating to taxation. LEGISLATIVE COUNSEL'S DIGEST SB 602, as amended, Wright. Local use tax: leased vehicles. Under regulations adopted by the State Board of Equalization pursuant to the Bradley -Burns Uniform Local Sales and Use Tax Law, lease transactions are generally subject to the use tax portion of that tax. This bill would provide that, with respect to the lease of a motor vehicle, it shall be eerlelusiYel}■ presumed that the use of the meter Yekiele bg the lessee eeeurs _ the tang distriet where the lease wets negetiated if the lease contract is negotiated at an automobile dealership, the use tax shall be allocated to the city where the dealership is located. The bill would further provide that if the lease contract is negotiated through a leasing agent not solely alliliated with an automobile dealership, the use tax shall be allocated to the countypool of the county in which the lessee resides. The bill would make that presumption those allocations applicable for the duration of the lease, and would specify that this provision does not apply to lease transactions between an out-of-state lessor and a lessee who is a California resident. 98 SB 602 —2— AMENDED 2_ Vote: majority. Appropriation: no. Fiscal committee: yes. State -mandated local program: no. The people of the Stare of C.alifiornia do enact as follows• 1 SECTION 1. Section 7204.1 is added to the Revenue 2 and Taxation Code, to read: 3 7204.1. (a) Notwithstanding any other provision of 4 law, far pupas" of Oke and alleestion of in 5 connection with any use tax imposed pursuant to this part 6 with respect to the lease of a motor vehicle (as defined in 7 Section 415 of the Vekiele 6ede), it shall lie � , 8 WeAm"d that the toe of the meter Yehiele by the lessee 9 eee"M is the talereg dishier where the lease was 10 11 (1) ftheleasecontract negotiaVehicle Code) shaff be te atanautomobile 12 dealership, the use tax shall be allocated to the city where 13 the dealership is located. 14 (2) Ifthelease contractisnegotrated through a leasing 15 agent notsolelyafliatedwithanautomobdedealership, 16 the use tax shall be allocated to the county pool of the 17 county in which the lessee resides 18 (b) ,The presmil Affcd-ations established in 19 subdivision (a) shall be applicable for the duration of the 20 lease. 21 (c) This section shall not apply to lease transactions 22 between an out-of-state lessor and a lessee who is a 23 California resident. 0