BILL:		SB 157

AUTHOR:	STATE SENATOR DEBORAH BOWEN
		(D-MARINA DEL REY)

SUBJECT:	STREAMLINED SALES AND USE TAX AGREEMENT

STATUS:	SENATE APPROPRIATIONS COMMITTEE

ACTION:	SUPPORT

RECOMMENDATION

Staff recommends that the MTA Board of Directors adopt a support position on SB 157.

PROVISIONS

The Streamlined Sales and Use Tax Agreement (SSUTA) has been established as a joint effort by states to simplify laws relating to sales tax and to apply that sales tax to internet sales.  California does not participate in that agreement.

SB 157 would:

•	Create the SSUTA Act in the State of California.
•	Create a Board of Governors to represent California at the Agreement meetings.
•	Require that implementation of agreements reached by the project, (i.e. the imposition of the sales tax to internet sales) shall be done by separate legislation.

IMPACT ANALYSIS

The SSUTA has been established to develop a standard methodology across states, for imposition of the sales tax to Internet sales.  Since California has not participated in the Agreement, the state has gone without a voice in these proceedings.  SB 157 would create a methodology for California to participate.

The growth of Internet sales has begun to impact the state’s collection of sales tax.  The Board of Equalization has estimated that California has lost over $1.5 billion in sales tax revenue to Internet sales.  California had previously granted “amnesty” from the sales tax to Internet sales partially as a way to spur development of the technology.  Since many of the companies that developed this technology were originally based in California, the state had an economic interest in the success of these companies.  

Additionally, the Quinn Case determined that the complexity of the sales tax laws become a violation of the U.S. Constitution when applied to Internet sales.  This decision found that there must be a nexus between the taxing state and the business engaging in Internet sales and that this nexus is established by a physical presence. 

The recent budget crisis and the rapid growth of the Internet have dramatically affected that thinking and caused many in the state to reconsider this position.  SB 157 would place California into the Agreement and would begin the process for perhaps expanding sales taxes to Internet sales.

Los Angeles County’s local sales taxes for transportation could substantially increase if they were applied to the Internet. It is not possible at this point to estimate the final impact until a more complete assessment of the growth of Internet sales can be completed.  Under the SSUTA, states would not be allowed to impose sales taxes on Internet sales that are different than the sales tax imposed on other retailers.  Staff will monitor the progress of the Agreement, if SB 157 is approved, to ensure that Los Angeles County’s measures are included in the agreement.

Staff recommends the Board support SB 157.