Bill Text: CA AB1087 | 2009-2010 | Regular Session | Enrolled
Bill Title: State Board of Equalization: sales and use taxes:
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Vetoed) 2010-01-14 - Consideration of Governor's veto stricken from file. [AB1087 Detail]
Download: California-2009-AB1087-Enrolled.html
BILL NUMBER: AB 1087 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 4, 2009
PASSED THE ASSEMBLY SEPTEMBER 11, 2009
AMENDED IN SENATE SEPTEMBER 2, 2009
AMENDED IN ASSEMBLY JUNE 1, 2009
AMENDED IN ASSEMBLY MARCH 31, 2009
INTRODUCED BY Assembly Member Ma
FEBRUARY 27, 2009
An act to amend Section 10286.1 of the Public Contract Code, and
to amend Sections 6011 and 6012 of the Revenue and Taxation Code,
relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1087, Ma. State Board of Equalization: sales and use taxes:
administration: transportation charges: public contracts with
expatriate corporations: tax treaty.
The Sales and Use Tax Law imposes a tax on retailers measured by
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, measured by the
sales price of the property. That law provides various exclusions
from gross receipts and sales price, including an exclusion for
separately stated charges for transportation from the retailer's
place of business or other point from which shipment is made directly
to the purchaser, as specified.
This bill would state that charges for transportation are
separately stated when stated as a single amount and not combined in
a single amount with other charges.
Existing law regarding contracting between state agencies and
private contractors sets forth requirements for the procurement of
materials, supplies, equipment, and services by state agencies.
Existing law sets out the various responsibilities of the Department
of General Services, and other state agencies, in overseeing and
implementing state contracting procedures and policies. Existing law
prohibits a state agency from entering into any contract with an
expatriate corporation, as defined, or its subsidiary, unless certain
conditions are met. Existing law defines an expatriate corporation
as a foreign incorporated entity that is publicly traded in the
United States and that meets specified criteria.
This bill would revise the definition of an expatriate corporation
to also require that the entity be domiciled in a jurisdiction that
does not have an income tax treaty with the United States.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature in enacting this
act to clarify that a state agency shall not enter into any contract
with an expatriate corporation located in a foreign jurisdiction that
does not have an income tax treaty with the United States.
SEC. 2. Section 10286.1 of the Public Contract Code is amended to
read:
10286.1. (a) For purposes of this part, except as otherwise
provided in subdivisions (b) and (c), a state agency shall not enter
into any contract with an expatriate corporation or its subsidiaries.
(b) (1) For purposes of this article, an "expatriate corporation"
means a foreign incorporated entity that is publicly traded in the
United States to which all of the following apply:
(A) The United States is the principal market for the public
trading of the foreign incorporated entity.
(B) The foreign incorporated entity has no substantial business
activities in the place of incorporation.
(C) The foreign incorporated entity is domiciled in a jurisdiction
that does not have an income tax treaty with the United States.
(D) Either clause (i) or clause (ii) applies:
(i) The foreign entity was established in connection with a
transaction or series of related transactions pursuant to which (I)
the foreign entity directly or indirectly acquired substantially all
of the properties held by a domestic corporation or all of the
properties constituting a trade or business of a domestic partnership
or related foreign partnership, and (II) immediately after the
acquisition, more than 50 percent of the publicly traded stock, by
vote or value, of the foreign entity is held by former shareholders
of the domestic corporation or by former partners of the domestic
partnership or related foreign partnership. For purposes of subclause
(II), any stock sold in a public offering related to the transaction
or a series of transactions is disregarded.
(ii) The foreign entity was established in connection with a
transaction or series of related transactions pursuant to which (I)
the foreign entity directly or indirectly acquired substantially all
of the properties held by a domestic corporation or all of the
properties constituting a trade or business of a domestic partnership
or related foreign partnership, and (II) the acquiring foreign
entity is more than 50 percent owned, by vote or value, by domestic
shareholders or partners.
(iii) For purposes of this subparagraph, indirect acquisition of
property includes the acquisition of a stock share, or any portion
thereof, of the owner of that property.
(2) Notwithstanding subdivision (a), a state agency may contract
with an expatriate corporation, or its subsidiary, if it was an
expatriate corporation before January 1, 2004, to which both of the
following apply:
(A) The foreign entity provides, by operation of law, by
provisions of its governing documents, by resolution of its board of
directors, or in any other manner, at least the following
shareholders' rights:
(i) Shareholders of the entity have the right to inspect, at a
principal place of business in the United States, copies of the
entity's books and records, including, but not limited to,
shareholder names, addresses, and shareholdings in accordance with
the corporation law, as amended from time to time and as that law is
interpreted by the courts, of the United States jurisdiction in which
the entity was previously incorporated, or, if the entity was not
previously incorporated, in accordance with the terms set forth in
the Model Business Corporation Act, as that act may be amended from
time to time, provided that, if the corporate law of the United
States jurisdiction in which the entity was previously incorporated
or the Model Business Corporation Act does not provide access to the
shareholder names, addresses, and shareholdings, these books and
records are available for inspection by shareholders for purposes
properly related to their status as shareholders of the entity.
(ii) The entity permits its shareholders to bring derivative
proceedings on behalf of the entity, provided that these derivative
proceedings are brought on a basis and under the terms applicable
under the law, as amended from time to time and as interpreted by, or
required by, the courts of the United States jurisdiction in which
the entity was previously incorporated, or, if the entity was not
previously incorporated, on a basis and under the terms set forth in
the Model Business Corporations Act as that act may be amended from
time to time and as it is interpreted by, or required by, the courts.
(iii) Entity transactions in which any director is interested are
approved in accordance with the applicable law, as amended from time
to time and as interpreted by the courts, of the United States
jurisdiction in which the entity was previously incorporated, or, if
the entity was not previously incorporated, in accordance with the
terms set forth in the Model Business Corporations Act, as may be
amended from time to time and as interpreted by the courts.
(iv) The entity has consented to the jurisdiction, for any
otherwise available cause of action by or on behalf of the entity's
shareholders, including any pendent state causes of action, of all of
the following courts:
(I) The state courts of one or more states.
(II) The United States federal courts in any state in which the
entity consents to the jurisdiction of that state's courts pursuant
to subclause (I).
(v) The entity has appointed an agent for service of process in
the state or states in which the entity has consented to
jurisdiction, as described in clause (iv), and the entity meets at
least one of the following conditions:
(I) The entity has unencumbered assets in the United States, which
assets may include equity or debt investments in United States
companies, with a book value in excess of fifty million dollars
($50,000,000), and the entity delivers to the Secretary of State an
opinion of an attorney licensed in the United States that judgments
rendered against the entity may be satisfied by using these assets.
(II) The entity posts a bond or similar security in an amount of
at least fifty million dollars ($50,000,000).
(III) The entity has directors' and officers' insurance in an
amount of at least fifty million dollars ($50,000,000).
(vi) The entity agrees that, in connection with any lawsuit
brought against it by its shareholders in any court in which the
entity has consented to jurisdiction as described in clause (iv), the
entity will provide to the court notice of the manner in which the
entity complied with clause (v) and, if the entity complied with that
clause in the manner specified in subclause (I) of clause (v), a
copy of the opinion described in that subclause.
(vii) Shareholder approval is required for any sale of all or
substantially all of the entity's assets in accordance with the law,
as amended from time to time and as it is interpreted by the courts,
of the United States jurisdiction in which it was previously
incorporated, or, if it was not previously incorporated, in
accordance with the terms set forth in the Model Business
Corporations Act, as it may be amended from time to time.
(viii) The directors and officers of the entity occupy a fiduciary
relationship with the entity and its shareholders and these
directors and officers, in performing their duties, act in good faith
in a manner that a director or officer believes to be in the best
interests of the entity and its shareholders, as that standard of
care is interpreted by the courts.
(ix) The entity agrees to hold no more than one of every four
annual shareholder meetings in a location outside the United States
and, in the event that the entity holds an annual meeting outside the
United States, the entity agrees to provide access to that meeting
through a Web cast or other technology that allows the entity's
shareholders to do both of the following:
(I) Listen to the meeting, watch the meeting, or both.
(II) Send questions that will be addressed at the meeting.
(x) The entity provides a description of the shareholder rights
described in clauses (i) to (ix), inclusive, and any subsequent
changes to these rights, on the entity's Web site or in its 10K
filings with the United States Securities and Exchange Commission.
(B) The entity uses worldwide combined reporting to calculate the
income on which it pays taxes to the state.
(c) The chief executive officer of a state agency or his or her
designee may waive the prohibition specified in subdivision (a) if
the executive officer or his or her designee has made a written
finding that the contract is necessary to meet a compelling public
interest. For purposes of this section, a "compelling public interest"
includes, but is not limited to, ensuring the provision of essential
services, ensuring the public health and safety, or an emergency as
defined in Section 1102. If a waiver is granted to a vendor pursuant
to this subdivision, the requirement to submit a declaration of
compliance, as set forth in paragraph (1) of subdivision (d), does
not apply to that vendor.
(d) (1) For purposes of this chapter, "state agency" means every
state office, department, division, bureau, board, commission, and
the California State University, but does not include the University
of California, the Legislature, the courts, or any agency in the
judicial branch of government.
(2) On or after January 1, 2004, all state agencies shall, as a
condition of the contract, require any vendor that is offered a
contract to do business with the state to submit a declaration
stating that the vendor is eligible to contract with the state
pursuant to this section.
(3) A vendor that declares as true any material matter in a
declaration described in this subdivision that he or she knows to be
false is guilty of a misdemeanor.
(e) (1) Except as provided in paragraph (2) and subdivision (f),
this section applies to contracts that are entered into on or after
January 1, 2004.
(2) With respect to an entity that was an expatriate corporation,
as defined in paragraph (1) of subdivision (b), before January 1,
2004, this section applies to contracts that are entered into on or
after April 1, 2004.
(f) (1) The declaration requirement set forth in subdivision (d)
does not apply to a credit card purchase of goods of two thousand
five hundred dollars ($2,500) or less.
(2) The total amount of exemption authorized herein shall not
exceed seven thousand five hundred dollars ($7,500) per year for each
company from which a state agency is purchasing goods by credit
card. It shall be the responsibility of each state agency to monitor
the use of this exemption and adhere to these restrictions on these
purchases.
SEC. 3. Section 6011 of the Revenue and Taxation Code is amended
to read:
6011. (a) "Sales price" means the total amount for which tangible
personal property is sold or leased or rented, as the case may be,
valued in money, whether paid in money or otherwise, without any
deduction on account of any of the following:
(1) The cost of the property sold.
(2) The cost of materials used, labor or service cost, interest
charged, losses, or any other expenses.
(3) The cost of transportation of the property, except as excluded
by other provisions of this section.
(b) The total amount for which the property is sold or leased or
rented includes all of the following:
(1) Any services that are a part of the sale.
(2) Any amount for which credit is given to the purchaser by the
seller.
(3) The amount of any tax imposed by the United States upon
producers and importers of gasoline and the amount of any tax imposed
pursuant to Part 2 (commencing with Section 7301) of this division.
(c) "Sales price" does not include any of the following:
(1) Cash discounts allowed and taken on sales.
(2) The amount charged for property returned by customers when
that entire amount is refunded either in cash or credit, but this
exclusion shall not apply in any instance when the customer, in order
to obtain the refund, is required to purchase other property at a
price greater than the amount charged for the property that is
returned. For the purpose of this section, refund or credit of the
entire amount shall be deemed to be given when the purchase price
less rehandling and restocking costs are refunded or credited to the
customer. The amount withheld for rehandling and restocking costs may
be a percentage of the sales price determined by the average cost of
rehandling and restocking returned merchandise during the previous
accounting cycle.
(3) The amount charged for labor or services rendered in
installing or applying the property sold.
(4) (A) The amount of any tax (not including, however, any
manufacturers' or importers' excise tax, except as provided in
subparagraph (B)) imposed by the United States upon or with respect
to retail sales whether imposed upon the retailer or the consumer.
(B) The amount of manufacturers' or importers' excise tax imposed
pursuant to Section 4081 or 4091 of the Internal Revenue Code for
which the purchaser certifies that he or she is entitled to either a
direct refund or credit against his or her income tax for the federal
excise tax paid or for which the purchaser issues a certificate
pursuant to Section 6245.5.
(5) The amount of any tax imposed by any city, county, city and
county, or rapid transit district within the State of California upon
or with respect to retail sales of tangible personal property,
measured by a stated percentage of sales price or gross receipts,
whether imposed upon the retailer or the consumer.
(6) The amount of any tax imposed by any city, county, city and
county, or rapid transit district within the State of California with
respect to the storage, use or other consumption in that city,
county, city and county, or rapid transit district of tangible
personal property measured by a stated percentage of sales price or
purchase price, whether the tax is imposed upon the retailer or the
consumer.
(7) Separately stated charges for transportation from the retailer'
s place of business or other point from which shipment is made
directly to the purchaser, but the exclusion shall not exceed a
reasonable charge for transportation by facilities of the retailer or
the cost to the retailer of transportation by other than facilities
of the retailer. However, if the transportation is by facilities of
the retailer, or the property is sold for a delivered price, this
exclusion shall be applicable solely with respect to transportation
which occurs after the purchase of the property is made. Charges for
transportation are separately stated for the purposes of this
paragraph if those charges are stated as a single amount and are not
included within a single amount that combines transportation charges
with other charges.
(8) Charges for transporting landfill from an excavation site to a
site specified by the purchaser, either if the charge is separately
stated and does not exceed a reasonable charge or if the entire
consideration consists of payment for transportation.
(9) The amount of any motor vehicle, mobilehome, or commercial
coach fee or tax imposed by and paid the State of California that has
been added to or is measured by a stated percentage of the sales or
purchase price of a motor vehicle, mobilehome, or commercial coach.
(10) (A) The amount charged for intangible personal property
transferred with tangible personal property in any technology
transfer agreement, if the technology transfer agreement separately
states a reasonable price for the tangible personal property.
(B) If the technology transfer agreement does not separately state
a price for the tangible personal property, and the tangible
personal property or like tangible personal property has been
previously sold or leased, or offered for sale or lease, to third
parties at a separate price, the price at which the tangible personal
property was sold, leased, or offered to third parties shall be used
to establish the retail fair market value of the tangible personal
property subject to tax. The remaining amount charged under the
technology transfer agreement is for the intangible personal property
transferred.
(C) If the technology transfer agreement does not separately state
a price for the tangible personal property, and the tangible
personal property or like tangible personal property has not been
previously sold or leased, or offered for sale or lease, to third
parties at a separate price, the retail fair market value shall be
equal to 200 percent of the cost of materials and labor used to
produce the tangible personal property subject to tax. The remaining
amount charged under the technology transfer agreement is for the
intangible personal property transferred.
(D) For purposes of this paragraph, "technology transfer agreement"
means any agreement under which a person who holds a patent or
copyright interest assigns or licenses to another person the right to
make and sell a product or to use a process that is subject to the
patent or copyright interest.
(11) The amount of any tax imposed upon diesel fuel pursuant to
Part 31 (commencing with Section 60001).
(12) (A) The amount of tax imposed by any Indian tribe within the
State of California with respect to a retail sale of tangible
personal property measured by a stated percentage of the sales or
purchase price, whether the tax is imposed upon the retailer or the
consumer.
(B) The exclusion authorized by subparagraph (A) shall only apply
to those retailers who are in substantial compliance with this part.
SEC. 4. Section 6012 of the Revenue and Taxation Code is amended
to read:
6012. (a) "Gross receipts" mean the total amount of the sale or
lease or rental price, as the case may be, of the retail sales of
retailers, valued in money, whether received in money or otherwise,
without any deduction on account of any of the following:
(1) The cost of the property sold. However, in accordance with any
rules and regulations as the board may prescribe, a deduction may be
taken if the retailer has purchased property for some other purpose
than resale, has reimbursed his or her vendor for tax which the
vendor is required to pay to the state or has paid the use tax with
respect to the property, and has resold the property prior to making
any use of the property other than retention, demonstration, or
display while holding it for sale in the regular course of business.
If that deduction is taken by the retailer, no refund or credit will
be allowed to his or her vendor with respect to the sale of the
property.
(2) The cost of the materials used, labor or service cost,
interest paid, losses, or any other expense.
(3) The cost of transportation of the property, except as excluded
by other provisions of this section.
(4) The amount of any tax imposed by the United States upon
producers and importers of gasoline and the amount of any tax imposed
pursuant to Part 2 (commencing with Section 7301) of this division.
(b) The total amount of the sale or lease or rental price includes
all of the following:
(1) Any services that are a part of the sale.
(2) All receipts, cash, credits and property of any kind.
(3) Any amount for which credit is allowed by the seller to the
purchaser.
(c) "Gross receipts" do not include any of the following:
(1) Cash discounts allowed and taken on sales.
(2) Sale price of property returned by customers when that entire
amount is refunded either in cash or credit, but this exclusion shall
not apply in any instance when the customer, in order to obtain the
refund, is required to purchase other property at a price greater
than the amount charged for the property that is returned. For the
purpose of this section, refund or credit of the entire amount shall
be deemed to be given when the purchase price less rehandling and
restocking costs are refunded or credited to the customer. The amount
withheld for rehandling and restocking costs may be a percentage of
the sales price determined by the average cost of rehandling and
restocking returned merchandise during the previous accounting cycle.
(3) The price received for labor or services used in installing or
applying the property sold.
(4) (A) The amount of any tax (not including, however, any
manufacturers' or importers' excise tax, except as provided in
subparagraph (B)) imposed by the United States upon or with respect
to retail sales whether imposed upon the retailer or the consumer.
(B) The amount of manufacturers' or importers' excise tax imposed
pursuant to Section 4081 or 4091 of the Internal Revenue Code for
which the purchaser certifies that he or she is entitled to either a
direct refund or credit against his or her income tax for the federal
excise tax paid or for which the purchaser issues a certificate
pursuant to Section 6245.5.
(5) The amount of any tax imposed by any city, county, city and
county, or rapid transit district within the State of California upon
or with respect to retail sales of tangible personal property
measured by a stated percentage of sales price or gross receipts
whether imposed upon the retailer or the consumer.
(6) The amount of any tax imposed by any city, county, city and
county, or rapid transit district within the State of California with
respect to the storage, use or other consumption in that city,
county, city and county, or rapid transit district of tangible
personal property measured by a stated percentage of sales price or
purchase price, whether the tax is imposed upon the retailer or the
consumer.
(7) Separately stated charges for transportation from the retailer'
s place of business or other point from which shipment is made
directly to the purchaser, but the exclusion shall not exceed a
reasonable charge for transportation by facilities of the retailer or
the cost to the retailer of transportation by other than facilities
of the retailer. However, if the transportation is by facilities of
the retailer, or the property is sold for a delivered price, this
exclusion shall be applicable solely with respect to transportation
which occurs after the sale of the property is made to the purchaser.
Charges for transportation are separately stated for the purposes of
this paragraph if those charges are stated as a single amount and
are not included within a single amount that combines transportation
charges with other charges.
(8) Charges for transporting landfill from an excavation site to a
site specified by the purchaser, either if the charge is separately
stated and does not exceed a reasonable charge or if the entire
consideration consists of payment for transportation.
(9) The amount of any motor vehicle, mobilehome, or commercial
coach fee or tax imposed by and paid to the State of California that
has been added to or is measured by a stated percentage of the sales
or purchase price of a motor vehicle, mobilehome, or commercial
coach.
(10) (A) The amount charged for intangible personal property
transferred with tangible personal property in any technology
transfer agreement, if the technology transfer agreement separately
states a reasonable price for the tangible personal property.
(B) If the technology transfer agreement does not separately state
a price for the tangible personal property, and the tangible
personal property or like tangible personal property has been
previously sold or leased, or offered for sale or lease, to third
parties at a separate price, the price at which the tangible personal
property was sold, leased, or offered to third parties shall be used
to establish the retail fair market value of the tangible personal
property subject to tax. The remaining amount charged under the
technology transfer agreement is for the intangible personal property
transferred.
(C) If the technology transfer agreement does not separately state
a price for the tangible personal property, and the tangible
personal property or like tangible personal property has not been
previously sold or leased, or offered for sale or lease, to third
parties at a separate price, the retail fair market value shall be
equal to 200 percent of the cost of materials and labor used to
produce the tangible personal property subject to tax. The remaining
amount charged under the technology transfer agreement is for the
intangible personal property transferred.
(D) For purposes of this paragraph, "technology transfer agreement"
means any agreement under which a person who holds a patent or
copyright interest assigns or licenses to another person the right to
make and sell a product or to use a process that is subject to the
patent or copyright interest.
(11) The amount of any tax imposed upon diesel fuel pursuant to
Part 31 (commencing with Section 60001).
(12) (A) The amount of tax imposed by any Indian tribe within the
State of California with respect to a retail sale of tangible
personal property measured by a stated percentage of the sales or
purchase price, whether the tax is imposed upon the retailer or the
consumer.
(B) The exclusion authorized by subparagraph (A) shall only apply
to those retailers who are in substantial compliance with this part.
For purposes of the sales tax, if the retailers establish to the
satisfaction of the board that the sales tax has been added to the
total amount of the sale price and has not been absorbed by them, the
total amount of the sale price shall be deemed to be the amount
received exclusive of the tax imposed. Section 1656.1 of the Civil
Code shall apply in determining whether or not the retailers have
absorbed the sales tax.
