Bill Text: CA AB2060 | 2009-2010 | Regular Session | Enrolled
Bill Title: Public contracts: fixed price contracts: sales and use
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Vetoed) 2010-09-30 - Vetoed by Governor. [AB2060 Detail]
Download: California-2009-AB2060-Enrolled.html
BILL NUMBER: AB 2060 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 25, 2010
PASSED THE ASSEMBLY AUGUST 26, 2010
AMENDED IN SENATE AUGUST 20, 2010
AMENDED IN SENATE AUGUST 18, 2010
AMENDED IN SENATE JULY 15, 2010
AMENDED IN ASSEMBLY MAY 18, 2010
INTRODUCED BY Assembly Member Charles Calderon
FEBRUARY 18, 2010
An act to add Section 7111 to the Public Contract Code, and to
amend Sections 7261 and 7262 of the Revenue and Taxation Code,
relating to fixed price contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 2060, Charles Calderon. Public contracts: fixed price
contracts: sales and use taxes rate changes: transactions and use
taxes.
Existing law imposes requirements on public entities with respect
to the terms of public contracts. Existing law imposes a state sales
and use tax on retailers and on the storage, use, or other
consumption of tangible personal property in this state at the
combined rate of 71/4% of the gross receipts from the retail sale of
tangible personal property in this state and of the sales price of
tangible personal property purchased from any retailer for storage,
use, or other consumption in this state that is stored, used, or
otherwise consumed in this state.
This bill would require a fixed price contract, as specified,
between a government entity, as defined, and a contractor to
authorize payment for a change in the contract price that is
attributable to an increase or decrease in the state sales and use
tax rate, with the increase or decrease paid in accordance with the
contract terms or as agreed to by the parties, as prescribed. By
placing new duties on local officials with respect to their contract
practices, the bill would impose a state-mandated local program.
The Transactions and Use Tax Law authorizes districts, as
specified, to impose transactions and use taxes in accordance with
the Sales and Use Tax Law. That law requires the transactions tax
portion and transactions use portion of any transactions and use
taxes ordinance adopted under that law to include specified
provisions, including provisions that exempt from the tax the sale,
or the storage, use, or other consumption of, tangible personal
property obligated to be furnished or purchased for a fixed price
pursuant to a contract entered into prior to the operative date of
the ordinance, and provisions that exempt from the tax a lease of, or
possession of, or the exercise of any right or power over, tangible
personal property during the period of time for which there is an
obligation to lease the property for an amount fixed by the lease
prior to the operative date of the ordinance. That law provides that
property is not deemed obligated pursuant to a contract or lease if
any party has an unconditional right to terminate the contract or
lease.
This bill would instead provide that the property is not deemed
obligated to a contract or lease if the tax payer has an
unconditional right to terminate the contract or lease.
Section 2230 of the Revenue and Taxation Code provides that the
state will reimburse cities and counties for revenue losses caused by
the enactment of sales and use tax exemptions.
This bill would provide that, notwithstanding Section 2230 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse cities and counties for sales and use tax
revenues lost by them pursuant to this bill.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7111 is added to the Public Contract Code, to
read:
7111. (a) A fixed price contract between a government entity and
a contractor shall authorize payment for a change in the contract
price that is attributable to an increase or decrease in taxes
imposed by Part 1 (commencing with Section 6001) of Division 2 of the
Revenue and Taxation Code. This increase or decrease shall be paid
in accordance with the provisions of the contract governing payment
for changes in the work or, if no provisions are set forth, payment
shall be as agreed to by the parties.
(b) This section shall apply only to an increase or decrease in
the sales and use tax rate imposed with respect to the following:
(1) (A) The gross receipts from the sale of, and the storage, use,
or other consumption in this state of, tangible personal property
obligated pursuant to a contract entered into for a fixed price prior
to the operative date of the increase or decrease in the sales and
use tax rate.
(B) This paragraph shall apply only to a contract in which a
government entity is a party to the contract.
(C) For purposes of this paragraph, tangible personal property
shall not be deemed obligated pursuant to a contract for any period
of time for which the contractor has the right to terminate the
contract upon notice, whether or not the right is exercised.
(2) (A) The gross receipts from the sale of, and the storage, use,
or other consumption in this state of, materials and fixtures
obligated pursuant to a construction contract entered into for a
fixed price prior to the operative date of the increase or decrease
in the sales and use tax rate.
(B) This paragraph shall apply only to a construction contract in
which a government entity is a party to the construction contract.
(C) For purposes of this paragraph, materials and fixtures shall
not be deemed obligated pursuant to a construction contract for any
period of time for which the contractor has the right to terminate
the contract upon notice, whether or not the right is exercised.
(3) (A) A lease of tangible personal property that is a continuing
sale of the property for any period of time for which the lessor is
obligated to lease the property for an amount fixed by the lease
prior to the operative date of the increase or decrease in the sales
and use tax rate.
(B) This paragraph shall apply only to a lease of tangible
personal property to a government entity.
(C) For purposes of this paragraph, the sale or lease of tangible
personal property shall be deemed not to be obligated pursuant to a
contract or lease for any period of time for which the contractor or
lessor has the unconditional right to terminate the contract or lease
upon notice, whether or not that right is exercised.
(4) (A) The possession of, or the exercise of any right or power
over, tangible personal property pursuant to a lease that is a
continuing purchase of the property for any period of time for which
the lessee is obligated to lease the property for an amount fixed by
a lease entered into prior to the operative date of the increase in
the sales and use tax rate.
(B) This paragraph shall apply only to a lease of tangible
personal property to a government entity.
(C) For purposes of this paragraph, the storage, use, or other
consumption of, or possession of, or exercise of any right or power
over, tangible personal property shall be deemed not to be obligated
pursuant to a contract or lease for any period of time for which the
contractor or lessee has the unconditional right to terminate the
contract or lease upon notice, whether or not the right is exercised.
(c) For purposes of this section, the following terms apply:
(1) "Fixed price" means either of the following:
(A) The price or prices specified in the contract or lease, and
the contract or lease does not authorize an increase or decrease in
price due to an increase or decrease in the sales and use tax rate.
(B) The prices or price specified in the construction contract is
a lump sum price or a stated unit price or a guaranteed maximum
price, and the construction contract does not authorize an increase
or decrease in price due to an increase or decrease in the sales and
use tax rate.
(2) "Government entity" means the State of California, or any
city, county, or city and county, community college district, school
district, county superintendent of schools, or special district in
this state.
(d) (1) This section shall apply only to an increase or decrease
in the sales and use tax rate that occurs on or after the effective
date of the act adding this section.
(2) If the sales and use tax rate imposed pursuant to Sections
6051.7 and 6201.7 of the Revenue and Taxation Code, or any portion
thereof, is extended for a period or periods on and after July 1,
2011, the sales and use tax rate extension shall be regarded as an
increase in the sales and use tax rate for purposes of this section.
SEC. 2. Section 7261 of the Revenue and Taxation Code is amended
to read:
7261. The transactions tax portion of any transactions and use
taxes ordinance adopted under this part shall be imposed for the
privilege of selling tangible personal property at retail, and shall
include provisions in substance as follows:
(a) A provision imposing a tax for the privilege of selling
tangible personal property at retail upon every retailer in the
district at a rate of one-quarter of 1 percent, or a multiple
thereof, of the gross receipts of the retailer from the sale of all
tangible personal property sold by that person at retail in the
district.
(b) Provisions identical to those contained in Part 1 (commencing
with Section 6001), insofar as they relate to sales taxes and are not
inconsistent with this part, except that the name of the district as
the taxing agency shall be substituted for that of the state and
that an additional transactor's permit shall not be required if a
seller's permit has been or is issued to the transactor under Section
6067.
(c) A provision that all amendments subsequent to the effective
date of this part to Part 1 (commencing with Section 6001) relating
to sales tax and not inconsistent with this part shall automatically
become a part of the transactions and use taxes ordinance. However,
no amendment shall operate so as to affect the rate of tax imposed by
the district's board.
(d) A provision that the amount subject to tax shall not include
the amount of sales tax or use tax imposed by the State of California
or by any city, city and county, or county pursuant to the
Bradley-Burns Uniform Local Sales and Use Tax Law, or the amount of
any state-administered transactions or use tax.
(e) A provision that there are exempted from the tax the gross
receipts from the sale of tangible personal property, other than fuel
or petroleum products, to operators of aircraft to be used or
consumed principally outside the county in which the sale is made and
directly and exclusively in the use of the aircraft as common
carriers of persons or property under the authority of the laws of
this state, the United States, or any foreign government.
(f) A provision that sales of property to be used outside the
district which are shipped to a point outside the district, pursuant
to the contract of sale, by delivery to that point by the retailer or
his or her agent, or by delivery by the retailer to a carrier for
shipment to a consignee at such point, are exempt from the tax.
For purposes of this section, "delivery" of vehicles subject to
registration pursuant to Chapter 1 (commencing with Section 4000) of
Division 3 of the Vehicle Code, aircraft licensed in compliance with
Section 21411 of the Public Utilities Code, and undocumented vessels
registered under Division 3.5 (commencing with Section 9840) of the
Vehicle Code shall be satisfied by registration to an out-of-district
address and by a declaration under penalty of perjury, signed by the
buyer, stating that the address is, in fact, his or her principal
place of residence.
"Delivery" of commercial vehicles shall be satisfied by
registration to a place of business out of district and a declaration
under penalty of perjury, signed by the buyer, that the vehicle will
be operated from that address.
(g) A provision that the sale of tangible personal property is
exempt from tax if the seller is obligated to furnish the property
for a fixed price pursuant to a contract entered into prior to the
operative date of the ordinance. A lease of tangible personal
property which is a continuing sale of that property is exempt from
tax for any period of time for which the lessor is obligated to lease
the property for an amount fixed by the lease prior to the operative
date of the ordinance. For the purposes of this subdivision, the
sale or lease of tangible personal property shall be deemed not to be
obligated pursuant to a contract or lease for any period of time for
which the seller or lessor has the unconditional right to terminate
the contract or lease upon notice, whether or not that right is
exercised.
SEC. 3. Section 7262 of the Revenue and Taxation Code is amended
to read:
7262. The use tax portion of any transactions and use tax
ordinance adopted under this part shall impose a complementary tax
upon the storage, use, or other consumption in the district of
tangible personal property purchased from any retailer for storage,
use, or other consumption in the district. The tax shall be at a rate
of one-quarter of 1 percent, or a multiple thereof, of the sales
price of the property whose storage, use, or other consumption is
subject to the tax, and the ordinance shall include provisions in
substance as follows:
(a) Provisions identical to those contained in Part 1 (commencing
with Section 6001), insofar as they relate to use taxes and are not
inconsistent with this part, except that the name of the district as
the taxing agency shall be substituted for that of the state. The
name of the district shall be substituted for the word "state" in the
phrase "retailer engaged in business in this state" in Section 6203
and in the definition of that phrase.
The following additional provisions shall be included:
(1) Except as provided in paragraph (2), a retailer engaged in
business in the district shall not be required to collect use tax
from the purchaser of tangible personal property, unless the retailer
ships or delivers the property into the district or participates
within the district in making the sale of the property, including,
but not limited to, soliciting or receiving the order, either
directly or indirectly, at a place of business of the retailer in the
district or through any representative, agent, canvasser, solicitor,
subsidiary, or person in the district under the authority of the
retailer.
(2) "A retailer engaged in business in the district" shall also
include any retailer of any of the following: vehicles subject to
registration pursuant to Chapter 1 (commencing with Section 4000) of
Division 3 of the Vehicle Code, aircraft licensed in compliance with
Section 21411 of the Public Utilities Code, or undocumented vessels
registered under Division 3.5 (commencing with Section 9840) of the
Vehicle Code. That retailer shall be required to collect use tax from
any purchaser who registers or licenses the vehicle, vessel, or
aircraft at an address in the district.
(b) A provision that all amendments to the provisions of Part 1
(commencing with Section 6001) relating to the use tax and not
inconsistent with this part shall automatically become a part of the
ordinance. However, no amendment shall operate so as to affect the
rate of tax imposed by the district's board.
(c) A provision that the amount subject to tax shall not include
the amount of any sales tax or use tax imposed by the State of
California or by any city, city and county, or county pursuant to the
Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5
(commencing with Section 7200)) or the amount of any
state-administered transactions or use tax.
(d) A provision that any person subject to a use tax under an
ordinance adopted pursuant to this part shall be entitled to credit
against that tax or any transactions tax, or to reimbursement for a
transactions tax, paid to a district or retailer in a district
imposing a transactions and use tax pursuant to this part.
(e) A provision that, in addition to the exemptions provided in
Sections 6366 and 6366.1, the storage, use, or other consumption of
tangible personal property, other than fuel or petroleum products,
purchased by operators of aircraft, and used or consumed by the
operators directly and exclusively in the use of the aircraft as
common carriers of persons or property for hire or compensation under
a certificate of public convenience and necessity issued pursuant to
the laws of this state, the United States, or any foreign
government, is exempt from the use tax.
(f) A provision that the storage, use, or other consumption in the
district of tangible personal property is exempt from the tax if the
purchaser is obligated to purchase the property for a fixed price
pursuant to a contract entered into prior to the operative date of
the ordinance. The possession of, or the exercise of any right or
power over, tangible personal property under a lease which is a
continuing purchase of the property is exempt from tax for any period
of time for which the lessee is obligated to lease the property for
an amount fixed by a lease entered into prior to the operative date
of the ordinance. For purposes of this subdivision, the storage, use,
or other consumption of, or possession of, or exercise of any right
or power over, tangible personal property shall be deemed not to be
obligated pursuant to a contract or lease for any period of time for
which the purchaser or lessee has the unconditional right to
terminate the contract or lease upon notice, whether or not the right
is exercised.
SEC. 4. Notwithstanding Section 2230 of the Revenue and Taxation
Code, no appropriation is made by this act and the state shall not
reimburse any local agency for any sales and use tax revenues lost by
it under this act.
SEC. 5. If the Commission on State Mandates determines that this
act contains costs mandated by the state, reimbursement to local
agencies and school districts for those costs shall be made pursuant
to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of
the Government Code.
