BILL NUMBER: AB 780 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 12, 2011
AMENDED IN ASSEMBLY MAY 10, 2011
AMENDED IN ASSEMBLY MARCH 15, 2011
INTRODUCED BY Assembly Member Charles Calderon
FEBRUARY 17, 2011
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 780, as amended, 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. The Sales and Use Tax 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 7 1/4
% 6 1/4 % 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 provide, for a fixed price contract, as specified,
between a government entity and a contractor, that the contractor is
entitled to an increase in payment for a change in the contract
price that is attributable to an increase in the taxes imposed by the
Sales and Use Tax Law, and the government entity is entitled to a
reduction in payment for a change in the contract price that is
attributable to a decrease in the taxes imposed by the Sales and Use
Tax Law, with the increase or decrease paid in accordance with the
contract terms or as agreed to by the parties, as prescribed.
The bill would also authorize the government entity to require the
contractor to submit invoices for specified items consumed solely for
use in the public work pursuant to the contract entered
into by the government entity and the contractor. By placing
new duties on local officials with respect to their contract
practices, the bill would impose a state-mandated local program.
Existing laws authorize districts, as specified, to impose
transactions and use taxes in accordance with the Transactions and
Use Tax Law, which conforms to the Sales and Use Tax Law. The
Transactions and Use Tax Law requires any transactions and use taxes
ordinance adopted in accordance with that law to include specified
provisions, as may be amended, including provisions that exempt from
the tax the sale of, 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 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 provide that the sale or lease of tangible
personal property to a government entity, as defined, is deemed
obligated pursuant to a contract or lease for any period of time for
which the contractor or lessor does not have the unconditional right
to terminate that 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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
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) For a fixed price contract between a government entity
and a contractor, the contractor is entitled to an increase in
payment for a change in the contract price that is attributable to an
increase in the taxes imposed by Part 1 (commencing with Section
6001) of Division 2 of the Revenue and Taxation Code, and the
government entity is entitled to a reduction in payment for a change
in the contract price that is attributable to a decrease in the taxes
imposed by Part 1 (commencing with Section 6001) of Division 2 of
the Revenue and Taxation Code. This increase or decrease shall be
made 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. The government
entity may require the contractor to submit invoices for those
materials or supplies specifically purchased for actual incorporation
into the public work, including, but not limited to, materials or
supplies consumed solely for use in the public work pursuant to the
contract entered into by the government agency and contractor.
(b) (1) This section shall apply in the case of an increase in the
sales and use tax rate imposed only with respect to the following:
(A) (i) 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 with a government
entity for a fixed price prior to the operative date of the increase
in the sales and use tax rate.
(ii) For purposes of this subparagraph, tangible personal property
shall not be deemed obligated pursuant to a contract for a fixed
price for any period of time for which the contractor has the right
to terminate the contract, unconditionally or upon notice, whether or
not the right is exercised.
(B) (i) 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 with a
government entity for a fixed price prior to the operative date of
the increase in the sales and use tax rate.
(ii) For purposes of this subparagraph, materials and fixtures
shall not be deemed obligated pursuant to a construction contract for
a fixed price for any period of time for which the contractor has
the right to terminate the contract, unconditionally or upon notice,
whether or not the right is exercised.
(C) (i) A lease of tangible personal property to a government
entity that is a continuing sale and purchase of that 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 in the sales and use tax rate.
(ii) For purposes of this subparagraph, the lessor shall be deemed
not to be obligated to lease the property for an amount fixed by the
lease for any period of time for which the lessor has the right to
terminate the lease, unconditionally or upon notice, whether or not
that right is exercised.
(2) This section shall apply in the case of a decrease in the
sales and use tax rate imposed only with respect to the following:
(A) The gross receipts from the sale of, and the storage, use, or
other consumption in this state of, tangible personal property
pursuant to a contract entered into with a government entity for a
fixed price prior to the operative date of the decrease in the sales
and use tax rate.
(B) The gross receipts from the sale of, and the storage, use, or
other consumption in this state of, materials and fixtures pursuant
to a construction contract entered into with a government entity for
a fixed price prior to the operative date of the decrease in the
sales and use tax rate.
(C) A lease of tangible personal property to a government entity
that is a continuing sale and purchase of that property for any
period of time for which the lessor is to lease the property for an
amount fixed by the lease prior to the operative date of the decrease
in the sales and use tax rate.
(c) For purposes of this section, the following terms apply:
(1) "Fixed price" means the amount of all costs or prices is fixed
by the contract or lease, the contract or lease does not reserve to
the contractor or lessor the right to increase that amount, and the
contract or lease does not address the obligations of the parties in
the event of any change in taxes or tax rates, including sales and
use tax rates.
(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) This section shall apply only to contracts entered into on and
after the effective date of the act adding this section, and 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.
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) (1) 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.
(2) (A) 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 any
party to the contract or lease has the unconditional right to
terminate the contract or lease upon notice, whether or not that
right is exercised.
(B) (i) Notwithstanding subparagraph (A), the sale or lease of
tangible personal property to a government entity shall be deemed
obligated pursuant to a contract or lease for any period of time for
which the contractor or lessor does not have the unconditional right
to terminate that contract or lease.
(ii) For purposes of this subparagraph, "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.
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) (1) 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.
(2) (A) 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 any party to the contract or lease has the unconditional right
to terminate the contract or lease upon notice, whether or not the
right is exercised.
(B) (i) Notwithstanding subparagraph (A), the sale or lease of
tangible personal property to a government entity shall be deemed
obligated pursuant to a contract or lease for any period of time for
which the contractor or lessor does not have the unconditional right
to terminate that contract or lease.
(ii) For purposes of this subparagraph, "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.
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.