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AB-1776 Sales and use taxes: exemptions: newspapers.(2019-2020)

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Date Published: 04/30/2019 09:00 PM
AB1776:v96#DOCUMENT

Amended  IN  Assembly  April 30, 2019
Amended  IN  Assembly  April 22, 2019
Amended  IN  Assembly  April 10, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 1776


Introduced by Assembly Member Levine

February 22, 2019


An act to add Section 6362 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 1776, as amended, Levine. Sales and use taxes: exemptions: newspapers.
Existing state sales and use tax laws impose a tax on retailers measured by the 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. The Sales and Use Tax Law provides various exemptions from those taxes, including an exemption for the sale of, or the storage, use, or consumption of, newspapers and periodicals published by an organization that qualifies for tax-exempt status and meets specified requirements, and an exemption for the sale of, or the storage, use, or consumption of, a newspaper or periodical distributed at specified intervals without charge. Until July 15, 1991, existing law provided for the sale of, or the storage, use, or consumption of, any newspaper or periodical regularly issued at specified intervals, any tangible property that becomes an ingredient or component part of that newspaper or periodical, and any photograph transferred under specified conditions for the purpose of being reproduced in that newspaper.
This bill, on and after January 1, 2020, and before January 1, 2025, would reinstate the exemption from those taxes on the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, photographs transferred under specified conditions for the purpose of being reproduced in that newspaper, and would make an exemption from those taxes on the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, newspapers. newspapers, unless otherwise provided.
The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.
Existing law requires the state to reimburse counties and cities 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 any local agencies for sales and use tax revenues lost by them pursuant to this bill.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 6362 is added to the Revenue and Taxation Code, to read:

6362.
 (a) On and after January 1, 2020, there are exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, any newspaper regularly issued at average intervals not exceeding three months or any tangible personal property that becomes an ingredient or component part of the newspaper.
(b) On and after January 1, 2020, there is exempted from the taxes imposed by this part, the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, a photograph, whether or not produced to special order, when the possession, but not the title, of the photograph is transferred for the purpose of being reproduced one time only in a newspaper pursuant to subdivision (a).
(c) The exemption provided by this section shall not apply to the gross receipts from the sale of, and the storage, use, or other consumption in this state of, newspapers during the term of a prepaid subscription, if the subscription was entered into and paid for prior to January 1, 2020.

(c)

(d) This section shall become inoperative on January 1, 2025.

SEC. 2.

 (a) It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to this act.
(b) With respect to Section 6362 of the Revenue and Taxation Code, as added by this act, the Legislature finds and declares the following:
(1) The specific goals, purposes, and objectives of this act are as follows:
(A) Californians’ right to know is enshrined in the California Constitution, which states that the people have the right of access to information concerning the conduct of the people’s business.
(B) Printed, published, and distributed California newspapers continue to employ journalists in local communities who gather and report news about local, regional, and state issues.
(C) California newspapers inform the public, thereby increasing civic literacy and public participation in self-government.
(D) Newspapers were exempted from the sales and use tax laws from enactment of the Sales and Use Tax Law on tangible personal property in the 1930s until 1991.
(E) In 1991, faced with an unprecedented $8 billion budget deficit, the Legislature adopted a budget proposed by Governor Pete Wilson that removed the sales and use tax exemption for four products: bottled water, candy and snack foods, newspapers and periodicals, and bunker fuel (stored fuel).
(F) In 1992, the people voted to approve a ballot measure that restored sales and use tax exemptions for bottled water and snack foods.
(G) Shortly after the sales and use tax exemption was removed for, and the tax again imposed on, all newspapers, the Legislature passed, and the Governor signed, a bill to narrow the scope of the tax by exempting student and religious newspapers, freely distributed newspapers, and the distribution of most weekly newspapers, such as those distributed between 4 and 60 times a year and delivered by mail or common carrier.
(H) Recent regulatory changes have further limited application of the sales and use tax laws to newspapers by clarifying that the digital part of a mixed digital and print subscription is not subject to sales and use tax.
(I) The sales and use tax laws continue to apply to a relatively small number of businesses engaged in activities protected by the First Amendment to the United States Constitution—all daily newspapers and certain weekly newspapers—while virtually every other content creator and aggregator competing for the same audiences and advertising dollars is untaxed, including broadcast television and radio and digital aggregators of information.
(J) Application of the sales and use tax laws on newspapers penalizes news companies that employ journalists in California communities, who gather news, inform the public, and serve their communities, while that tax policy benefits businesses that aggregate and redistribute high quality content created by newspapers.
(K) Ironically, the sales and use tax laws continue to be levied on the print products of the only business set out for special protection in the federal Bill of Rights: the press.
(L) Unlike the aggregators and redistributors of digital content, California newspapers are responsible for the content they create and publish. Newspapers and the journalists that work for them subscribe to journalistic principals and a code of ethics.
(M) When the Legislature placed a tax on newspapers nearly 30 years ago, no one could foresee the changes that would occur on the media landscape.
(N) It is the intent of the Legislature for the enactment of this measure to do all of the following:
(i) Level the playing field for all competing media with regard to the sales and use tax laws, no matter the method of distribution.
(ii) Increase the ability of newspapers to employ journalists in California communities and serve the community’s need for accurate local, regional, and statewide information.
(iii) Prevent further erosion of local newsgathering caused by aggregators of information.
(2) Mindful of the fact that many factors determine economic efficiency and individual business decisions, the performance indicators related to this act are as follows: the number of printed, published, and distributed newspapers paying sales and use taxes as determined by the state upon the effective date of this act as compared to that number on the date one year prior to the scheduled repeal of the exemption.
(3) The data collection requirements to enable the Legislature to determine whether the tax exemption is meeting, failing to meet, or exceeding its specified goals, purposes, and objectives are as follows:
(A) The Legislative Analyst’s Office shall review the effectiveness of the tax exemption and may request information from the California Department of Tax and Fee Administration and any state governmental entity with authority relating to the purchasing of newspapers.
(B) The California Department of Tax and Fee Administration and any state governmental entity with authority relating to the purchasing of newspapers shall provide to the Legislative Analyst’s Office any data requested by the Legislative Analyst’s Office pursuant to this paragraph.

SEC. 3.

 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. 4.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.