Articles Posted in California

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The California Department of Tax and Fee Administration (Department) has given notice that it proposes to amend California Code of Regulations, title 18, section (Regulation) 1706, Drop Shipments.  Regulation 1706, subdivision (c) provides that a drop shipper making a drop shipment must report and pay tax measured by the retail selling price of the property paid by the California consumer to the true retailer, unless the sale and use of the property are otherwise exempt.  The proposed amendments clarify that marketplace sales are generally not drop shipment transactions and provide more guidance about how a person can overcome the presumption they are a drop shipper. https://seesalt.pillsburylaw.com/files/2020/05/250px-Seal_of_California.svg_.png Continue Reading ›

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Five years and six interested parties meetings later, California is finally ready to proceed with the formal rulemaking process to adopt substantial amendments to its market-based sourcing rules.  At the Franchise Tax Board’s September 9, 2021 meeting, FTB staff requested permission and received approval from its three-member Board to commence the formal regulatory process under California’s Administrative Procedure Act (APA) to amend California Code of Regulations, Title 18, section 25136-2 (Regulation 25136-2). https://seesalt.pillsburylaw.com/files/2020/05/250px-Seal_of_California.svg_.png Continue Reading ›

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Pillsbury SALT attorney Jeff Phang will present during CLA’s taxation webinar on September 13. Jeff is partnering with Annie Rothschild (Eversheds Sutherland) to present on the topic, “Recent Developments in California Income Tax Apportionment and Sourcing Law.”CLA-300x66

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California’s Court of Appeal again held that a special tax measure placed on the local ballot as a citizen initiative required only a simple majority, not a supermajority, vote to pass.  Seal_of_San_Francisco

Proposition G is a school parcel tax initiative that passed on San Francisco’s June 2018 ballot with 60.76% of the vote. The Proposition G school parcel tax is a special tax—in other words, the expenditure of its revenues is dedicated to a specific project or projects—and not a general tax, which revenues roll into the locality’s general fund. Here, the Proposition G school parcel tax funds are earmarked for educators’ salaries, staffing, professional development, technology, charter schools, and oversight of funding.

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Ab8oGgo5_400x400-300x300California’s Court of Appeal held a local sales tax ordinance (Measure K) was a general tax, not a special tax, and therefore its adoption did not require a two-thirds vote (supermajority) under California’s Constitution. A tax is “special” and therefore would require a two-thirds vote, when the expenditure of its revenues is dedicated to a specific project or projects. The plaintiffs argued that Measure K was a special tax because the funds were earmarked for the funding of the county’s public safety services and essential services. The Court of Appeal disagreed, concluding tax proceeds that are deposited in a separate account for unspecified “other essential services” could be used for any and all government services that qualify as an “essential service” and are therefore not dedicated to a specific project or purpose, indicative of a general tax. Thus, the court held Measure K was valid.

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In a recent Tax Notes State article, Pillsbury lawyers Craig Becker, Breann Robowski, Richard Nielsen and Robert Merten examine San Francisco’s new tax provisions and unintended consequences they may have. Read more here.

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Much to the recent surprise of many in the tax community, the California Department of Tax and Fee Administration (“CDTFA”) is able to adopt or amend regulations without the normal review process by the Office of Administrative Law (“OAL”) under the Administrative Procedures Act (“APA”). Continue Reading ›

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In 2018, San Francisco voters approved, by simple majority vote, two new gross receipts taxes: the Homelessness Gross Receipts Tax (SF-HT) and the Commercial Rents Tax (SF-CRT), with both Seal_of_San_Franciscotaxes effective as of January 1, 2019.[1] Because these taxes fund specific governmental services, they are designated as special taxes (specifically, the SF-HT funds homelessness services and the SF-CRT funds early childhood education). Since the California Constitution specifies that special taxes imposed by local government need two-thirds voter approval (i.e., a “supermajority”), taxpayer groups have filed lawsuits to invalidate these special taxes, as both were approved by only a majority vote (61% for the SF-HT and 51% for the SF-CRT).[2] As discussed more fully below, the courts have ruled against these taxpayer groups and the California Supreme Court to date has refused review.

The pressing question is whether San Francisco taxpayers, who paid the SF-HT and/or the SF‑CRT for 2019 and 2020, should be filing claims to protect their rights to refunds in the unlikely (but not impossible) event that these taxes are ultimately rendered invalid.

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