Administration - Transactions And Use Taxes - Revenue & Taxation - CA

Section § 7270

This section outlines the requirements for a district when imposing a transactions and use tax. Before the tax takes effect, the district must contract with the state board to handle the administration and operation of the tax.

If the district does not do this in time, the start date for the tax will be delayed until the next quarter after the contract is signed. The district must cover all costs and potential refunds related to the tax.

If someone challenges the entire tax as invalid, the district must place tax proceeds in an escrow account with interest until a court makes a final decision. The district can recover costs and losses from anyone involved in the tax's creation, except the state.

(a) Prior to the operative date of any ordinance imposing a transactions and use tax pursuant to this part, the district shall contract with the board to perform all functions incident to the administration and operation of the ordinance. If the district has not contracted with the board prior to the operative date of its ordinance, it shall nevertheless so contract and, in that case, the operative date shall be the first day of the first calendar quarter following the execution of the contract.

(b) The contract shall contain a provision that the district shall reimburse the board for and hold the board harmless from any and all costs, losses, or refunds of any kind whatsoever.

(c) The contract shall also contain a provision that, in the event that a legal action is commenced challenging the validity of the tax in its entirety, as opposed to its application to an individual taxpayer, the district shall place the tax proceeds into an interest-bearing escrow account until the legality of the tax is finally resolved by a final and nonappealable decision rendered by a court of competent jurisdiction. That provision shall be enforceable by any interested person in a proceeding for a writ of mandate.

(d) The district shall be entitled to indemnity for any and all costs, losses, or refunds from any entity, except the state, that participated in the imposition of the tax. For the purposes of this part, “participated” means any involvement in procuring the legislation that authorized the tax, or in enacting or administering the ordinance imposing the tax. Any organization that is a member of the legislative body of the district imposing the tax has participated in the imposition of the tax within the meaning of this section.

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Section § 7270.5

If you want to challenge a district transactions and use tax ordinance, or any related bonds or proceedings, claiming it's unconstitutional or invalid, you need to file a lawsuit using a specific legal process outlined in California's Code of Civil Procedure. The state can't be sued, and you have to start your lawsuit within 60 days after voters approve the tax ordinance, unless a longer time is allowed by the law. If you miss this deadline, the tax and all related actions are considered legal and can't be challenged.

Any action or proceeding filed on the basis that a tax ordinance provided for in this part or Part 1.7 (commencing with Section 7280) or the issuance of any bonds thereunder or any of the proceedings in relation thereto is contested, questioned, or denied on the basis that the tax ordinance is unconstitutional or otherwise invalid and filed for the sole purpose of contesting the validity of the district transactions and use tax, shall be commenced pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure. The state shall not be made a party to the action or proceeding. That action shall not be filed more than 60 days after the approval of the enabling ordinance by the voters unless the authorizing legislation specifies a longer period. If no action is filed within that period, the tax, the bonds, and all proceedings in relation thereto, including the adoption and approval of the ordinance, shall be held to be valid and in every respect legal and uncontestable.

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Section § 7271

This section mandates that all transaction and use taxes collected by a board on behalf of a district must be transferred to the district regularly and without delay. These transfers should happen at least twice every three months.

All transactions and use taxes collected by the board pursuant to contract with the district shall be transmitted by the board to the district periodically as promptly as feasible. The transmittals shall be made at least twice in each calendar quarter.

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Section § 7271.1

This law explains how refunds on sales taxes work between the state tax board and districts in California. If a district's quarterly sales taxes are reduced because the board is paying a refund to a taxpayer, and the refund is greater than either $50,000 or 20% of the district's total quarterly taxes, the district can ask for the excess amount to be returned. The board will then pay back that excess, called the 'offset portion', over a period of time to the district. However, the board won't do this if it delays refund payments to taxpayers or disrupts normal tax distributions to other districts.

(a) For purposes of this section:

(1) “Quarterly taxes” means the total amount of transactions and use taxes transmitted by the board to a district for a calendar quarter.

(2) “Refund” means the amount of transactions and use taxes deducted by the board from a district’s quarterly taxes in order to pay the district’s share of a transactions and use tax refund due to one taxpayer.

(3) “Offset portion” means that portion of the refund which exceeds the greater of fifty thousand dollars ($50,000) or 20 percent of the district’s quarterly taxes.

(b) Except as provided in subdivision (c), if the board has deducted a refund from a district’s quarterly taxes which includes an offset portion, then the following provisions apply:

(1) Within three months after the board has deducted an offset portion, the district may request the board to transmit the offset portion to the district.

(2) As promptly as feasible after the board receives the district’s request, the board shall transmit to the district the offset portion as part of the board’s periodic transmittal of transactions and use taxes.

(3) The board shall thereafter deduct a pro rata share of the offset portion from future transmittals of transactions and use taxes to the district over a period to be determined by the board, but not less than two calendar quarters and not more than eight calendar quarters, until the entire amount of the offset portion has been deducted.

(c) The board shall not transmit the offset portion of the refund to the district if that transmittal would reduce or delay either the board’s payment of the refund to the taxpayer or the board’s periodic transmittals of transactions and use taxes to other districts.

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Section § 7272

This law specifies that the district must pay for the board's costs to prepare for administering and operating the local sales tax ordinance. These costs, which the district must pay monthly, include everything from developing procedures to printing forms. The total preparatory costs can be up to $175,000. If there's a disagreement about costs, the Director of Finance will make the final decision.

The district shall pay to the board its costs of preparation to administer and operate the transactions and use taxes ordinance. The district shall pay such costs monthly as incurred and billed by the board. Such costs include all preparatory costs, including costs of developing procedures, programming for data processing, developing and adopting appropriate regulations, designing and printing of forms, developing instructions for the board’s staff and for taxpayers, and other necessary preparatory costs which shall include the board’s direct and indirect costs as specified by Section 11256 of the Government Code. Any disputes as to the amount of preparatory costs incurred shall be resolved by the Director of Finance, and his or her decision shall be final. The maximum amount of all preparatory costs to be paid by the district shall not, in any event, exceed one hundred seventy-five thousand dollars ($175,000).

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Section § 7273

This law explains how California charges districts for the board's services related to sales tax collection. Starting from the 2006-07 fiscal year, fees are determined by a specific methodology and adjusted based on actual costs. Each district's charge is partially based on their share of tax revenue, adjusted for differences in tax rates. The amounts can be revised if there's a significant difference between budgeted and actual costs, with necessary notifications to legislative committees. Charges for new districts in a fiscal year are estimated based on projected revenue. The assessed amounts are deducted quarterly from the taxes collected. Notably, from 2008-09 to 2014-15, certain revenue sources were excluded from these calculations.

In addition to the amounts otherwise provided for preparatory costs, the board shall charge each district an amount for the board’s services in administering the transactions and use tax determined by the board, with the concurrence of the Department of Finance, as follows:

(a) Beginning with the 2006–07 fiscal year, the amount charged all districts shall be based on the methodology described in Alternative 4C of the November 2004 report by the State Board of Equalization entitled “Response to the Supplemental Report of the 2004 Budget Act.” The amount charged each district shall be based upon the district’s proportional share of the revenue after weighting the revenue to equalize the differences in district tax rates.

(1) The amount charged each district may be adjusted in the current fiscal year to reflect the difference between the board’s budgeted costs and any significant revised estimate of costs. Any adjustment shall be subject to budgetary controls included in the Budget Act. Prior to any adjustment, the Department of Finance shall notify the Chairperson of the Joint Legislative Budget Committee not later than 30 days prior to the effective date of the adjustment.

(2) The amount charged each district shall be adjusted to reflect the difference between the board’s recovered costs and the actual costs incurred by the board during the fiscal year two years prior.

(b) The board shall, by June 1 of each year, notify districts of the amount that it anticipates will be assessed for the next fiscal year. The districts shall be notified of the actual amounts that will be assessed within 30 days after enactment of the Budget Act for that fiscal year.

(c) The amount charged a district that becomes operative during the fiscal year shall be estimated for that fiscal year based on weighted revenue.

(d) The amounts determined by subdivision (a) shall be deducted in equal amounts from the quarterly allocation of taxes collected by the board for a given district.

(e) Notwithstanding any other provision of this section, for the 2008–09 fiscal year to the 2014–15 fiscal year, inclusive, the amounts determined by subdivision (a) shall not include any revenues collected pursuant to Sections 6051.7 and 6201.7.

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Section § 7273.2

Each year, the board must write a report detailing how much it spent, both recovered and unrecovered, while managing sales and use taxes set by various districts.

The board shall annually prepare a report showing the amount of both reimbursed and unreimbursed costs incurred by it in administering transactions and use taxes imposed by districts pursuant to this part.

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Section § 7274

This law requires the board to provide all licensed dealers of vehicles, vessels, and aircraft in the state with information about which cities and counties have extra local sales taxes and what those tax rates are.

The board shall make available to all licensed vehicle, vessel, and aircraft dealers who hold seller’s permits in this state information concerning the cities and counties located within districts which impose transactions and use tax ordinances and the applicable tax rates in those cities and counties.

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