BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE AB 521 - Harvey
Senator Mike Thompson, Chairman Amended:
3/29/95
Hearing: July 19, 1995 Fiscal: Yes
SUBJECT: Sales & Use Tax: Exemption for ostriches.
DIGEST -- WHAT THE BILL DOES
EXISTING LAW exempts from the sales and use tax any form
of animal life owhich ordinarily constitute food for human
consumption.o
The sale of ostrich meat to a consumer is exempt from
tax.
THIS BILL adds a new exemption from the sales tax for the
sale of ostriches and feed for ostriches. This would make
the sale of ostrich eggs and animals used in breeding
programs not subject to tax. Feed for ostriches would also
be exempt from tax.
This bill also adds oostricho to the definition of ofowlo
and opoultryo in the Food and Agricultural Code.
This exemption would apply to ostriches purchased on or
after January 1, 1996, the date this statute takes effect.
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Harvey
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FISCAL EFFECT: (Board of Equalization)
Estimating the revenue effects of an exemption for the
sale of ostriches has been difficult because numbers vary on
how many ostriches are purchased each year and how many are
used for breeding stock.
Based on California Ostrich Association data, the Board
had estimated an annual revenue loss of $220,000 in General
Fund revenues and $129,000 in local revenues due to sales of
ostriches. This estimate was based on $3 million in sales of
ostrich chicks -- about 750-1000 chicks -- and $1 million in
sales of breeding pairs.
More recent information provided by the California Farm
Bureau seems to indicate that fewer birds are being sold.
According to their survey, the following numbers of ostriches
were sold in 1994:
15 breeder pairs
25 pairs aged 12-23 months
200 chicks under 12 months
Using the Farm Bureauos estimates, the General Fund loss
from the sale of ostriches would be about $50,000 and the
local loss would be about $30,000.
In past years, the estimate for this exemption has been
much higher. According to the Board analysis, the price of
ostrich chicks has fallen as the supply is rising.
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Harvey
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COMMENTS:
A. Purpose of the bill.
AB 521 is intended to exempt the sales of ostriches used
for breeding and the feed consumed by breeder ostriches from
the sales tax. Proponents point out that ostrich meat is
gaining acceptance as a food and should be exempt from tax as
are other animals which are used to produce food.
B. Does ostrich ordinarily constitute food for human
consumption?
Proponents of AB 521 note that ostrich meat is low in fat
and cholesterol and is served in some restaurants. Several
facilities licensed to slaughter ostriches have opened in
California. But does ostrich oordinarily constitute food for
human consumption,o the term used in the existing sales tax
exemption for animals?
It is expected that about 290,000 - 500,000 pounds of
ostrich meat will be produced in California this year. This
represents about .015% - .04% of the 2 billion pounds of beef
and .02% - .03% of the 1.5 billion pounds of chicken and
turkey produced annually in California.
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Harvey
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Some ostrich growers indicate that growers are more
directed to increasing their flocks rather than slaughtering
them for market. oExperts indicate only 100,000 ratites
(ostrich family) are in America now, with up to a million
birds realistically needed before active slaughtering will
begin,o according to one California rancher.
C. Taxation of ostriches in other states.
Several states now exempt ostriches from the sales tax --
Washington, Arizona, New Mexico, Nevada, Utah, Florida,
Georgia, Indiana, Hawaii, Idaho, Oklahoma, and Wyoming.
Proponents indicate that they may move their operations to
states which provide an exemption if California continues to
tax ostriches.
D. Pyramid concerns.
In the past two years, concerns have been raised in
several states that promoters have tried to lure investors
into ostrich farms which are more of a pyramid scheme than a
legitimate business. In February 1994, the California
Commissioner of Corporations ordered a California-based
venture to halt the offer and sale of limited partnerships in
an ostrich ranching venture. While proponents correctly
point out that many new industries can be plagued with
get-rich schemes, there is a concern that the state may
inadvertently assist those schemes by making the sale and
upkeep of ostriches more attractive through a sales tax
exemption.
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Harvey
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E. Some sales of ostriches now exempt.
Sales of ostrich meat are exempt. Also exempt are sales
of ostriches to a slaughterhouse. The sales which would be
affected by this bill are primarily the sales of breeding
stock -- the mature pairs of ostriches which may sell for as
much as $20-30,000.
Support and Opposition
Support: California Ostrich Association
California Farm Bureau Federation
Lucking and Associates
Akers R-Lazy-7 Ostrich Ranch
West Coast Ostrich Company
Sonoma Knolls Big Birds
Pacific Egg and Poultry Association
J & J Big Bird Ranch
Brandywine Meats, Inc.
Oppose: California Federation for Animal Legislation
Contra Costa Humane Society
Marin Humane Society
State Humane Association of California
California Animal Control Directorso
Association
Humane Society of the United States
Assembly Votes
AB 521 -
Harvey
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Agriculture: 10 - 0
Revenue & Taxation: 8 - 1
Appropriations: 10 - 6
Floor: 51 - 24
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Consultant: Anne Maitland
July 13, 1995 11:15 AM