BILL ANALYSIS                                                                                                                                                                                                    



                                                          AB 3187
                                                         Page 1

Date of Hearing: May 6, 1996

            ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
                      Nao Takasugi, Chairman

         AB 3187 (Martinez) - As Amended:  April 18, 1996

 LOCAL GOVERNMENT          7-0

 SUBJECT:  Sales and use taxes:  exemptions:  thrift store  
merchandise.

 VOTE REQUIREMENT:  Majority.  Tax Levy.

 SUMMARY:  Creates a sales and use tax exemption for thrift store  
merchandise.  Specifically,  this bill:

1)  Exempts from state and local sales and use taxes used pieces  
of clothing, household items, or other retail items sold by thrift  
stores operated by a nonprofit organization if the purpose of that  
thrift store is to obtain funding for medical and social services  
for the chronically ill.

2)  Requires the state to make no appropriation or reimbursement  
to local agencies for revenues lost due to the tax exemption.

 FISCAL EFFECT:  Before the April 18 amendments which expanded the  
universe of applicable merchandise from items costing less than  
$50 to all items, the Board of Equalization's staff estimated a  
fiscal loss of $900,000 for the state, $400,000 for local  
governments and $120,000 transit loss. 

 EXISTING LAW:

1) Imposes a six percent state tax on the gross receipts from the  
   sale, storage, use or other consumption in this state of  
   tangible personal property.

2) Authorizes counties and cities to impose local sales and use  
   taxes in conformity with state sales and use taxes.

3) Requires that enacted exemptions to sales and use taxes, by the  
   Legislature, be incorporated into the local taxes.

4) Requires the state to reimburse counties and cities from losses  
   caused by the enactment of sales and use tax exemptions.         
                 

5)  Exempts the sales of charitable organizations which meet all  
of certain criteria:  formed and operated for charitable purposes;  
engaged in the relief of poverty and distress; the organization's  
sales must be principally a matter of assistance to purchasers in  
distressed financial condition; the property which is sold must  
have been made or assembled by that organization.

6)  Provides exemptions for particular sales, such as veterans  







                                                          AB 3187
                                                         Page 2

organizations' "Buddy poppy lapel pins", some purchases by  
nonprofit museums, wheelchairs and canes for the legally blind. 

 BACKGROUND:  Currently a few non-profit organizations receive the  
tax exemption on the sales tax of purchases from thrift stores  
(e.g., Goodwill Industries, St. Vincent de Paul and Salvation  
Army).  These agencies qualify for the exemption as they meet all  
the statutorily defined conditions, namely the "welfare exemption"  
from property taxation provided by Section 214 of the Revenue and  
Taxation Code.  This bill extends this exemption to all non-profit  
agencies which provide revenue to be used for medical and social  
services to the chronically ill.

This proposal is sponsored by BoE Member Brad Sherman on behalf of  
the AIDS Healthcare Foundation.  The Foundation operates several  
thrift stores in the
Los Angeles area, selling used items in order to raise funds for  
the purposes of providing medical services to AIDS patients.

 Related Legislation:  AB 143 (Martinez) also from this Session,  
provided a similar exemption, but was not heard in committee.

 ARGUMENTS IN SUPPORT:  All thrift stores, operated by non-profit  
organizations, arguably have purposes as laudable as those of the  
Salvation Army, Goodwill Industries and St. Vincent de Paul.  To  
receive the tax exempt status, under corporation income tax laws,  
these organizations serve worthy social purposes and should be  
treated similarly for sales and use tax exemption.

The Legislature has demonstrated its support for exempting a  
segment of non-profit organizations with the enactment of AB 2685  
(Costa), Chapter 855, Statutes of 1994.  This legislation provided  
an exemption from sales and use tax for sales of tangible personal  
property at an auction, conducted by a non-profit organization,  
when the proceeds of that auction are used to fund shelters for  
homeless individuals and families.

 ARGUMENTS IN OPPOSITION:  None received by Committee.

 REGISTERED SUPPORT / OPPOSITION:

 Support

[according to the Assembly Local Government Committee]
Brad Sherman (Sponsor)
AIDS Healthcare Foundation

 Opposition

None reported to Committee. 

 Analysis prepared by:  Julia King / REV. & TAX. / 322-3730