Capitol Alert: California Senate committee rejects late-blooming sales tax bill

A late-blooming legislative measure that would intervene in a decades-long squabble among cities over allocation of sales taxes was turned back Wednesday by the Senate Governance and Finance Committee.

The measure, Assembly Bill 658, didn't even get a motion for approval in the committee during a hastily called hearing.

It had surfaced just Monday as a "gut-and-amend" maneuver by Assemblyman Charles Calderon, D-Whittier, aimed at overturning a July 31 San Francisco Superior Court decision that reversed a long-standing Board of Equalization rule on sales tax allocation.

The overturned rule, in essence, required that local taxes on merchandise that's ordered through a retail outlet and shipped from a remote site be placed in a countywide pool for allocation to cities and other local governments, rather that being given to the city in which the retail outlet is located, as are taxes on direct sales inside stores.

The City of Brisbane and several others sued, contending that the taxes should be allocated to the jurisdiction in which the transaction occurs, rather than placed in a pool, and won the case in Superior Court.

The state Board of Equalization is likely to appeal the decision, but were it to be upheld, a handful of cities with large retail complexes would get more sales tax money while most others would see reductions. However, as senators were told, no one has up-to-date information on how much money is at stake. A nearly two-decade-old study of the issue pegged it at about $10 million a year at the time.

Lobbyists from cities lined up on both sides of the issue, while the League of California Cities urged the committee not to intervene until the legal situation is clarified. The committee's chairwoman, Davis Democrat Lois Wolk, agreed, calling the issue "extremely complex" and noting "there are winners and losers in this."

Among the cities registering opposition to the legislation is one of the potential winners, Roseville, which is home to several major retail complexes. It called AB 658 "an ill-considered attempt to circumvent a trial court decision that has not yet been reviewed on appeal."

The conflict is a subset of a larger, even longer-running debate over "situs" - the doctrine that local sales taxes should accrue to the jurisdiction in which the transaction occurs. There have been numerous efforts during the years to create sales tax pools of one kind or another, including one a decade ago by Senate President Pro Tem Darrell Steinberg that would have compelled the pooling of sales taxes in the multi-county Sacramento region, but none has been successful.