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Resolution No. 1657 . " 1 RESOLUTION No. 1657 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON RECOMMEND- 3 ING THAT ASSEMBLY BILL 817, AS AMENDED, DO NOT PASS. 4 THE CITY COUNCIL OF THE CITY OF VERNON DOES RESOLVE AS FOLLOWS: 5 6 THAT WHEREAS, Assembly Bill 817, as amended, is 7 calendared for consideration on May 21, 1953; and 8 WHEREAS, the City Council of the City of Vernon believes 9 that said Bill is detrimental to the interest of the City of 10 Vernon, and all persons doing business, and/or paying taxes in 11 said City; 12 NOW, THEREFORE, BE IT RESOLVED: 13 Section 1: That the City Council requests the Assembly 14 Committee on Revenue and Taxation to.us.e its offices to defeat 16 15 the passage of said Bill; 17 18 19 20 21 22 23 24 25 <C 26 z o ...It 0:: ~ ~ '" 27 <( '" - 0 m~ z 3 ~ ~ .. mz~~u III 28 o ::::l 0: It . . z :Io '" 0 ~ · ~ .1-> ~ IX g -ml-.....:c oJ 29 :: <( 0 u" III oZ>-..;;:z~ Ota <; 0 ~ lIlu : ~ ~ 30 0:: a> z ~ <( o_~ u :l ~ :l 31 :I 32 Section 2: That the City Council requests the Honorable Jonathan J. Holliba.ugh, Assemblyman from this District, to oppose the passage of said Bill; Section 3: That a copy of this resolution be sent to the Assembly Committee on Revenue and Taxation; Section 4: That a copy of this resolution be sent to Assembly Jonathan J. Hollibaugh; Section 5: The City Clerk of the City of Vernon is hereby directed to certify to the passa.ge of this Resolution and thereupon and thereafter the same shall be in full force and effect. Adopted and Approved this 19th day of MaJi 1953. / / , City Clerk -1- . . ..' .. , . 1 STATE OF CALIFORNIA ) ) SS. 2 COUNTY OF LOS ANGELES ) 3 4 I, G. A. ANDERSON, City Clerk or the City of Vernon, 5 do hereby certify that the foregoing Resolution No. 1657 was 6 duly adopted by the City Council of the City of Vernon and 7 approved by the Mayor of said City at a regular meeting thereof 8 held on May 19, 1953. 4-~-~-- City Clerk 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 <l 26 z C .. 0: a: ~ ~ '" 27 <C '" - 0 m~ z 5 ~ ~ ..md~u'" 28 o::llt '" ' . z J:o"'O:':< ~ ....> ~ Q: g -ml-..aJa.o( oJ 29 ::: or:( 0 0 1&1 oZ>o>-ii: z ~ Ol-!:iio~ UlUU< I- ~ 30 a: .. Cl oJ <C ~!~ u ~ ~ :l 31 J: 32 -2- ~- ...~ r.._\.:-.~ .~ SALES AND USE TAX C0M11!TTEE OF THE LOS ANGELES DIVISION LEAGUE OF CALIFORNIA CITIES TO: City Attorneys and City Clerks. . Although no further sales tax legislation was antieiP4ted dur1ng the remainder of the session. A.B. 817 has just been introduced and is the most important legislation at this time affecting cities in relation to their sales and use taxes. The bill, proposed by the Board of Equalization and introduced by Assemblyman Patrick B. McGee, is now in the hopper of the Assembly Committee on Revenue and Taxatioh. Copies of the proposed bill and the author's arguments are enclosed. ~'le would like to bring to your attention the dangers involved in the following sections: 1. Section 6...which allocates to the counties 10% of the returns from sales within the cities. ThiS proposal is in direct contradiction to the adopted policy of the cities that no funds derived from the sales tax inside cities be used to subsidize county services, and was the prime objection to previous legislation. 2. Section 7..."No distribution (of proposed sales tax moneys) shall be made to any - - - city imposing any sales tax or use tax under local ordinances, or any tax or license fee of like character. no matter how desil2:pated.tt This could be interpreted to include business licenses based on "gross receipts." It would also jeopardize a city's power to levy a local sales tax suited to the needs of the community, and would further penalize the city in that any local sales tax would be in addition to the 3t% tax proposed by the bill. 3. This legisLation is contrary to the well~thought- out and detailed recommendations of the Senate Interim Committee on State and Local Taxation, and the hasty introduction of the bill has not provided sufficient time for study by the affected cities. This may be an attempt to push their legislation detrimental to cities, and, therefore, requires your immediate action. The Board of Directors of the Los Angeles County Division has, therefore, authorized this committee to contact the cities so that the following action may be taken: 1. City Attorne~s: Review the legislation immediately and offer its legal implications for your city council's consideration. Page 2. 2. City Clerks: Report this matter to your council immediately so that they may, within their considered opinion, adopt resolutions in opposition to this legislation and set forth the effect it would have upon the city. Resolutions and letters should be addressed to the members of the Assembly Committee on Revenue and Taxation, and to your local assemblyman. Committee members are listed below for your information. Thomas M. Erwin, Chairman L. Backstrand Clark L. Bradley Bernard R. Brady Charles E. Chapel Daniel J. Creedon Clayton A. Dills Ricll!3..rd J. Dolwig Thollias J. Doyle Francis Dunn, Jr. J ann 1rf. Evans William W. Hansen Augustus Hawkins Herbert Klocksiem Glenard Lipscomb Lester ~IcMillan G. Delbert Morris l'iarvin Sherwin Vincent Thomas Stanley T. Tomlinson Ralph Hilton, Chairman Sales and Use Tax Committee ^ ~ ~ 4/30/53 AUTHORIS STATEMENT ON A. B. 817, AS AMENDED From Patrick G. McGee, Assemblyman, 64th District (Los Angeles County) California has too many sales and use taxesc They are con- fusing our consumers, plaguing our retailers, and disrupting our trade. It is the purpose of this bill to put an end to these condi- tions before they get entirely out of hand. In addition to the 3% State tax, there are 162 city sales taxes, with 91 use tax concomitants~ at rates ranging from t.% to It.%. More than four-fifths of the retail trade in California is subject to these municipal taxes. In combination with the State tax, they result in a rate of 3t.% or morec These city rates are continually changing - always upward. Today 58 cities have a 1% rate. This marks a 25% increase in their number in less than a year. Soon it may be expected to be 100, or a third of all of California's municipalitiesc My bill would stop this constant upward spiral of sales and use taxesc By providing for a single 3~ tax as of January 1, 19549 it would eliminate the undesirable results from the multiple taxation now prevalent throughout Ca1iforniac Administered by the State, the combined tax would be at a uniform rate. One-seventh of its proceeds would be distributed to local governments, to be expended by them for the state purposes which are their responsibility. No distribution would be made, how- ever, to any city that persists in levying a separate sales tax. Allocations would be in relation to the place of sale wi,th equitable sharing between city and county governments. The need for this legislation is urgent, before more cities go to higher rates, and before the confusion becomes intolerable. .. EXPLANATORY STATEMENT OF HOW A. B. 817 WOULD REDUCE TAX BURDENS So that specific information may be available on the fisca~ effect of A. B. 817, as amended, the State Board of Equalization was asked to compile the attached data. These are estimates of 1952-53 revenues from existing city sales taxes and estimated distributions to cities and counties, as proposed in the bill. Five counties were selected for comparison: Los Angeles, Napa, Santa Clara, San Bernardino and San Franoisco. All of the cities in those counties have been listed, showing city sales tax rates, or indicating that the ci,ties do not impose such taxes. In Los Angeles County, for example, there are 45 cities, in 30 of which sales taxes are imposed. The prevalent rate of the city taxes is ~, but one city imposes a 3/4% tax; in three others the rate is 1%. This schedule shows that the estimated revenue from the municipal tax in the City of Los Angeles is $12,750,000, whereas the distribution of 90% of t% in the State rate (as contemplated in A. B. 817) would produce $13,826,400. Thus, at the same over-all rate, 3~, the revenue would be $1,076,400 greater under the combined tax. This would mean that increased city revenue could result in lowering the city tax rate by 4~ for each $100 of assessed value. In addition, as a result of the formula prescribed in A. B. 817, $6,652,950 would be distributed to the County of Los Angeles. This would be the entire tax of ~ on sales in unincorporated areas and 1/10 of the tax at that rate on sales within cities in the county. This allocation to the county could result in reduction of the county property tax rate by ll~ per $100 of assessed valuation. Since property in the City of Los Angeles is subject both to city and county taxes, these two reductions in rate must be .added to get the full effect of the distribution of the ~ in the State rate 0 It would mean that a Los Angeles property owner would find his taxes reduced to the extent of 15~ per $100 of assessed valuation. Comparable savings would be effected in other cities within the county. Even in Alhambra, where the city rate is now 3/4%, resulting in a total tax of 3-3/4% that would be cut back to 3~ under A. B. 817, the loss in sales tax revenues to the city would be negligible. It might be the equi valen t of an addition of 3~ per $100 in the c1 ty prop- erty tax rate9 but this would be more than of'fset by the reduction of' ll~ per $100 in the county rate9 resulting from the county's share of the State-imposed tax. Hence, with a reduced sales tax rate, the prop- erty owner in Alhambra would still find it possible to enjoy a tax re- duction of 8~ per $100 of assessed value of his property under this bill. Spectacular benefits would be enjoyed in San Francisco, where the present t% city tax yields only $4,830,000, in contrast to the $7,241,940 to be derived from San Francisco's share of the State tax. This could mean a reduction of 20;' per $100 of assessed value in the city and coun ty tax rate, with no change in the sales tax rate. Nor would the bene fi ts be con fined to me tropoli tan areas. As shown by the attached tables, if A.B. 817 becomes law the amount of reduction of county tax rates that might be anticipated throughout the State would be around 12~ per $100 of assessed value. In cities which do not now have sales taxes the reduction would be as much as 55~ per $100 of assessed value, e.g., St. Helena in Napa County. Similar data could be compiled for all of the counties and cities of' the State but these should be sufficient to demonstrate why A.B. 817 would be a good law. ~!.. !. 817 Would Reduce Tax Burdens PRELIMINARY ESTIMATES OF 1952-53 REVENUES FROM EXISTING CITY SALES TAXES AND OF 1952-53 DISTRIBUTIONS TO crrIES AM> COtmTIES OF A ONE-HALF PERCENT Sl.TPPI..EMENT 'ro THE STATE SALES TAX HAD SUCH SUPPLEMENT BED ALLOCATED TO SOURCE OF COLLECTION,!.! CITIES IN LOS AliGELES COUNTY City and County 1 Los Angeles County AlbwBbra.ooo.ooooeo ArcadiaoQo.....o... A'V8,loDo q. . -0 0 0 0. . 0 " 0 0 0 AZUBaoooooooooooooo Bellooooocooooooooo Beverly Hills...... Burbankoooooooooooo Claremont.......... co~tonooo.oooooooo Covinao 0- . 0- 0- 0 .., . .0 000- 0- Culver City........ E1 Monte........... E1 Segundo......... Gardenao 00'0 0 00 . 0 0 0- 0. 0 Glendale........... G1endora........... Hawthorne.......... Hermosa Beach...... Huntington Beach... Inglewood.......... I,a, VeI"Ileooooooooooo Long Beach......... Los Angeles........ 1/2 ~wood............ 1/2 Manhattan Beach.... 1/2 Maywood............ 1/2 Monrovia........... Montebello...o.o... Monterey Park...... 1/2 Palos Verdes Este:tes Pasadena........... 1/2 Pomonaoooooooo.oooo 1 Redondo Beach...... 1/2 San Fernando....... 1/2 San GabrieL....... 1/2 City sa.1es tax rate 2 3/4i 1 1/2 1/2 1/2 1/2 1/2 -- 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 1/2 Estimated revenue from city sales tax, 1 52- 3 $385,700 Excess (or Change in deficiency) of property tax rate Distribution state distri- to co~ensate of ~ but ion over for excess or supplement revenue from deficiency of to state local sales tax state distribution sales tax co1.4 - co1.3 Increase Decrease 5 7 24,300 42,400 47,700 408,600 458,500 13,400 37,600 186,000 Y75,200 654,400 13,500 70,000 73,800 305,100 331,600 12,750,000 73,000 32,300 39,400 39, 500 813,500 356,400 105,400 128,400 60,400 $362,300 98,300 13,600 87,500 88,500 409,800 459,600 14,200 328,000 41,900 251,200 144,800 102,000 92,000 606,700 21,400 97,000 78,400 426,500 390,800 5,200 1,627,900 13,826,400 110,800 43,400 61,700 133,000 79,300 49,200 3,600 887,500 303,800 95,100 161,800 91,500 -$23,400 98,300 -10,700 45,100 40,800 1,200 1,100 800 328,000 4,300 65,200 69,600 102,000 92,000 -47,700 7,900 27,000 4,600 121,400 59,200 5,200 1,627,900 1,076,400 37,800 11,100 22,300 133,000 79,300 9,700 3,600 74,000 -52,.600 -10,300 33,400 31,100 $.03 .28 $.21 .33 .34 .001 .001 .01 .71 .06 .14 .51 .23 ..80 .03 .19 .18 .04 .24 ..10 ..16 043 .04 .15 .07 .22 .50 .24 005 .06 003 .12 .03 025 .12 PRELlMIltARYESTmATES OF 1952,;,53 RE:vENtJESFROMEXISTING CITYSAIES TAXES AND OF 1952-53 DISTRIBO'l'IONSTOCITlES AND COUNTIES OF A OWE-H.ALF PERCENTSUPP:r..EMEETTO THE STATE SALES TAX HAD SUCH SUPPLEMENT BEEN ALLOCATED TO SOURCE OF COLLECTION,!! CITIES IN LOS ANGELES COtmTY (Continued) City sales tax City and county rate 1 2 Los Angeles County{Cont.) San MBrino.......ooo Estimated revenue from city sales tax, 1952-5 3 Santa Monica........ l~ $1,075,800 Sierra Madre........ Signal Hill......... South Gate.......... South Pasadena...... 1/2 Torrance............ 1/2 Vern.onooooo......oo-v- West Covina......... Whittier............ 1/2 All cities.......... Unincorporated area. Totals for Los Angeles County..... 1I52,8oo 71,700 143,300 $18,869,700 Excess (or deficiency) or Distribution state distri- of # but ion over supplement revenue fro:rn to state local sales tax sales tax col. 4 - ~ol. 3) 5 Change in property tax rate to compensate for excess or deficiency of state distribution Increase Decrease 7 $34,500 $34,500 $.10 573,500 -502,300 $.40 12,700 12,700 .16 43,100 43,100 .14 460,600 460,600 .78 59,300 6,500 .03 128,700 57,000 .09 800,000 800,000 .48 4,500 4,500 .05 225,000 81,700 .25 $23,936,600 $5,066,900 4/6,652,950 4/6,652,950 .ll $18,869,700 $30,589,550 $11,719,850 !! All collections are assigned to the outlet from which they arise. Those from outlets in a city are divided between the city and the county, 90 percent going to the city and 10 percent to the county. Audit pick-ups 'Would. be similarly al1.ocated but are not included in the figures presented since no data on their source are readily available. gj Estimated on the assumption that the 1951-52 revenues from a tax that was first effective on January 2, 1952 constituted 25 percent of a tull year's revenues. V Estimated on the assumption that the 1951-52 revenues from a tax that was first effective on July I, 1951 constituted 75 percent of a f'ull year1s revenues. Y Including the county's share in taxes on sales assigned to the cities as described in footnote 1. A.B. #.817 (As amended) An act to declare the policy of the State with respect to sales and use taxes, to amend Sections 6051 and 6201 of the Revenue and Taxation Code, and to add Sections 7103 to 7107, both inclusive, to said Code, all relating to sales and use taxes, and making an appropriation in pursuance of said policy. The people of the State of California do enact as follows: Section 1. It is the policy of this state to avoid the difficulties of taxpayer compliance, the complications of overlapping administrative activity, the disruption of normal trade, and the waste occasioned by multiple taxation of the same sale or use of property by the State and its poli tical subdivisions or municipal corporations. In furtherance of this policy, this act is designed to provide a means to avoid these undesirable results trom such multiple taxation by including in the State Sales and Use Tax Law provision for sharing the proceeds with the counties, cities and counties, and cities of the State on an equitable basis, if the local uni ts of government refrain from imposing like taxes. In so doing, the Legislature recognizes that it is without authority to impose taxes for municipal purposes but it also is aware of the fact that substantial sums are ex- pended out of local treasuries for State purposes, and it contemplates that the proceeds of the State Sales and Use Tax Law made available to the counties, cities and counties, and cities under this act will be so expended. Sec. 2. Section 6051 of the Revenue and Taxation Code is amended to read~ 6051. For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of 2! percent of the gross receipts of any re- tailer from the sale of all tangible personal property sold at retail in this State on or after August 1, 1933, and to and including June 30, 1935, and at the rate of 3 percent thereafter 9 and at the rate of 2t percent on and after July 1, 1943, and to and including June 30, 19499 and at the rate of 3 percent on and after July 1., 1949, and to and including December 31, 1953, and at the rate of 1! percent thereafter. Sec. 3. Section 6201 of said code is amended to read~ 6201. An excise tax is hereby imposed on the storage, use, or other consumption in this State of tangible personal property purchased from any retailer on or after July 1, 1935, for storage, use, or other consumption in this State at the ra te of 3 percent of the sale s price of the property, and at the rate of 2t percent on and after July 1, 1943, and to and including June 30, 1949, and at the rate of 3 percent on and after July 1., 1949, and to and including December 31, 1953, and at the rate of 3~ percent thereafter. Sec. 4. Section 7103 is added to said Code to read~ 7103. Out of the money in the State Treasury deposited to the credit of the Retail Sales Tax Fund there is hereby appropriated for distribution among the counties, cities -2- ~ . and counties, and cities of the State, in the manner and subject to the limitations herein prescribed, an amount equal to the sum of one-seventh of all taxes collected under this part at the rate of 3i percent and a like fraction of all interest and penalties collected thereon, less a like fraction of all refunds and interest paid by the State with respect thereto. For the purposes of this part the amoUnt hereby appropriated shall be designated "net collections" 0 Sec. 5. Section 7104 is added to said Code to read: 7104. The net collections shall be distributed among the counties, cities and counties, a.nd cities in the proportions specified in Section 7105 in accordance with the place where the sale occurs giving rise to liability under this part, except that when the liability is paid directly to the State by the user of property, the distribution shall be in accordan ce wi th the place of use. For the purpose of determining place of sale and place of use, the board is authorized to utilize such formulae as it believes are designed reasonably to divide the net collec- tions in accordance with the provisions hereof. Sec. 6. Section 7105 is added to said Code to read: 71050 On the basis specified in Section 7104, the distri- bution of the net collections shall beg (a) To each county, the entire amount arising out of sales or use occurring at places within the unincorporated area of the coun ty and 10 percen t of the amoun t arising out of sale s or use occurring at places within incorporated areas in the county. -3- ~ '.... ..' (b) To each city and county, the entire amount arising out of sales or use occurring at places within the city and coun ty . (c) To each city, 90 percent of the amount arising out of sales or use occurring at places within the city. Sec. 7. Section 7106 is added to said Code to read: 7106. No distribution shall be made to any county, city and coun ty, or city imposin g any sale s tax or use tax under local ordinance, or any tax or license fee of like character no matter how designated 0 In the event that such a local tax or license is imposed with respect to sales or use during any calendar quarter, the net collections otherwise distributable to the county~ city and county, or city with respect to the entire quarterly period shall revert to the Retail Sales Tax Fund and shall be transferred therefrom to the General Fund of the State 0 Sec. 8. Section 7107 is added to said Code to read: 7107. On or before July 1, 1954, the board shall certify to the Sta~e Controller the net collections to be distributed to each county, city and county>> and city on the basis of the payments under the Sales and Use Tax Law transmitted to the State Treasurer on or before May 31, 1954, to be deposited in the State Treasury to the credit of the Retail Sales Tax Fund. Thereafter, the State Controller shall draw his warrants on the Retail Sales Tax Fund payable accordingly to the several counties, -4- 1 "'" ... .. -, ~ - cities and counties, and citieso On or before October 1, 1954, and quarterly thereafter the board shall certify to the State Controller the net collections to be distributed to each county, city and county, and city, since the last distribution thereof, in each instance covering a period ending on the last day of the calendar month preceding the date of the certification. Thereafter, the State Controller shall draw his warrants on the Retail Sales Tax Fund payable accordingly to the several counties, cities and counties, and citieso -5-