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State Bd. of Equalization Says Bill By State Senator Alan Lowenthal (co-authored by Assemblywoman Bonnie Lowenthal) Would Cost State $92-137 Million Annually By Letting Shippers Continue To Avoid Paying CA's Sales/Use Tax On Part Of Marine Fuel They Buy; Senate Appropriations Committee Advances Measure to Senate Floor


(May 25, 2012) -- An analysis by the State Board of Equalization of SB 1243 by state Senator Alan Lowenthal (D., LB-Paramount) (co-authored by Assemblywoman Bonnie Lowenthal (D, LB)) that would let shippers continue for the next twelve years to avoid paying CA's sales/use tax on a portion of the fuel they buy estimetes it would cost the state of California (including local entities) from $92 million to 137.5 million annually.

In a written legislative analysis, the State Board of Equalization states in pertinent part [bracketed material by us for clarity]:


The revenue loss [annually] from exempting from the sales and use tax maritime fuels sold to a water common carrier, for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out of state destination would be as follows:

[Based on total maritime fuel sales $ 1.047.6 billion and $ 1.571.5 billion]

General Fund loss (3.94%) between $ 41.3 million and 61.9 million

Fiscal Recovery loss (0.25%) between 2.6 million and 3.9 million

Local Revenue Fund 2011 loss (1.06%) between 11.1 million and 16.7 million

Local Tax loss (2.00%) between 21.0 million and 31.4 million

Special District loss (1.5%)* between 15.7 million and 23.6 million

Total between $ 91.7 million and $ 137.5 million

* Nearly all of the maritime fuels are sold in jurisdictions with a tax rate of 8.75%.

[The BOE routinely provides legislative analyses to address administrative, cost, revenue and policy issues of pending legislation and doesn't indicate a formal BOE position on the bill.]

To read the State Board of Equalization analysis in full, click here. To view the bill in full, click here

As reported yesteday (May 24) and carried live on's front page (via the California Channel), the state Senate Appropriations Committee voted 7-0 -- with no dissent by any Committee Democrats or Republicans -- to advance SB 1243 to the Senate floor.

Sen. Lowenthal is running for Congress in a newly drawn LB-west OC Congressional seat...and the major Republican candidates in the June Congressional election -- LB City Councilman Gary DeLong and former Congressman/former Assemblyman Steve Kuykendall -- both support SB 1243.

The Senate Appropriations Committee's May 24 vote came after a May 21 hearing by the Committee at which Senator Lowenthal presented his bill and the state Dept. of Finance (part of the Governor's office) disclosed the State Board of Equalization's estimate of state costs. The Dept. of Finance also told the Committee that the Governor's office has "no position" on the bill. To hear Senator Lowenthal's May 21 presentation of his bill and Committee colloquy (approx six and a half minutes), click here.

SB 1243 now proceeds to the Senate floor...while the state legislature faces a looming state budget deficit (spending exceeding revenue) approaching $16 billion. Governor Brown advocates a November ballot measure that would increase the state sales tax by a quarter percent and increase the state income tax for high income earners...and has threatened cuts to schools without it.

The BOE's estimate of lost revenue includes a local tax revenue (statewide) losses of $21-34.4 million annually. The Long Beach City Council's committee on state legislation, chaired by Councilman Patrick O'Donnell, has held no hearings to date on SB 1243. A proposal several years ago by Councilwoman Gerrie Schipske to urge the state legislature to repeal the exemption [and require shippers to pay the full sales tax as other consumers do in purchasing fuel] received an icy reception from a previous City Council.

A May 9 legislative analysis listed the bills supporters/opponents as follows:

Support: American President Lines; American Waterways Operators; California Taxpayers Association; City of Carson Mayor, Jim Dear; CMA CGM America, LLC; Cruise Lines International Association; Futureports; General Steamship Agencies; General Steamship Corporation; Harbor Association of Industry & Commerce; Horizon Lines; Inlandboatman's Union of the Pacific; International; International Longshore & Warehouse Union (ILWU); ILWU - Northern CA District Council; ILWU - Southern CA District Council; Maersk, Inc.; Masters, Mates and Pilots Union; Matson Navigation Company, Inc.; Mitchell and Mitchell Insurance Agency; MOL (America) Inc.; OOCL Inc.; Pacific Merchant Shipping Association; Sailor's Union of the Pacific; Seafarers International Union; Western Ocean Services; Yang Ming Corporation; 15 members of the Inlandboatmen's Union Southern CA Region

Opposition : Unknown.

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