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Business Taxes Law Guide—Revision 2024

BTLG Table of Contents > Transactions And Use Tax Law > Chapter 3 > entire chapter

Transactions And Use Tax Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 1.6. Transactions and Use Taxes

Chapter 3. Administration

7270. Required contract with the board. (a) Prior to the operative date of any ordinance imposing a transactions and use tax pursuant to this part, the district shall contract with the board to perform all functions incident to the administration and operation of the ordinance. If the district has not contracted with the board prior to the operative date of its ordinance, it shall nevertheless so contract and, in that case, the operative date shall be the first day of the first calendar quarter following the execution of the contract.

(b) The contract shall contain a provision that the district shall reimburse the board for and hold the board harmless from any and all costs, losses, or refunds of any kind whatsoever.

(c) The contract shall also contain a provision that, in the event that a legal action is commenced challenging the validity of the tax in its entirety, as opposed to its application to an individual taxpayer, the district shall place the tax proceeds into an interest-bearing escrow account until the legality of the tax is finally resolved by a final and nonappealable decision rendered by a court of competent jurisdiction. That provision shall be enforceable by any interested person in a proceeding for a writ of mandate.

(d) The district shall be entitled to indemnity for any and all costs, losses, or refunds from any entity, except the state, that participated in the imposition of the tax. For the purposes of this part, "participated" means any involvement in procuring the legislation that authorized the tax, or in enacting or administering the ordinance imposing the tax. Any organization that is a member of the legislative body of the district imposing the tax has participated in the imposition of the tax within the meaning of this section.

History—Added by Stats. 1974, Ch. 532, effective August 23, 1974. Stats. 1983, Ch. 337, in effect January 1, 1984, substituted "has not" for "shall not have" after "district" in the second sentence of the first paragraph and added the second paragraph. Stats. 1995, Ch. 495, in effect January 1, 1996, added subdivision letter designation (a) before first paragraph; added subdivision letter (b) before second paragraph, and deleted "if a final judgment is entered in a court of competent jurisdiction holding that the ordinance imposing the transactions and use tax is unconstitutional or otherwise invalid" after "whatsoever" therein; and added subdivisions (c) and (d).

Note.—See legislative findings, declarations, and intent of Ch. 495, Stats. 1995 following Section 7267.

7270.5. Actions or proceedings filed: limitation. Any action or proceeding filed on the basis that a tax ordinance provided for in this part or Part 1.7 (commencing with Section 7280) or the issuance of any bonds thereunder or any of the proceedings in relation thereto is contested, questioned, or denied on the basis that the tax ordinance is unconstitutional or otherwise invalid and filed for the sole purpose of contesting the validity of the district transactions and use tax, shall be commenced pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure. The state shall not be made a party to the action or proceeding. That action shall not be filed more than 60 days after the approval of the enabling ordinance by the voters unless the authorizing legislation specifies a longer period. If no action is filed within that period, the tax, the bonds, and all proceedings in relation thereto, including the adoption and approval of the ordinance, shall be held to be valid and in every respect legal and uncontestable.

History—Added by Stats. 1995, Ch. 495, in effect January 1, 1996.

Note.—See legislative findings, declarations, and intent for Ch. 495, Stats. 1995, following Section 7267.

7271. Transmittal of taxes to the district. All transactions and use taxes collected by the board pursuant to contract with the district shall be transmitted by the board to the district periodically as promptly as feasible. The transmittals shall be made at least twice in each calendar quarter.

7271.03. Transmittals: Santa Cruz Metropolitan Transit District. (a) With regard to transmittals pursuant to Section 7271 to the Santa Cruz Metropolitan Transit District, the State Board of Equalization shall calculate the difference between the transmittals to that district for the fourth calendar quarter of 1989 and the first calendar quarter of 1990 and the corresponding transmittals for the fourth calendar quarter of 1988 and the first calendar quarter of 1989. The State Board of Equalization shall, on or before January 1, 1991, notify the Santa Cruz Metropolitan Transit District of the amounts of the differences and certify those amounts to the Controller.

(b) Within 10 days after the first notification pursuant to subdivision (a), the governing body of the Santa Cruz Metropolitan Transit District, if that district has received total amounts less than corresponding amounts received for the the fourth calendar quarter of 1988 and the first calendar quarter of 1989, may request the Controller to transmit, from the Earthquake Disaster Revenue Stabilization Assistance Fund established pursuant to Section 7204.03, the amounts of the differences, provided that the total amount requested is no less than ten thousand dollars ($10,000). Requests submitted pursuant to this subdivision shall be submitted on or before December 1, 1991, and shall include findings by the district's governing body that the amounts of the differences are directly attributable to the earthquake of October 17, 1989.

(c) Within 10 days of receiving a request pursuant to subdivision (b), the Controller shall transmit the requested amount.

(d) Notwithstanding any other provision of this section, if the Controller determines that the amount of sales tax revenue received by the State of California in the fourth calendar quarter of 1989 and the first calendar quarter of 1990 is less than the amount received in the corresponding quarters of the immediately preceding calendar year, the Controller shall reduce the amounts transmitted pursuant to subdivision (c) in proportion to that reduction.

(e) This section shall remain in effect only until January 1, 1992, and as of that date is repealed.

History—Added by Stats. 1990, Ch. 37, (1X), in effect September 25, 1990.

7271.05. Reduction in transmittals: Santa Cruz Metropolitan Transit District. [Repealed by Stats. 2007, Ch. 342 (SB 1748), in effect January 1, 2008.]

7271.1. Local agencies: refunds. (a) For purposes of this section:

(1) "Quarterly taxes" means the total amount of transactions and use taxes transmitted by the board to a district for a calendar quarter.

(2) "Refund" means the amount of transactions and use taxes deducted by the board from a district's quarterly taxes in order to pay the district's share of a transactions and use tax refund due to one taxpayer.

(3) "Offset portion" means that portion of the refund which exceeds the greater of fifty thousand dollars ($50,000) or 20 percent of the district's quarterly taxes.

(b) Except as provided in subdivision (c), if the board has deducted a refund from a district's quarterly taxes which includes an offset portion, then the following provisions apply:

(1) Within three months after the board has deducted an offset portion, the district may request the board to transmit the offset portion to the district.

(2) As promptly as feasible after the board receives the district's request, the board shall transmit to the district the offset portion as part of the board's periodic transmittal of transactions and use taxes.

(3) The board shall thereafter deduct a pro rata share of the offset portion from future transmittals of transactions and use taxes to the district over a period to be determined by the board, but not less than two calendar quarters and not more than eight calendar quarters, until the entire amount of the offset portion has been deducted.

(c) The board shall not transmit the offset portion of the refund to the district if that transmittal would reduce or delay either the board's payment of the refund to the taxpayer or the board's periodic transmittals of transactions and use taxes to other districts.

History—Added by Stats. 1989, Ch. 274, in effect January 1, 1990.

7272. Preparation charges. The district shall pay to the board its costs of preparation to administer and operate the transactions and use taxes ordinance. The district shall pay such costs monthly as incurred and billed by the board. Such costs include all preparatory costs, including costs of developing procedures, programming for data processing, developing and adopting appropriate regulations, designing and printing of forms, developing instructions for the board's staff and for taxpayers, and other necessary preparatory costs which shall include the board's direct and indirect costs as specified by Section 11256 of the Government Code. Any disputes as to the amount of preparatory costs incurred shall be resolved by the Director of Finance, and his or her decision shall be final. The maximum amount of all preparatory costs to be paid by the district shall not, in any event, exceed one hundred seventy-five thousand dollars ($175,000).

History—Stats. 1974, Ch. 532, effective August 23, 1974, revised the section to require the district to pay preparation costs rather than requiring such a term in the administration contract. Stats. 1983, Ch. 337, in effect January 1, 1984, added "or her" after "his" in the fourth sentence and substituted "one hundred seventy-five thousand dollars ($175,000)" for "one-hundred twenty-five thousand dollars ($125,000)" after "exceed" in the fifth sentence.

7272.3. O.C.T. District contract; preparation charges. [Repealed by Stats. 1975, Ch. 1186, in effect January 1, 1976.]

7272.5. S.C.C.T. District contract; preparation charges. [Repealed by Stats. 1972, Ch. 30, in effect March 23, 1972.]

7272.5. S.C.C.T. District contract; preparation charges. [Section 7272.5, as added by Stats. 1974, Ch. 1204, repealed by Stats. 1975, Ch. 1186, in effect January 1, 1976.]

7272.5. S.M.C.T. District contract; preparation charges. [Section 7272.5, as added by Stats. 1974, Ch. 502, repealed by Stats. 1975, Ch. 1186, in effect January 1, 1976.]

7272.7. S.C.R.T. District contract; preparation charges. [Repealed by Stats. 1974, Ch. 532, effective August 23, 1974.]

7272.8. District contracts generally; preparation charges. [Repealed by Stats. 1974, Ch. 532, effective August 23, 1974.]

7273. Charges for administering the taxes. In addition to the amounts otherwise provided for preparatory costs, the board shall charge each district an amount for the board's services in administering the transactions and use tax determined by the board, with the concurrence of the Department of Finance, as follows:

(a) Beginning with the 2006 07 fiscal year, the amount charged all districts shall be based on the methodology described in Alternative 4C of the November 2004 report by the State Board of Equalization entitled "Response to the Supplemental Report of the 2004 Budget Act." The amount charged each district shall be based upon the district's proportional share of the revenue after weighting the revenue to equalize the differences in district tax rates.

(1) The amount charged each district may be adjusted in the current fiscal year to reflect the difference between the board's budgeted costs and any significant revised estimate of costs. Any adjustment shall be subject to budgetary controls included in the Budget Act. Prior to any adjustment, the Department of Finance shall notify the Chairperson of the Joint Legislative Budget Committee not later than 30 days prior to the effective date of the adjustment.

(2) The amount charged each district shall be adjusted to reflect the difference between the board's recovered costs and the actual costs incurred by the board during the fiscal year two years prior.

(b) The board shall, by June 1 of each year, notify districts of the amount that it anticipates will be assessed for the next fiscal year. The districts shall be notified of the actual amounts that will be assessed within 30 days after enactment of the Budget Act for that fiscal year.

(c) The amount charged a district that becomes operative during the fiscal year shall be estimated for that fiscal year based on weighted revenue.

(d) The amounts determined by subdivision (a) shall be deducted in equal amounts from the quarterly allocation of taxes collected by the board for a given district.

(e) Notwithstanding any other provision of this section, for the 2008–09 fiscal year to the 2014–15 fiscal year, inclusive, the amounts determined by subdivision (a) shall not include any revenues collected pursuant to Sections 6051.7 and 6201.7.

History—Stats. 1969, p. 461, in effect June 12, 1969, revised the original language of the first two lines of this section, as enacted by Ch. 24, in effect November 10, 1969, by adding "otherwise" and deleting "in the preceding section" following "provided". Stats. 1971, p. 2790, operative July 1, 1972, provided that the board shall charge 0.82 percent of all district taxes for administering the transactions and use tax ordinance. Stats. 1985, Ch. 1091, effective January 1, 1986, added "except as provided in Section 7273.1" after "for preparatory costs, the board shall charge,". Stats. 1990, Ch. 1077, in effect January 1, 1991, added "Effective July 1, 1991", moved "except as provided in Section 7273.1" from after "charge" to after "costs," deleted "district" after "7273.1, the", added "following" after "charge the", added "its" before "services", added colon after "tax", deleted "ordinance of the district 0.82" after colon, added subdivision (a) and "For any district …, 0.79" and substituted "July 1, 1991" for "July 1, 1972" in subdivision (a); added subdivisions (b) and (c); added "(d) The", added "specified in subdivisions (a), (b), and (c)"; and substituted "a given" for "the" in subdivision (d). Stats. 1993, Ch. 75, in effect June 30, 1993, deleted "Effective July 1, 1991," before "In addition", substituted "In" for "in" before "addition", deleted "except as provided in Section 7273.1," after "costs", substituted "an amount" for "the following" after "charge", deleted former subdivisions (a), (b), (c), and (d) which specified percentages of the tax revenue that the Board was required to charge local entities as the cost of the Board's services, and added entire text of subdivisions (a) through (d). Stats. 1998, Ch. 890, in effect January 1, 1999, added comma after "board" in the first paragraph; added ", by June 1 of each year," after "board shall" and deleted "by June 1" after "notify districts" in subdivision (b); substituted "that" for "which" after "tax district" in subdivision (c); and added subdivisions (e) and (f). Stats. 1999, Ch. 865, (SB 1302), in effect January 1, 2000, added "amount as a" after "lesser of the", added "of revenue" after "percentage", added ", or the first … operations" after "fiscal year", and deleted "of the total transactions and use tax revenue collected by the board for that district for each fiscal year" after "following percentages" in subdivision (e); substituted "ranging from … one-half" for "of one quarter" after "and use tax" in paragraph (2), and substituted "below one-quarter … 5 percent" for "of one-eighth of 1 percent shall not exceed 5 percent" after "and use tax" in subparagraph (3) of subdivision (e); and substituted "1999" for "1998" after "March 1" and "2000" for "1999" after "January 1" in subdivision (f). Stats. 2001, Ch. 745 (SB 1191), in effect October 12, 2001, deleted former subdivision (f) which provided, "The board shall report to the Chairperson of the Senate Committee on Budget and Fiscal Review and the Chairperson of the Assembly Committee on Budget by March 1, 1999, and January 1, 2001, on the actions the board will take to adjust its costs commensurate with the changes in reimbursements effected by this bill. The report shall analyze the impact of the reduced reimbursements on the board's budget and how the board's actions may impact its revenue-producing activities. The board may not reduce positions that are responsible for the generation or receipt of revenues, including, but not limited to, positions in the audits and compliance programs." Stats. 2006, Ch. 49 (AB 1809), in effect January 1, 2007, added "each district" after "board shall charge", substituted "the board's" for "its" after "an amount for" in the first paragraph, substituted "2006–07" for "1993–94" after "Beginning with the", added "all districts" after "the amount charged" and substituted "methodology described … tax rates" for "total special taxing jurisdiction costs reflected in the annual Budget Act. This amount comprises the categories of direct, shared, and central agency costs incurred by the board and shall include the following:" after "based on the" in subdivision (a); deleted former paragraph (1) of subdivision (a) which provided, "The amount charged to each entity shall be based on the recommendations incorporated in the March 1992, report by the Auditor General entitled 'The Board of Equalization Needs To Adjust Its Model For Setting Reimbursement Rates For Special Tax Jurisdictions."'; renumbered former paragraphs (2) and (3) as (1) and (2), respectively; and substituted "The" for "For the 1995–96 fiscal year and each fiscal year thereafter, the" in former paragraph (3) of subdivision (a); deleted "transactions and use tax" after "amount charged a" and substituted "weighted revenue" for "that district's proportionate share of direct, indirect, and shared costs" in subdivision (c); and deleted former subdivision (e) which provided, "For the 1998–99 fiscal year and each fiscal year thereafter, the amount charged to a district by the board shall not exceed the lesser of the amount as a percentage of revenue the board would have charged for the 1998-99 fiscal year, or the first full year of a new district's operations under this section as it read prior to the amendments made by the act adding this subdivision, or the following percentages:

(1) For districts imposing a transactions and use tax of one-half of 1 percent or greater, the amount charged by the board shall not exceed 1.5 percent, for the 1998-99 fiscal year and each fiscal year thereafter.

(2) Beginning with the 1998–99 fiscal year and in each fiscal year thereafter, the amount charged to a district imposing a transactions and use tax ranging from one-quarter of 1 percent up to but less than one-half of 1 percent shall not exceed 3 percent.

(3) Beginning with the 1998–99 fiscal year and in each fiscal year thereafter, the amount charged to a district imposing a transactions and use tax below one-quarter of 1 percent shall not exceed 5 percent." Stats. 2007, Ch. 342 (AB 1748), in effect January 1, 2008, added "each district" after "amount charged" in paragraph (2) of subdivision (a). Stats. 2009, Ch. 12XXXX (AB 12XXXX), in effect July 28, 2009, added subdivision (e).

7273.1. Charges for administering the taxes. Notwithstanding Section 7273, the board shall charge the Santa Clara Traffic Authority and the Santa Clara Transit District each 0.82 percent of all district taxes available for distribution to the district on and after July 1, 1986, and prior to July 1, 1991. Those amounts shall be deducted from the taxes collected by the board for each district.

This section shall remain in effect only until July 1, 1991, and as of that date is repealed, unless a later enacted statute, which is enacted before July 1, 1991, deletes or extends that date.

History—Added by Stats. 1985, Ch. 1091, effective January 1, 1986. Stats. 1990, Ch. 1077, in effect January 1, 1991, substituted "Notwithstanding Section 7273" for "Effective July 1, 1986" and substituted "0.82 percent … that date" for "one-half of the amount calculated in accordance with the formula specified in Section 7273".

7273.2. Annual report of costs. The board shall annually prepare a report showing the amount of both reimbursed and unreimbursed costs incurred by it in administering transactions and use taxes imposed by districts pursuant to this part.

History—Added by Stats. 1987, Ch. 786, effective January 1, 1988.

7274. Information to retailers. The board shall make available to all licensed vehicle, vessel, and aircraft dealers who hold seller's permits in this state information concerning the cities and counties located within districts which impose transactions and use tax ordinances and the applicable tax rates in those cities and counties.

History—Added by Stats. 1987, Ch. 308, operative January 1, 1988.