BILL NUMBER: AB 2060	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 18, 2010
	AMENDED IN SENATE  JULY 15, 2010
	AMENDED IN ASSEMBLY  MAY 18, 2010

INTRODUCED BY   Assembly Member Charles Calderon

                        FEBRUARY 18, 2010

    An act to add Section 6376.3 to the Revenue and Taxation
Code, relating to taxation, to take effect immediately, tax levy.
  An act to add Section 7111 to the Public Contract
Code, relating to public contracts. 


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2060, as amended, Charles Calderon.  Sales and use
taxes: exemption: fixed price contract.   Public
contracts: fixed price contracts: sales and use taxes rate changes.

   Existing  law imposes requirements on public entities with
respect to the terms of public contracts. Existing  law imposes
a state sales and use tax on retailers and on the storage, use, or
other consumption of tangible personal property in this state at the
combined rate of  8   1/4   7
  1/4  % of the gross receipts from the retail sale of
tangible personal property in this state and of the sales price of
tangible personal property purchased from any retailer for storage,
use, or other consumption in this state that is stored, used, or
otherwise consumed in this state.
   This bill would  , for any increase in the state sales and
use tax rate that occurs on or after the effective date of this
bill, exclude from that increased rate of tax, the sale of, and the
storage, use or other consumption in this state of, tangible personal
property that is subject to a fixed price contract under specified
circumstances entered into prior to the operative date of the state
sales and use tax rate increase, as provided   require a
fixed price contract, as specified, between a government entity, as
defined, and a contractor to authorize payment for a change in the
contract price that is attributable to an increase or decrease in the
state sales and use tax rate, with the increase or decrease paid in
accordance with the contract terms or as agreed to by the parties, as
prescribed. By placing new duties on local officials with respect to
their contract practices, the bill would impose a state-mandated
local program  . 
   This bill would take effect immediately as a tax levy. 

   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.  
   This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no   yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 7111 is added to the  
Public Contract Code   , to read:  
   7111.  (a) A fixed price contract between a government entity and
a contractor shall authorize payment for a change in the contract
price that is attributable to an increase or decrease in taxes
imposed by Part 1 (commencing with Section 6001) of Division 2 of the
Revenue and Taxation Code. This increase or decrease shall be paid
in accordance with the provisions of the contract governing payment
for changes in the work or, if no provisions are set forth, payment
shall be as agreed to by the parties.
   (b) This section shall apply only to an increase or decrease in
the sales and use tax rate imposed with respect to the following:
   (1) (A) The gross receipts from the sale of, and the storage, use,
or other consumption in this state of, tangible personal property
obligated pursuant to a contract entered into for a fixed price prior
to the operative date of the increase or decrease in the sales and
use tax rate.
   (B) This paragraph shall apply only to a contract in which a
government entity is a party to the contract.
   (C) For purposes of this paragraph, tangible personal property
shall not be deemed obligated pursuant to a contract for any period
of time for which any party to the contract has the right to
terminate the contract upon notice, whether or not the right is
exercised.
   (2) (A) The gross receipts from the sale of, and the storage, use,
or other consumption in this state of, materials and fixtures
obligated pursuant to a construction contract entered into for a
fixed price prior to the operative date of the increase or decrease
in the sales and use tax rate.
   (B) This paragraph shall apply only to a construction contract in
which a government entity is a party to the construction contract.
   (C) For purposes of this paragraph, materials and fixtures shall
not be deemed obligated pursuant to a construction contract for any
period of time for which any party to the contract has the right to
terminate the contract upon notice, whether or not the right is
exercised.
   (3) (A) A lease of tangible personal property that is a continuing
sale of the property for any period of time for which the lessor is
obligated to lease the property for an amount fixed by the lease
prior to the operative date of the increase or decrease in the sales
and use tax rate.
   (B) This paragraph shall apply only to a lease of tangible
personal property to a government entity.
   (C) For purposes of this paragraph, the sale or lease of tangible
personal property shall be deemed not to be obligated pursuant to a
contract or lease for any period of time for which any party to the
contract or lease has the unconditional right to terminate the
contract or lease upon notice, whether or not that right is
exercised.
   (4) (A) The possession of, or the exercise of any right or power
over, tangible personal property pursuant to a lease that is a
continuing purchase of the property for any period of time for which
the lessee is obligated to lease the property for an amount fixed by
a lease entered into prior to the operative date of the increase in
the sales and use tax rate.
   (B) This paragraph shall apply only to a lease of tangible
personal property to a government entity.
   (C) For purposes of this paragraph, the storage, use, or other
consumption of, or possession of, or exercise of any right or power
over, tangible personal property shall be deemed not to be obligated
pursuant to a contract or lease for any period of time for which any
party to the contract or lease has the unconditional right to
terminate the contract or lease upon notice, whether or not the right
is exercised.
   (c) For purposes of this section, the following terms apply:
   (1) "Fixed price" means either of the following:
   (A) The price or prices specified in the contract or lease, and
the contract or lease does not authorize an increase or decrease in
price due to an increase or decrease in the sales and use tax rate.
   (B) The prices or price specified in the construction contract is
a lump sum price or a stated unit price or a guaranteed maximum
price, and the construction contract does not authorize an increase
or decrease in price due to an increase or decrease in the sales and
use tax rate.
   (2) "Government entity" means the State of California, or any
city, county, or city and county, community college district, school
district, county superintendent of schools, or special district in
this state.
   (d) (1) This section shall apply only to an increase or decrease
in the sales and use tax rate that occurs on or after the effective
date of the act adding this section.
   (2) If the sales and use tax rate imposed pursuant to Sections
6051.7 and 6201.7 of the Revenue and Taxation Code, or any portion
thereof, is extended for a period or periods on and after July 1,
2011, the sales and use tax rate extension shall be regarded as an
increase in the sales and use tax rate for purposes of this section.

   SEC. 2.    If the Commission on State Mandates
determines that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those costs
shall be made pursuant to Part 7 (commencing with Section 17500) of
Division 4 of Title 2 of the Government Code.  
  SECTION 1.    Section 6376.3 is added to the
Revenue and Taxation Code, to read:
   6376.3.  (a) On and after the operative date of an increase in the
sales and use tax rate, to the date on which that increase in tax
rate ceases to be operative, there is exempted from the taxes imposed
by this part an amount equal to an amount that is attributable to
the increased rate of tax imposed with respect to the following:
   (1) (A) The gross receipts from the sale of, and the storage, use,
or other consumption in this state of, tangible personal property if
the seller is obligated to furnish a government entity with the
property or the government entity is obligated to purchase the
property for a fixed price pursuant to a contract entered into prior
to the operative date of the increase in the sales and use tax rate.
   (B) For purposes of this paragraph, tangible personal property
shall not be deemed obligated pursuant to a contract for any period
of time for which any party to the contract has the right to
terminate the contract upon notice, whether or not the right is
exercised.

   (2) (A) The gross receipts from the sale of, and the storage, use,
or other consumption in this state of, materials and fixtures
obligated pursuant to a construction contract entered into for a
fixed price prior to the operative date of the increase in the sales
and use tax rate.
   (B) This paragraph shall apply only to construction contracts in
which a government entity is a party to the construction contract
   .
   (c) For purposes of this paragraph, tagible personal property
shall not be deemed obligated pursuant to a contract for any period
of time for which any party to the contract has the right to
terminate the contract upon notice, whether or not the right is
exercised.
   (3) (A) A lease of tangible personal property that is a continuing
sale of the property for any period of time for which the lessor is
obligated to lease the property for an amount fixed by the lease
prior to the operative date of the increase in the sales and use tax
rate.
   (B) This paragraph shall apply only to leases of tangible personal
property to a government entity.
   (C) For purposes of this paragraph, the sale or lease of tangible
personal property shall be deemed not to be obligated pursuant to a
contract or lease for any period of time for which any party to the
contract or lease has the unconditional right to terminate the
contract or lease upon notice, whether or not that right is
exercised.
   (4) (A) The possession of, or the exercise of, any right or power
over tangible personal property pursuant to a lease that is a
continuing purchase of the property for any period of time for which
the lessee is obligated to lease the property for an amount fixed by
a lease entered into prior to the operative date of the increase in
the sales and use tax rate. For purposes of this paragraph, the
storage, use, or other consumption of, or possession of, or exercise
of any right or power over, tangible personal property shall be
deemed not to be obligated pursuant to a contract or lease for any
period of time for which any party to the contract or lease has the
unconditional right to terminate the contract or lease upon notice,
whether or not the right is exercised.
   (B) This paragraph shall apply only to leases of tangible personal
property to a government entity.
    (b) For purposes of this section:
    (1) "Fixed price" means the the prices or price specified in the
construction contract is a lump sum price or a stated unit p4rice or
a guaranteed maximum price, and the construction contract does not
authorize an increase in price due to an incrases in the rate of
sales and use taxes.
    (2) "Government entity" means the United States, the State of
California, or any city, county, or city and county, community
college district, school district, county superintendent of schools,
or special district in this state.
   (c) This section shall apply only to increases in the sales and
use tax rate that occur on or after the effective date of the act
adding this subdivision.
   (d) On or before July 1, 2011, if the sales and use tax rate
imposed pursuant to Sections 6051.7 and 6201.7, or any portion
thereof, is extended for a period or periods on and after July 1,
2011, the sales and use tax rate extension shall be regarded as "an
increase in the sales and use tax rate" for purposes of subdivision
(a).  
  SEC. 2.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.