Fiona Ma for State Assembly

California Tax Gap Legislation is Working

As you may recall, SCADA worked closely in 2012 with the California Board of Equalization (BOE) and Assemblywoman Fiona Ma to pass AB 2618, which closed a significant tax gap loophole and gained compliance in the auto auction industry by requiring that an insurance auction could only accept resale certificates from pur- chasers who are licensed dealers, dismantlers, certified auto repair dealers or scrap metal processors. Prior to AB 2618, anyone with a BOE issued resale certificate could purchase vehicles tax free at the auctions. In many instances businesses purchasing vehicles at insurance auctions were utilizing resale certificates from non-automotive related business.

Now that AB 2618 has been in law for approximately a year, SCADA recently checked in with the BOE to see how things were progressing on tax collections. BOE staff reported back that they have made significant progress on taxable sales at the auctions during the first 6 months of 2013. To establish a baseline to calculate new collections, the staff reviewed data on the taxable sales reported by auto auctions for the past sev- eral years. As a result, BOE was able to show that the taxable mea- sure increased at the insurance auctions for the first two months of 2013 by more than 100% over the same reporting periods in the prior year. BOE says it is unknown if the increase is entirely due to the change in the law, but they did realize a significant increase. I think the percentage increase in tax collections speaks for itself and is a really positive development coming from AB 2618.