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Business Taxes Law Guide—Revision 2024
Uniform Local Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1.5. Uniform Local Sales and Use Taxes
Chapter 1. General Provisions
Section 7204.1
7204.1. Local agency; offset portion. (a) For purposes of this section:
(1) "Local agency" means a city, county, city and county, or redevelopment agency.
(2) "Quarterly taxes" means the total amount of sales and use taxes transmitted by the board to a local agency for a calendar quarter.
(3) "Refund" means the amount of sales and use taxes deducted by the board from a local agency's quarterly taxes in order to pay the local agency's share of a sales and use tax refund due to one taxpayer.
(4) "Offset portion" means, except as provided in subdivision (d), that portion of the refund which exceeds the greater of fifty thousand dollars ($50,000) or 20 percent of the local agency's quarterly taxes.
(b) Except as provided in subdivision (c), if the board has deducted a refund from a local agency'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 local agency may request the board to transmit the offset portion to the local agency.
(2) As promptly as feasible after the board receives the local agency's request, the board shall transmit to the local agency the offset portion as part of the board's periodic transmittal of sales and use taxes.
(3) The board shall thereafter deduct a pro rata share of the offset portion from future transmittals of sales and use taxes to the local agency 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 local agency 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 sales and use taxes to other local agencies.
(d) Notwithstanding any other provision, past, present, or future refunds required to be made by a local agency as a result of the California Court of Appeal decision in Aerospace Corporation v. State Board of Equalization, 218 Cal.App.3d 1300, may, at the discretion of the local agency, be made pursuant to the following provisions:
(1) "Local agency" means a city, county, city and county, redevelopment agency, or a local agency that has imposed a transactions and use tax pursuant to or in accordance with Part 1.6 (commencing with Section 7251) and that has contracted with the board to administer the taxes imposed under this part.
(2) "Offset portion" means, for purposes of this subdivision, that portion of the refund which is required as a result of the court's decision in Aerospace Corporation v. State Board of Equalization.
(3) All refunds associated with the Aerospace Corporation case shall be aggregated so that any local agency required to make those refunds will do so on the basis of aggregate claims rather than individual claims.
(4) The State Board of Equalization shall make the refund payments required pursuant to this court case from the Local Sales Tax Offset Fund, which is hereby created, as follows:
(A) Present and future refunds shall be made from the Local Sales Tax Offset Fund.
(B) Amounts equivalent to past refund payments that have been deducted from a local jurisdiction's sales and use tax and transactions and use tax transmittals prior to the effective date of this act shall be paid to the affected local jurisdiction from the Local Sales Tax Offset Fund.
(5) Notwithstanding Section 13340 of the Government Code, the Local Sales Tax Offset Fund is continuously appropriated without regard to fiscal years for the payment of refunds required by this paragraph. The fund may borrow moneys utilizing any financing vehicle deemed appropriate by the Treasurer, at the pooled money investment rate, in order to pay the refunds required by this paragraph. These refund payments shall be repaid to the Local Sales Tax Offset Fund by local agencies, with interest at the pooled money investment rate, not to exceed the rate paid by the state on funds borrowed by the Local Sales Tax Offset Fund for purposes of making the required refunds. Repayment of each local agency's share of the refund amount shall be made by local agencies through equal quarterly deductions from each local agency's sales and use taxes and transactions and use taxes prior to the transmittal of those taxes to those local agencies over the succeeding 10 years.
(6) A local agency may fulfill its refund obligation resulting from the Aerospace Corporation case in any of the following manners:
(A) Pursuant to the offset provisions provided by this section.
(B) Pursuant to the funding or refunding of outstanding indebtedness as set forth in Section 53550 of the Government Code.
(C) In any manner deemed appropriate by the local agency in accordance with existing law.
A local agency shall notify the State Board of Equalization of the manner in which the local agency intends to fulfill its refund obligation.
History—Added by Stats. 1989, Ch. 274, in effect January 1, 1990. Stats. 1992, Ch. 802, added subdivision (d).