2001 Was a Memorable Year for Tax Law Changes

NR# 64-P
Date: December 28, 2001
Customer & Taxpayer Service Division

2001 Was a Memorable Year for Tax Law Changes

Claude Parrish, Chairman, State Board of Equalization (BOE) remarked today that a number of changes were made to tax laws administered by the BOE during the 2001 legislative session. Legislative changes take effect on January 1, 2002, unless otherwise noted.

Highlights are as follows:

Assembly Bill 426, effective September 1, 2001, provides a number of partial sales tax exemptions related to the agricultural sector as follows:

  • Sales and purchases of farm equipment, machinery, and their parts are now partially exempt when sold to, or purchased by, qualified persons who are engaged in the business of producing and harvesting agricultural products as identified in Standard Industrial Classification Codes, or when sold to qualified persons that assist those so identified.
  • Sales and purchases of equipment, machinery, and their parts designed primarily for off-road use in commercial timber harvesting are now partially exempt when sold to, or purchased by, a qualified person engaged in commercial timber harvesting operations.
  • Sales and purchases of diesel fuel used in farming activities as defined in Internal Revenue Code Section 263A, or food processing, are now partially exempt. Sales and purchases of diesel fuel used in farming activities also include the diesel fuel used in the transportation of farm products to the marketplace.
  • Sales and purchases of racehorse breeding stock are now partially exempt if purchased solely for breeding purposes.

Note:These partial exemptions only apply to the state portion of the sales and use tax rate, currently 4.75% through December 31, 2001, and 5% beginning January 1, 2002. These exemptions do not apply to any local, city, county, or district taxes.

AB 426 also provides a state and local sales and use tax exemption for sales and purchases of LPG when delivered into a tank of 30 gallons or more to either a qualified residence for household use, or to a qualified person to be used in producing and harvesting agricultural products.

  • Senate Bill 394 provides that the Internet Tax Freedom Act, originally set to expire on January 1, 2002, will remain in effect until January 1, 2004, unless the California Commission on Tax Policy in the New Economy fails to submit a specified report, in which case the California Internet Tax Freedom Act will be repealed on January 1, 2003. The "California Internet Tax Freedom Act" was created by the Legislature in 1998 to prohibit the imposition, assessment, or attempt to collect any new local tax or fee on Internet access, on-line computer services, or the use thereof, except as specified. This prohibition does not include any existing tax, including any sales and use tax, business license tax, or utility user tax that is imposed in a uniform and nondiscriminatory manner, as specified. Therefore, sales and purchases via the Internet continue to remain subject to sales and use tax.
  • Assembly Bill 645, for property taxes, extends the final date for filing an assessment appeal from September 15th to November 30th in those counties where the county assessor does not send value notices to taxpayers of the assessed value of their real property by August 1.