State Sales and Use Taxes to be Administered by New Tax Entities

In the wake of the Legislature, restructuring the Board of Equalization through AB 102 (Committee on Budget) Chapter 16 of 2017, the “Taxpayer Transparency and Fairness Act of 2017”.  The legislation removed many of the BOE’s powers and transfers them to two new departments: The Department of Tax and Fee Administration and the Office of Tax Appeals. Due to its constitutional establishment the BOE will retain its some of its duties, including oversight of property taxes and the assessment of state-assessed properties.

Department of Tax and Fee Administration

Starting July 1, 2017, the responsibilities to administer these sales and use, excise taxes and fees will be transferred to this newly created department. A director, to be appointed by the governor, to oversee the operations of this new department. Initially, it is anticipated there will be no change in how these taxes and fees are to administered other than in the name of the department that will oversee them. Though with a new governing body there remain questions for future administration of these monies.

Office of Tax Appeals

Effective January 1, 2019, the new Office of Tax Appeals will assume the adjudicatory powers of the BOE for all taxes and fees except for state-assessed property taxes, insurance taxes, and alcohol taxes. The governor will appoint a director to oversee the Office, as well as a deputy director and the department’s chief counsel.

AB 102 does not specify the duration of these appointments, which will be at the discretion of the governor. Tax appeal panels within the Office of Tax Appeals will consist of three administrative law judges designated by the director. Each administrative law judge will have at least five years of experience being an active member of the State Bar of California and have knowledge of, and experience in tax and fee laws at the federal- and California State-level. Tax appeal panels will be located in Sacramento, Fresno, and Los Angeles.

(The BOE—which is comprised of four elected officials and the state controller—will continue to adjudicate all matters on its calendar through December 31, 2017.)