Tax: A duty, levy, toll, excise or tariff but not a fee.
By Rick Smith
Well folks, it's a new year again. Once again we look forward to new possibilities and of course new laws and taxes. California legislators enacted 745 new laws starting this year. Some affect some of us and some affect all of us. Some of us believe we need more regulation and control of what people can and can't do and some of us believe we can all live with a little less regulation and control. I must admit I side with the latter. I am affected by the new law that states my 7 year old must stay in his booster seat till he's 8 years old or 4' 9" in height. I think half the current population of the world is under that height. It's wonder we all survived our youth riding bikes without a helmet and riding in the back of Grandpa's pickup truck. It's a good thing our government saved all of us from our own self destructive behavior. I think the best one is that no matter what candidate our Electoral College votes are going to in the presidential election our state will now allocate them to whichever candidate gets the most national popular votes. I'm still having a hard time wrapping my head around that one.
One of the most unknown taxes is the Electronic Waste Recycling Act of 2003: Covered Electronic Waste Payment System (SB 20/SB 50).
The Electronic Waste Recycling Fee
On January 1, 2005, retailers began collecting the Electronic Waste Recycling Fee on covered electronic devices from consumers. The initial fees were established by the Legislature in SB20 and the CalRecycle was given the responsibility to annually evaluate the fee levels to maintain sufficient funding to administer the Act. In June 2008, the Board acted to increase the fees to maintain the solvency of the fund. Retailers remit these fees to the Board of Equalization (BOE).
What this did was effectively make me Tax, err, Fee collector for the state. The worst part of my job besides telling people that all their data is gone when their hard drive crashes is collecting taxes for our beloved state. Let me share with you something from http://caltax.org regarding the fee or tax.
Feds Say State's E-Waste Recycling 'Fee' Is a Tax
The federal government has entered the tax vs. fee debate by claiming that California is mislabeling a tax as a "fee." At issue is the $6-to-$10 California recycling (e-waste) fee that retailers are required to collect from consumers.
In a May 4, 2011 decision, the U.S. Government Accountability Office (GAO) concluded that California's "e-waste recycling fee is a tax and that Congress has not legislated a waiver of federal sovereign immunity permitting federal agencies to pay the tax." If the GAO found the charge to be a "fee," there would be no issue of sovereign immunity.
The 17-page GAO decision said "distinguishing a tax from a fee for service -- requires careful analysis, as the line between tax and fee can be a blurry one."
According to the GAO decision, one court has described a classic tax as one satisfying a three-part inquiry - an assessment that (1) is imposed by a legislature upon many, or all, citizens, and (2) raises money that (3) is spent for the benefit of the entire community.
On the other hand, a classic regulatory fee is imposed by an agency upon those subject to its regulation, may serve regulatory purposes, and may raise money to be placed in a special fund to help defray the agency's regulation-related expenses. When the characteristic of a charge places it somewhere between a tax and a fee, the most important factor becomes the purpose underlying the statute or regulation imposing the charge in question. If the ultimate use of the revenue benefits the general public, then the charge will be considered a tax; the charge will more likely be considered a fee if the revenue's benefits are narrowly circumscribed.
In concluding that California's e-waste recycling fee meets the definition of a tax, the GAO said the charge (1) has been levied by the California Legislature against purchasers of covered electronic devices (CEDs) (2) to raise revenue that (3) is to be spent for the public benefit, that is, to fund a statewide program that provides "consumers and the public" with cost-free and convenient opportunities to recycle CEDs.
Payment of the e-waste fee by purchasers of CEDs is not linked to a specific benefit or service provided by the State of California to the payers of the fee. California acknowledges as much, stating that "[t]he fee is not designed to be strictly tied to the device the fee was levied upon" and that CED purchasers are a "relatively anonymous population." Further, consumers are not guaranteed cost-free recycling services in California, nor are they entitled to a refund of the fee if they elect not to avail themselves of recycling services in California. Rather, recycling services from authorized providers are offered to the public at large, and no distinction is made between those who have paid the e-waste recycling fee and those who have not. Thus, the benefit of the e-waste recycling fee is not narrowly circumscribed to the consumers paying the e-waste fee, but rather, is conferred on the general public.
Since SB 50 (Sher) of 2004 passed each house with more than a two-thirds vote, there is no issue as the legality of the "fee" under Proposition 13. At issue is the immunity of federal government. More significantly, the federal analysis of fee vs. tax can be used in future debates on the issue, and in discussions over whether legislative vote requirements on bills are mislabeled.
Further, the federal determination creates a problem for California retailers. The Board of Equalization is requiring retailers to collect the fee/tax and will impose assessments and numerous penalties if they do not, but the federal government will not pay the tax to retailers.
Lynn Bartolo, chief of the BOE's Special Taxes and Fees Division, told CalTax:
"We have been in discussions with federal representatives since the eWaste program was implemented. Our position was and continues to be that the California eWaste fee is a fee not a tax and the feds should be paying it when applicable. Staff disagrees with the GAO Decision paper and the analysis upon which they base their conclusion. We are having internal discussions about the paper's impact on our feepayers and whether continued dialog with the feds on this issue would be beneficial (remember, we've been discussing this and attempting to gain their cooperation for five years).
"At the same time, we recognize that the position that the Feds have taken puts our retailers in the unfortunate position of having to make a business decision about whether to make a sale and pay the fee to us without reimbursement from the federal government or not do business with them (sales of covered electronic devices specifically). We are working with BOE's Legislative Division and Legal Department to develop one or more legislative proposals to submit to the Board's Legislative Committee for approval. Our proposal will focus on providing the retailers with additional options to allow them to make sales to the feds and others while remaining compliant with the law, since the obligation to collect/remit the fee is imposed on the retailer. The Legislative Division's annual solicitation for legislative proposals from staff kicks off in the fall (Sept-Nov).
"We recognize that GAO Decision impacts our feepayers and we are doing what we can to address the issue."
Whew, Sorry for the lengthy legalize but I wanted to illustrate my point. It's hard enough to make a profit after I pay all my taxes, fees, insurance and other mandates by all levels of state and local government agencies, but now if I sell a Netbook to the naval base I cannot collect the e-waste fee but must still pay it to the state? Why should I have to even think about this stuff? I just want to sell and fix computers. More and more I am feeling kinship to our founding fathers "don't tread on me" attitude. I'm not a member of the Tea Party but I might just join somebody tossing a few CED'S into the harbor.