(1) Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law generally provides that the taxes are due and payable to the California Department of Tax and Fee Administration (CDTFA) quarterly on or before the last day of the month next succeeding each quarterly period and requires, for purposes of sales tax, a return to be filed by a seller that contains, among other information, the gross receipts of the seller during the preceding reporting period.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law, with respect to specified vehicles sold at retail on and after January 1, 2021, by a licensed dealer, except a new motor vehicle dealer, requires the dealer to pay the applicable sales tax, or use tax pursuant to the Transactions and Use Tax Law, to the Department of Motor Vehicles (DMV) acting for and on behalf of CDTFA within 30 days from the date of the sale. Existing law authorizes the CDTFA to exempt a licensed dealer from the requirement to pay the applicable taxes to the DMV if specified requirements are met, and authorizes the CDTFA to revoke that exemption if it notifies the licensed dealer of the failure to satisfy those requirements, as provided.

This bill would authorize the CDTFA to reinstate the above-described exemption where specified requirements are met, and would require the CDTFA to notify the licensed dealer that the exemption is reinstated, as provided. The bill would also make nonsubstantive changes to the exemption provisions.

(2) Existing federal law, the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a qualified ABLE program established and maintained by a state, as specified.

Existing law establishes the Qualified ABLE Program, administered by the California ABLE Act Board, in this state for purposes of implementing the federal ABLE Act. That law, among other things, authorizes the contributions to an ABLE account during the taxable year if specified requirements are met.

The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Those laws, for taxable years beginning on or after January 1, 2016, conform to the exclusions from gross income provided under federal income tax law provisions relating to the ABLE Act, as those exclusions read in specified federal law prior to the One Big Beautiful Bill Act.

This bill would also conform, for taxable years beginning on or after January 1, 2026, state tax law to those changes relating to qualified ABLE programs made by the One Big Beautiful Bill Act. The bill would also make conforming changes relating to the requirements for making contributions to an ABLE account.