New law requires cities to report on local sales tax sharing agreements

By Ben Triffo, legislative affairs lobbyist

Cities must now annually disclose how much sales and use tax revenue they rebate to retailers. The new requirement aligns with the sales tax sharing agreement transparency recommendations put forward by the Cal Cities City Manager Sales Tax Working Group. Cal Cities worked with Asm. Jacqui Irwin to reduce the impact to cities while ensuring oversight and public review of sales tax sharing agreements.

AB 2854 (Irwin) requires cities with sales tax sharing agreements with any type of retailer — online or brick and mortar — that result in a rebated amount of Bradley-Burns Local Sales and Use Tax to report the following information:

• The name of any parties to the agreement.
• The total dollar amount of rebated sales and use tax revenues received by each party on or after the execution of the agreement through and including June 30 of the fiscal year immediately preceding the date of the report.
• The total dollar amount of rebated sales and use tax revenues received by each party to the agreement during the fiscal year immediately preceding the date of the report.
• When the agreement was first executed and when it terminated or will terminate, absent any renewal.
• The percentage of a retailer’s sales and use taxes, if any, used to calculate or determine the rebated sales and use tax revenues received by each party to the agreement.
• The percentage of a retailer’s sales and use taxes, if any, used to calculate or determine the rebated sales and use tax revenues received by any other person who is not a party to the agreement.

Cities must report this information to the California Department of Tax and Fee Administration (CDTFA) and post it to their websites by April 30 each year. Any city that does not have a sales tax sharing agreement is exempt from the requirement but must report this to CDTFA. The agency has yet to finalize when and how cities can report this information.

If a city fails to publish or report the required information, the city will receive notice from CDTFA by certified mail. It will have 45 days from the mailing notice to report or publish the information. A city can request an extension of 30 days if it cannot meet the 45-day filing period.

Cities that fail to meet the new requirements will be subject to penalties of $1,000 per day for up to 180 days after the filing period ends and $4,000 per day after that.

Cal Cities will host a webinar on the new reporting requirements and what cities should know to avoid any unintended penalties once more information is available.