A New Session: Sales Tax on Services, Tax Conformity Key in 2019.

• Author: Fox, Jason
• Position: Capitol Beat

On Dec, 3, the Legislature will convene its new two-year session and swear in the newly elected members of the Assembly and Senate. In January, Gov. Jerry Brown will be handing the reins over to Governor-Elect Gavin Newsom. Both the new administration and Legislature will have their plates full in the new year with longstanding issues and introducing legislative priorities.

With Newsom's outspoken opposition to the Trump administration, it's safe to assume there will be several significant pieces of legislation focused on countering newly enacted federal policies. On the other side of the Capitol, the Legislature will be renewing its efforts on issues surrounding affordable housing, infrastructure and state revenue volatility, while focusing on starting new initiatives, such as tax conformity.

Sales Tax on Services 2.0 Over the past several years, CalCPA has been actively opposed to attempts to impose a new sales tax on business services. Last year, CalCPA, along with coalition partners, was successful in defeating Sen. Hcrtzberg's SB 993, which proposed to enact a 3 percent sales tax on services, including those provided by CPAs. The defeat of this legislation was largely spearheaded by CalCPAs grassroots members. Even with last year's success, it's likelv a similar proposal will be seen in the new year.

The majority party intends to either propose similar legislation or include it in a broader state tax reform package. Unlike years prior, the new administration has signaled an interest in backing this effort, largely because California has recently been plagued by revenue shortfalls. Lawmakers are pointing to the state's income tax as the main reason for the volatility in state revenue. Seen as a potential part of a larger solution, a new business services tax could be included in a broad state tax reform package that focuses on expanding the tax base.

CalCPA will work with its partners and grassroots members to ensure that the profession remains a part of discussions.

Tax Conformity

Tax conformity is already center stage for state tax regulators and is quickly becoming a major focus of the Legislature leading into 2019, as conflicts between federal and state tax codes create confusion and inefficiencies for taxpayers and tax practitioners. This often leads to tax practitioners having to make numerous adjustments using different methodologies to accommodate for the variances in state and federal returns.

The Franchise Tax Board has been...