Public contracts: fixed price contracts: sales and use taxes rate changes: transactions and use taxes.

Existing law imposes requirements on public entities with respect to the terms of public contracts. The Sales and Use Tax Law imposes a state sales and use tax on retailers and on the storage, use, or other consumption of tangible personal property in this state at the combined rate of 1 4 %"?> 614% of the gross receipts from the retail sale of tangible personal property in this state and of the sales price of tangible personal property purchased from any retailer for storage, use, or other consumption in this state that is stored, used, or otherwise consumed in this state. This bill would provide, for a fixed price contract, as specified, between a government entity and a contractor, that the contractor is entitled to an increase in payment for a change in the contract price that is attributable to an increase in the taxes imposed by the Sales and Use Tax Law, and the government entity is entitled to a reduction in payment for a change in the contract price that is attributable to a decrease in the taxes imposed by the Sales and Use Tax Law, with the increase or decrease paid in accordance with the contract terms or as agreed to by the parties, as prescribed. The bill would also authorize the government entity to require the contractor to submit invoices for specified items consumed solely for use in the public work pursuant to the contract entered into by the government entity and the contractor. By placing new duties on local officials with respect to their contract practices, the bill would impose a state-mandated local program. Existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which conforms to the Sales and Use Tax Law. The Transactions and Use Tax Law requires any transactions and use taxes ordinance adopted in accordance with that law to include specified provisions, as may be amended, including provisions that exempt from the tax the sale of, or the storage, use, or other consumption of, tangible personal property obligated to be furnished or purchased for a fixed price pursuant to a contract entered into prior to the operative date of the ordinance, and provisions that exempt from tax a lease of, or possession of, or the exercise of any right or power over, tangible personal property during the period of time for which there is an obligation to lease the property for an amount fixed by the lease prior to the operative date of the ordinance. That law provides that property is not deemed obligated pursuant to a contract or lease if any party has an unconditional right to terminate the contract or lease. This bill would provide that the sale or lease of tangible personal property to a government entity, as defined, is deemed obligated pursuant to a contract or lease for any period of time for which the contractor or lessor does not have the unconditional right to terminate that contract or lease. Section 2230 of the Revenue and Taxation Code provides that the state will reimburse cities and counties for revenue losses caused by the enactment of sales and use tax exemptions. This bill would provide that, notwithstanding Section 2230 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse cities and counties for sales and use tax revenues lost by them pursuant to this bill. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.