California: A Sales Tax Exemption for Pawn Shops?
- Mar 2, 2016 | Gail Cole
Update, 8.30.2016: Although the California legislature approved AB 2365, Governor Brown vetoed it. His veto message read in part: "I continue to believe that the state's budget remains precariously balanced due to unexpected costs and the provision of new services. New sales tax exemptions, like new spending on programs, need to be considered comprehensively as part of the budget deliberations."
The California Board of Equalization is sponsoring legislation seeking a sales tax exemption for some pawn shop sales.
Assembly Bill 2365 would “provide an exemption from sales and use taxes if an original pledger reacquires from a pawnbroker tangible personal property he or she pledged to the pawnbroker as a security loan within six months after title to the property is vested in the pawnbroker.”
The Board reasons that it could “help customers reclaim the items they sold to pawn shops by lowering the cost to buy back those items.” And so it could. As of this writing, the cost to the state (in terms of lost sales tax revenue) has not been revealed.
This legislation reveals one of the many quirks of sales tax law—the somewhat arbitrary nature of exemptions. It also underscores why sales and use tax compliance can be challenging for businesses.
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