AB 2854: Bradley-Burns Uniform Local Sales and Use Tax Law

Breaking news: As of 9/29/2023 AB-2854 has been enacted after being signed by Governor Newsom.

Assembly Bill 2854 (AB 2854) has been introduced by Assembly Member Grayson and requires local agencies to publicly disclose any agreements involving the rebate of local sales tax revenue to a business to increase accountability.

What is local tax and what are the agreements for?

AB 2854 was introduced with the goal of creating more transparency around what are referred to as ‘local tax sharing agreements’. In California, the total sales tax rate is made up of a state (6%), county (varies), district (varies), and local (1%) tax. The 1% local tax is referred to as the Bradley Burns Tax, which is allocated to the city or county in which a sale occurs.

A ‘local tax sharing agreement’, also referred to as revenue sharing agreement, allows businesses and cities/counties to enter into an agreement that is mutually beneficial. This agreement ensures that the local jurisdiction receives the local 1% tax by creating business operations (opening a warehouse, store front, etc.) what would entitle the city/county to the 1% local tax, and that city/county would then share the tax with the business.

There can be wonderful benefits to this agreement, such as job creation and increased revenue to a city/county that otherwise wouldn’t have received it; however, if these agreements are set up with the wrong intentions, they can also be seen to take money away from other jurisdictions.

What is this bill about and why should businesses care?

AB 2854 requires that local cities/counties publish detailed information about rebated/shared local sales tax revenue on their website by April 30^th each year. This includes information about the parties involved in the rebate agreements, the amounts rebated, and the terms of the agreements.

Local agencies that have not engaged in any tax rebate agreements must report this to the state by April 30 and are exempt from the posting requirement.

While the predominant imposition of responsibilities is to the cities/counties that enter these agreements, business may be affected by their own agreements being now made public, which could have a negative affect on their reputation. Additionally, we may see a decrease in the number of agreements entered into due to these new publishing rules.

Got Questions?

Curious about how AB 2854 could impact your local agency or business? Schedule a call with us here.