Tribal Food and Beverage Sales Tax
• Amendments to Tribal Code
• Adoption of:
• Tax Rate
• Interest Rates
• Rebate/Incentive Rate
• Distributions to Cities
• Local Tax and District Tax
• Riverside County District Tax
• Draft Tribal Sales Tax Agreement Template
Amendments to Tribal Code
Tribal Tax Ordinance Chapter 3.08
Section 3.08.710
• Current statute limits the interest imposed on the late payment and underpayment to 15% of the tax amount that is due.
• At current interest rates, if a deficiency is two year’s old, interest would nearly reach its cap, and this reduces the incentive for payment since the limitation prohibits additional intertest from accruing.
• Accordingly, this limitation could hinder collection of delinquent tax liabilities.
• Therefore, the Tax Department proposes an amendment to subdivision (b)(1) to remove the 15% cap.
Section 3.08.1230
• This section requires that the tax rate is adopted by the Tribal Council prior to December 31st each year.
• The Tax Department proposes an amendment to subdivision (b) to establish the tax rate by December 31, 2022, and thereafter, pursuant to subdivision (b)(1), that rate will remain in place until otherwise amended by resolution.
• This will allow flexibility to address any changes in the event the State of California or local jurisdictions should change their rates. • This amendment will provide the flexibility to enact tax rate changes as warranted rather than imposing a statutory restriction of a January 1st effective date.
• Additionally, an amendment is proposed to add subdivision (b)(2) to provide a mechanism to authorize an allocation to local jurisdictions.
Section 3.08.1235
• This is a new section to the ordinance to address sales by Delivery Network Companies (DNCs).
• DNCs are businesses, such as UberEats, Postmates, GrubHub, and DoorDash, that deliver meals, food, and beverages from an eating or drinking establishment.
• Some DNCs (UberEats and Postmates) have elected with the CDTFA to become retailers to report and remit the sales and use tax on the meals, food, and beverages they deliver to their customers.
• This section will deem the DNCs (that elect to be a retailer with CDTFA) as an eating or drinking establishment for the purposes and the Tribal food and beverage sales tax and therefore require they report and remit the Tribal food and beverage sales tax.
Section 3.08.1270
• Currently, the code requires that a customer is provided a proof of sale with a separate statement of the tax collected by the retailer. • A common industry practice for some food and beverage retailers (most often bars) is to sell items as “tax included” meaning there is no separate statement of the tax collected.
• This amendment is to provide conformity to the requirements of the California Department of Tax and Fee Administration and reflect current industry practice.
• Accordingly, retailers will need to meet only one standard of record- keeping, and it will ease the administrative burden upon the retailers.
Rate Setting
• Tribal Food and Beverage Sales Tax Rate
• Use the combined California sales and use tax rate.
• The current rates are as follows:
• Rancho Mirage 7.75%
• Cathedral City 8.75%
• Palm Springs 9.25%
• Interest Rates
• Underpayments and unpaid sales tax
• Equivalent rate to the current CDTFA interest rate. Currently 6% (8% effective January 1, 2023)
• Overpayments
• Equivalent rate to the current CDTFA interest rate. Currently 0% (2% effective January 1, 2023)
• Rebate/Incentive Rate
• We recommend a rebate at the rate of 3% of the sales tax timely reported and paid before the quarterly due date.
Distribution of Tribal Food and Beverage Sales
Tax Proceeds to Cities
• The Bradley-Burns Local Tax is 1.25%
• 1% is distributed to the place of sale (Under these facts it is the city) • 0.25% is distributed to the county
• It is recommended that we enter into an Tribal Sales Tax Agreement to distribute an amount equivalent to the current distributions that cities presently receive from the CDTFA. This includes the 1% local tax and the district tax the cities currently receive.
• Palm Springs receives 1.5% district tax.
• Cathedral City receives 1.0% district tax.
• Rancho Mirage receives no district tax.
• The Tribal Sales Tax Agreement would direct that the proceeds be spent on a specific purpose for use by the cities.
• It is also proposed that we do not distribute any sales tax proceeds to the county of Riverside (the rate is 0.25%).
Distribution of Tribal Food and Beverage Sales
Tax Proceeds to Cities (Contd.)
• Riverside County District Tax
• The current combined California sales and use tax rate includes 0.5% tax for Riverside County.
• We recommend that we do not distribute this to the county, but instead redirect these proceeds to the cities of Rancho Mirage, Cathedral City, and Palm Springs.
• We further recommend this distribution is not included in the Tribal Sales Tax Agreement with the cities for local and district tax distributions. It would be an additional quarterly payment under a separate Tribal Sales Tax Agreement.
• We recommend it should also be directed towards a specific purpose for use by the cities.
Draft Tribal Sales Tax Agreement Template
• This will cover distributions to the cities
• The allocation will vary by city
• There will be two agreements for each city
• One agreement will address the 1% local tax plus any applicable district tax • The funds are provided for public safety
• This is proposed to be a long term agreement
• The second agreement will address the 0.5% additional district tax • The funds are provided for public safety
• This is proposed to be a two-year agreement