G\T Y OF
PISMO BEACH CITY COUNCIL STAFF REPORT
A�syo��Pc� Agenda Item #9.D
Meeting Date: December 17, 2024
TITLE:
California Department of Tax and Fee Administration Resolutions to Implement Transactions and Use Tax Measure F-24, Effective April 1, 2025 RECOMMENDATION:
1. Adopt a Resolution authorizing the City Manager to execute agreements with the California Department of Tax and Fee Administration for implementation of a transactions and use tax.
2. Adopt a Resolution authorizing the examination transactions and use tax records.
DISCUSSION:
On June 6, 2024, the City Council adopted Resolution R-2024-040 directing the placement of the Pismo Beach Essential Services Measure, also known as Measure F- 24, for a local transactions and use tax, on the November 5, 2024 ballot. Measure F-24 sought voter approval to renew a half-cent ('/2 ¢) transactions and use (sales) tax passed by Pismo Beach voters in 2014, as well as an additional half-cent ('/2 ¢) transactions and use tax. This local transactions and use tax is a 1% tax that will become effective April 1, 2025 and expire on March 31, 2037.
On November 5, 2024, the voters passed Measure F-24 with a 62.53% majority. As part of implementing the Measure, the California Department of Tax and Fee Administration (CDTFA, or Department) requires that the local jurisdiction provide several documents to enable the Department's role in administering and collecting the transactions and use taxes for the City. The Department requires that the City enter into a "Preparatory Agreement" and an "Administration Agreement" prior to implementation of said taxes. The Department requires that the City Council authorize a signatory for the agreements. In addition, the Department requires a resolution authorizing the City's sales tax auditor to examine sales or transactions and use tax records.
In addition to these resolutions, the Department has requested several other documents that are due to the Department by December 27, 2024. These include:
• Preparatory Agreement
• Administration Agreements
• Transaction and Use Tax Ordinance
• Certification of Final Election Results
• Contact form for all communications
• Designation letter
• Contact form for notification and appeals
Council Agenda 12-17-2024 9.D-1
• EFT authorization agreement and voided check
• Media and registration request form
Conclusion and Recommendation
Staff recommends that the Council:
1. Adopt a Resolution (Attachment 1) authorizing the City Manager to execute agreements with the California Department of Tax and Fee Administration for implementation of a local transactions and use tax.
2. Adopt a Resolution (Attachment 2) authorizing the examination of sales or transactions and use tax records.
FISCAL IMPACT:
There is no direct fiscal impact of approving the two subject resolutions. Implementing the Measure will result in the City receiving approximately $4.0 million in transaction and use tax revenues effective April 1, 2025 for 12 years, offset by collection fees of the California Department of Tax and Fee Administration.
ATTACHMENTS:
1. Resolution authorizing the City Manager to execute agreements with CDTFA
1.A: Exhibit A to Resolution: Preparatory Agreement
1.13: Exhibit B to Resolution: Administrative Agreement
2. Resolution authorizing the examination of sales or transactions and use tax records
Submitted by: Nadia Feeser, Administrative Services Director City Manager Approval:
Council Agenda 12-17-2024 9.D-2
Attachment 1
RESOLUTION NO. R-2024-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,
CALIFORNIA AUTHORIZING THE CITY MANAGER TO EXECUTE
AGREEMENTS WITH THE CALIFORNIA DEPARTMENT OF TAX AND FEE
ADMINISTRATION FOR IMPLEMENTATION OF A LOCAL TRANSACTIONS AND
USE TAX
WHEREAS, on June 4, 2024, the City Council adopted, and November 5, 2024, the voters did approve, Ordinance No. 0-2024-003, a ballot measure amending the City Municipal Code and providing for a local transactions and use tax; and WHEREAS, the California Department of Tax and Fee Administration (Department) administers and collects the transactions and use taxes for all applicable jurisdictions within the state; and
WHEREAS, the Department will be responsible to administer and collect the transactions and use tax for the City; and
WHEREAS, the Department requires that the City enter into a "Preparatory Agreement" and an "Administration Agreement" prior to implementation of said taxes; and WHEREAS, the Department requires that the City Council authorize the agreements.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Pismo Beach that the "Preparatory Agreement" attached as Exhibit A and the "Administrative Agreement" attached as Exhibit B are hereby approved and the City Manager is hereby authorized to execute each agreement.
UPON MOTION OF Council Member seconded by Council Member the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 17t" day of December 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
Approved: Attest:
Ed Waage, Mayor Erica Inderlied, City Clerk
Council Agenda 12-17-2024 9.D-3
Attachment 1
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Pismo Beach, California, on
Erica Inderlied, City Clerk
Council Agenda 12-17-2024 9.D-4
Attachment 1.A
AGREEMENT FOR PREPARATION TO ADMINISTER AND OPERATE 7. Communications and notices may be sent by first class United States mail or through email CITY'S TRANSACTIONS AND USE TAX ORDINANCE at [email protected]. If and when communications and notices may include confidential information, communications and notices must be sent through encrypted email at [email protected] or by mail.Communications and notices to be sent to the Department shall be In order to prepare to administer a transactions and use tax ordinance adopted in accordance with addressed to:
the provision of Part 1.6(commencing with Section 7251)of Division 2 of the Revenue and Taxation Code,the City of Pismo Beach,hereinafter called City,and the CALIFORNIA DEPARTMENT OF California Department of Tax and Fee Administration 27 TAX AND FEE ADMINISTRATION,hereinafter called Department,do agree as follows: P.O.Box 9 MIC:
Sacramento,,Cali 9
ali 94279-0027
1. The Department agrees to enter into work to prepare to administer and operate a transactions Attention: Administrator and use tax in conformity with Part 1.6 of Division 2 of the Revenue and Taxation Code which has been Local Revenue Branch approved by a majority of the electors of the City and whose ordinance has been adopted by the City.
Communications and notices to be sent to City shall be addressed to:
2. City agrees to pay to the Department at the times and in the amounts hereinafter specified all City of Pismo Beach of the Department's costs for preparatory work necessary to administer the City's transactions and use 760 Mattie Road tax ordinance.The Department's costs for preparatory work include costs of developing procedures, Pismo Beach,CA 93449 programming for data processing, developing and adopting appropriate regulations, designing and Attention: Administrative Services Director/City Treasurer printing forms, developing instructions for the Department's staff and for taxpayers, and other appropriate and necessary preparatory costs to administer a transactions and use tax ordinance. These 8. The date of this agreement is the date on which it is approved by the Department of General costs shall include both direct and indirect costs as specified in Section 11256 of the Government Code. Services. This agreement shall continue in effect until the preparatory work necessary to administer City's transactions and use tax ordinance has been completed and the Department has received all
3. Preparatory costs may be accounted for in a manner which conforms to the internal payments due from City under the terms of this agreement. accounting and personnel records currently maintained by the Department. The billings for costs may be presented in summary form. Detailed records of preparatory costs will be retained for audit and verification by the City. CITY OF PISMO BEACH CALIFORNIA STATE DEPARTMENT OF
TAX AND FEE ADMINISTRATION
4. Any dispute as to the amount of preparatory costs incurred by the Department shall be By By referred to the State Director of Finance for resolution,and the Director's decision shall be final.
Jorge E.Garcia Administrator
5. Preparatory costs incurred by the Department shall be billed by the Department periodically, City Manager Local Revenue Branch with the final billing within a reasonable time after the operative date of the ordinance. City shall pay Date: Date:
to the Department the amount of such costs on or before the last day of the next succeeding month following the month when the billing is received.
6. The amount to be paid by City for the Department's preparatory costs shall not exceed one hundred seventy-five thousand dollars($175,000)(Revenue and Taxation Code Section 7272.) (Rev.07/24) 1 (Rev.07/24) 2 Council Agenda 12-17-2024 9.D-5
Attachment 1.13
AGREEMENT FOR STATE ADMINISTRATION
OF CITY TRANSACTIONS AND USE TAXES B. Other Applicable Laws. City agrees that all provisions of law applicable to the administration and operation of the Department Sales and Use Tax Law which are not inconsistent The City Council of the City of Pismo Beach has adopted,and the voters of the City of with Part 1.6 of Division 2 of the Revenue and Taxation Code shall be applicable to the administration Pismo Beach hereafter called"City"or"District" have approved b the required majority vote,City and operation of the City Ordinance. City agrees that money collected pursuant to the City Ordinance ( tY" ) PP Y q J tY tY
of Pismo Beach Transactions and Use Tax Ordinance 0-2024-003 (hereafter called"Ordinance"),a may be deposited into the State Treasury to the credit of the Retail Sales Tax Fund and may be drawn copy of which is attached hereto. To carry out the provisions of Part 1.6 of Division 2 of the Revenue from that Fund for any authorized purpose,including making refunds,compensating and reimbursing and Taxation Code and the Ordinance,the California State Department of Tax and Fee Administration, the Department pursuant to Article IV of this Agreement,and transmitting to City the amount to which (hereinafter called the"Department")and the City do agree as follows: City is entitled.
ARTICLE I C. Transmittal of money.
DEFINITIONS 1. For the period during which the tax is in effect,and except as otherwise provided herein,all Unless the context requires otherwise,wherever the following terms appear in the Agreement, district taxes collected under the provisions of the City Ordinance shall be transmitted to City they shall be interpreted to mean the following: periodically as promptly as feasible,but not less often than twice in each calendar quarter.
1. "District taxes"shall mean the transactions and use taxes,penalties,and interest imposed 2• For periods subsequent to the expiration date of the tax whether by City's self-imposed under an ordinance specifically authorized by Revenue and Taxation Code Section 7285.9, and in limits or by final judgment of any court of the State of California holding that City's Ordinance is compliance with Part 1.6,Division 2 of the Revenue and Taxation Code. invalid or void, all district taxes collected under the provisions of the City Ordinance shall be transmitted to City not less than once in each calendar quarter.
2. "City Ordinance" shall mean the City's Transactions and Use Tax Ordinance referred to above and attached hereto,Ordinance No.0-2024-003,as amended from time to time,or as deemed to 3. Transmittals may be made by mail or electronic funds transfer to an account of the City be amended from time to time pursuant to Revenue and Taxation Code Section 7262.2. designated and authorized by the City. A statement shall be famished at least quarterly indicating the amounts withheld pursuant to Article IV of this Agreement.
ARTICLE II
ADMINISTRATION AND COLLECTION D. Rules. The Department shall prescribe and adopt such rules and regulations as in its OF CITY TAXES judgment are necessary or desirable for the administration and operation of the City Ordinance and the distribution of the district taxes collected thereunder.
A. Administration. The Department and City agree that the Department shall perform exclusively all functions incident to the administration and operation of the City Ordinance. E. Preference. Unless the payer instructs otherwise,and except as otherwise provided in this Agreement,the Department shall give no preference in applying money received for state sales and use taxes,state-administered local sales and use taxes,and district transactions and use taxes owed by a taxpayer,but shall apply moneys collected to the satisfaction of the claims of the State,cities,counties, cities and counties,redevelopment agencies,other districts,and City as their interests appear. (Rev.7/24) 2
Council Agenda 12-17-2024 9.D-6
Attachment 1.13
F. Security. The Department agrees that any security which it hereafter requires to be of the Department,to all districts with which the Department has contracted using ratios reflected by furnished by taxpayers under the State Sales and Use Tax Law will be upon such terms that it also will the distribution of district taxes collected from all taxpayers. be available for the payment of the claims of City for district taxes owing to it as its interest appears.
The Department shall not be required to change the terms of any security now held by it,and City shall 2. All district taxes collected as a result of determinations or billings made by the not participate in any security now held by the Department. Department, and all amounts refunded or credited may be distributed or charged to the respective districts in the same ratio as the taxpayer's self-declared district taxes for the period for which the G.Records of the Department. When requested by resolution of the legislative body of the determination,billing,refund or credit applies.
City under section 7056 of the Revenue and Taxation Code, the Department agrees to permit authorized personnel of the City to examine the records of the Department, including the name, B. Vehicles,Vessels, and Aircraft. For the purpose of allocating use tax with respect to address,and account number of each seller holding a seller's permit with a registered business location vehicles, vessels, or aircraft, the address of the registered owner appearing on the application for in the City, pertaining to the ascertainment of transactions and use taxes collected for the City. registration or on the certificate of ownership may be used by the Department in determining the place Information obtained by the City from examination of the Department's records shall be used by the of use.
City only for purposes related to the collection of transactions and use taxes by the Department ARTICLE IV pursuant to this Agreement.
COMPENSATION
H. Annexation. City agrees that the Department shall not be required to give effect to an annexation, for the purpose of collecting, allocating, and distributing District transactions and use The City agrees to pay to the Department as the State's cost of administering the City taxes,earlier than the first day of the calendar quarter which commences not less than two months after Ordinance such amount as is provided for by law. Such amounts shall be deducted from the taxes notice to the Department. The notice shall include the name of the county or counties annexed to the collected by the Department for the City. extended City boundary. In the event the City shall annex an area,the boundaries of which are not coterminous with a county or counties,the notice shall include a description of the area annexed and ARTICLE V two maps of the City showing the area annexed and the location address of the property nearest to the MISCELLANEOUS PROVISIONS extended City boundary on each side of every street or road crossing the boundary.
A. Communications. Communications and notices may be sent by first class United States ARTICLE III mail to the addresses listed below,or to such other addresses as the parties may from time to time ALLOCATION OF TAX designate or through email [email protected]. If and when communications and notices may include confidential information,communications and notices must be sent through encrypted email at A. Allocation. In the administration of the Department's contracts with all districts that [email protected] or by mail. impose transactions and use taxes imposed under ordinances,which comply with Part 1.6 of Division 2 of the Revenue and Taxation Code:
1. Any payment not identified as being in payment of liability owing to a designated district or districts may be apportioned among the districts as their interest appear,or,in the discretion (Rev.7/24) 3 (Rev.7/24) 4
Council Agenda 12-17-2024 9.D-7
Attachment 1.13
Communications and notices to be sent to the Department shall be addressed to: ARTICLE VI
ADMINISTRATION OF TAXES IF THE
California State Department of Tax and Fee Administration ORDINANCE IS CHALLENGED AS BEING INVALID P.O.Box 942879
Sacramento,California 94279-0027
A. Impoundment of funds.
Attention: Administrator
Local Revenue Branch 1. When a legal action is begun challenging the validity of the imposition of the tax,the City shall deposit in an interest-bearing escrow account,any proceeds transmitted to it under Communications and notices to be sent to the City shall be addressed to: Article II.C.,until a court of competent jurisdiction renders a final and non-appealable judgment that the tax is valid.
City of Pismo Beach
760 Mattie Road
Pismo Beach,CA 93449 2. If the tax is determined to be unconstitutional or otherwise invalid, the City shall Attention: Administrative Services Director transmit to the Department the moneys retained in escrow,including any accumulated interest,within ten days of the judgment of the trial court in the litigation awarding costs and fees becoming final and Unless otherwise directed,transmittals of payment of District transactions and use taxes non-appealable. will be sent to the address above.
B. Term. The date of this Agreement is the date on which it is approved by the Department of B.Costs of administration. Should a final judgment be entered in any court of the State of General Services. The Agreement shall take effect on April 1,2025. This Agreement shall continue California, holding that City's Ordinance is invalid or void, and requiring a rebate or refund to until December 31 next following the expiration date of the City Ordinance,and shall thereafter be taxpayers of any taxes collected under the terms of this Agreement,the parties mutually agree that:
renewed automatically from year to year until the Department completes all work necessary to the administration of the City Ordinance and has received and disbursed all payments due under that 1. Department may retain all payments made by City to Department to prepare to Ordinance. administer the City Ordinance.
C. Notice of Repeal of Ordinance. City shall give the Department written notice of the 2. City will pay to Department and allow Department to retain Department's cost of repeal of the City Ordinance not less than 110 days prior to the operative date of the repeal. administering the City Ordinance in the amounts set forth in Article IV of this Agreement.
3. City will pay to Department or to the State of California the amount of any taxes plus interest and penalties,if any,that Department or the State of California may be required to rebate or refund to taxpayers.
4. City will pay to Department its costs for rebating or refunding such taxes,interest,or penalties. Department's costs shall include its additional cost for developing procedures for processing (Rev.7/24) 5 (Rev.7/24) 6
Council Agenda 12-17-2024 9.D-8
Attachment 1.13
the rebates or refunds,its costs of actually making these refunds,designing and printing forms,and developing instructions for Department's staff for use in making these rebates or refunds and any other costs incurred by Department which are reasonably appropriate or necessary to make those rebates or refunds. These costs shall include Department's direct and indirect costs as specified by Section 11256 of the Government Code.
5. Costs may be accounted for in a manner,which conforms to the internal accounting, and personnel records currently maintained by the Department. The billings for such costs may be presented in summary form. Detailed records will be retained for audit and verification by City.
6. Any dispute as to the amount of costs incurred by Department in refunding taxes shall be referred to the State Director of Finance for resolution and the Director's decision shall be final.
7. Costs incurred by Department in connection with such refunds shall be billed by Department on or before the 25th day of the second month following the month in which the judgment of a court of the State of California holding City's Ordinance invalid or void becomes final. Thereafter Department shall bill City on or before the 25th of each month for all costs incurred by Department for the preceding calendar month. City shall pay to Department the amount of such costs on or before the last day of the succeeding month and shall pay to Department the total amount of taxes,interest,and penalties refunded or paid to taxpayers, together with Department costs incurred in making those refunds.
CITY OF PISMO BEACH CALIFORNIA STATE DEPARTMENT OF
TAX AND FEE ADMINISTRATION
By By
Jorge E.Garcia Administrator
City Manager Local Revenue Branch
Date: Date:
(Rev.7/24) 7
Council Agenda 12-17-2024 9.D-9
Attachment 2
RESOLUTION NO. R-2024-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,
CALIFORNIA AUTHORIZING EXAMINATION OF SALES OR TRANSACTIONS AND
USE TAX RECORDS
WHEREAS, pursuant to Ordinance Number 0-324, the City of Pismo Beach entered into a contract with the California Department of Tax and Fee Administration (Department) to perform all functions incident to the administration and collection of sales and use taxes; and
WHEREAS, pursuant to Ordinance Numbers 0-2008-002, 0-2014-008, and 0-2024-003, Revenue and Taxation Code section 7270, the City entered into a contract with the California Department of Tax and Fee Administration (Department) to perform all functions incident to the administration and collection of transactions and use taxes; and WHEREAS, the City Council of the City of Pismo Beach deems it desirable and necessary for authorized officers, employees and representatives of the City to examine confidential sales or transactions and use tax records of the Department pertaining to sales or transactions and use taxes collected by the Department for the City pursuant to that contract; and
WHEREAS, Section 7056 of the California Revenue and Taxation Code sets forth certain requirements and conditions for the disclosure of Department records, and Section 7056.5 of the California Revenue and Taxation Code establishes criminal penalties for the unlawful disclosure of information contained in, or derived from, the sales or transactions and use tax records of the Department.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Pismo Beach as follows:
Section 1. That the City Manager, Administrative Services Director, and Finance Manager, or other officer or employee of the City designated in writing by the Administrative Services Director to the California Department of Tax and Fee Administration are hereby appointed to represent the City with authority to examine sales or transactions and use tax records of the Department pertaining to sales or transactions and use taxes collected for the City by the Department pursuant to the contract between the City and the Department.
Section 2. The information obtained by examination of Department records shall be used only for purposes related to the collection of City sales or transactions and use taxes by the Department pursuant to that contract.
Council Agenda 12-17-2024 9.D-10
Attachment 2
Section 3. That Hinderliter, de Llamas and Associates a California Corporation (HdL) is hereby designated to examine the sales or transactions and use tax records of the Department pertaining to sales or transactions and use taxes collected for the City by the Department. The person or entity designated by this section meets all of the following conditions, which are also included in the contract between the City and Hinderliter, de Llamas and Associates:
a) has an existing contract with the City to examine those sales or transactions and use tax records;
b) is required by that contract to disclose information contained in, or derived from, those sales or transactions and use tax records only to the officer or employee authorized under Section 1 of this resolution to examine the information;
c) is prohibited by that contract from performing consulting services for a retailer during the term of that contract;
d) is prohibited by that contract from retaining the information contained in, or derived from those sales or transactions and use tax records, after that contract has expired.
BE IT FURTHER RESOLVED by City Council of the City of Pismo Beach hereby that the information obtained by examination of Department records shall be used only for purposes related to the collection of City sales or transactions and use taxes by the Department pursuant to the contract between the City and the Department.
Section 4. That this resolution supersedes all prior resolutions of the City Council of the City of Pismo Beach adopted pursuant to subdivision (b) of Revenue and Taxation Code section 7056.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 17t" day of December 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
Approved: Attest:
Ed Waage, Mayor Erica Inderlied, City Clerk
Council Agenda 12-17-2024 9.D-11
Attachment 2
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Pismo Beach, California, on
Erica Inderlied, City Clerk
Council Agenda 12-17-2024 9.D-12