In Bloomberg Video, Professor Shanske Explains California's Local Tax Loophole

Bloomberg Tax visited King Hall to interview Professor Darien Shanske for a video (watch below) about how California’s Bradley-Burns Uniform Local Sales and Use Tax Law allows cities that hold big retailers’ warehouses to share local tax revenues with the corporations.

The video highlights Dinuba, a small Tulare County city with a Best Buy distribution center. Shanske explains how such relationships between cities and corporations likely come about, given the potential benefits under Bradley-Burns.

“If you are a big company that is fulfilling a lot of orders, the site of your warehouse is going to be the site of an enormous amount of sales tax revenue,” Shanske said. “So you can now have an option, with all these jurisdictions, to say, ‘If you want the warehouse, what are you going to do for me?’  And the answers that many of these jurisdictions have come up with is, ‘Well, I know what we’ll do … we’ll give you half the sales tax back, how’s that?’”

Meanwhile, cities where customers purchase the products online draw no local taxes from sales.

The video also addresses failed legislative efforts to update the law.

Darien Shanske is a professor of law at UC Davis. His academic interests include taxation, particularly state and local taxation, local government law, public finance, and political theory, particularly jurisprudence.