Calif. Bills that Would Tax Financial Advice Are Amended

California AB 1963 would have expanded the category of taxable services and imposed a 4% sales tax for their use, while reducing the rates for state sales and personal income taxes.

The bill was introduced by Assembly Member Alyson Huber and opposed by a coalition of organizations, including the Securities Industry and Financial Markets Association (SIFMA) and the Financial Services Institute (FSI).

“This amendment prevents an unnecessary obstacle to investors getting financial advice,” said Dale Brown, president and chief executive of FSI. “We have worked with a coalition of organizations that also believe investors have a right to advice without any extra costs, and without our members having to become tax collectors.”

Amendments turned the bill into a piece of  legislature for a study on such taxes.

FSI also registered its opposition to California AB 2540, introduced by Assembly Member Mike Gatto, which would have expanded the sales and use tax base to include specified categories of services, and exclude $10,000 of personal business income from taxes. For the first time, services, such as providing advice and financial services to investors, would have been subject to taxes. Advisers and broker/dealers would have been responsible for collecting taxes from clients, possibly creating a barrier to receiving advice and support, FSI said.

That bill was substantially revamped, and no taxes will be levied on financial services.

A copy of AB 2540 bill with amendments is available here and a copy of AB 1963 is available here.