Davis Moves to Halt Tax on Overseas Purchases

State Controller Gray Davis vowed Monday to seek either legislative or administrative action to stop the Board of Equalization from taxing California residents for purchases they made abroad last year.

Davis said it was “fundamentally unfair” for state administrators not to give taxpayers any notice before they began charging a use tax on goods purchased overseas.

“Everyone understands that hitting someone with an unexpected tax bill when they return from overseas is just not part of the American way,” Davis said. “Fairness is a fundamental aspect of the American legal system. Notice is a fundamental aspect of the American legal system. This retroactive tax bill has neither.”

Board of Equalization officials said they decided to enforce the tax after the U.S. Customs Service agreed to give them access to the declarations that California residents make of their overseas purchases as they re-enter the United States.

Thousands of California residents began receiving the unexpected tax notices last week. By the end of the year, officials estimate that as many as 58,000 travelers will be required to pay the tax. Officials acknowledged that they did not send out notices advising taxpayers that the levy was being enforced until December.

The use tax, which was passed in 1935, applies to all goods purchased outside the state for use in California. However, until officials reached the agreement with the Customs Service, they said they had no way of enforcing it on purchases made overseas.

“In effect this is really a new law,” said Davis. “It’s been ignored for 55 years, so no taxpayer could be faulted for being ignorant of it.”

Davis, who is also a member of the Board of Equalization, said he will ask lawmakers to pass an urgency bill that would delay enforcement of the tax until the public can be informed. If legislation is not successful, he said he will ask the five-member board to delay enforcement of the tax.

At least one board member, Chairman Conway Collis, has already suggested similar action by the board.