Swap Meet Crackdown Bill Gains

SACRAMENTO —  The Assembly Revenue and Taxation Committee on Monday approved a bill to establish a four-year pilot program to crack down on vendors who fail to pay state sales tax at swap meets and flea markets in Paramount and Compton.

“We think there’s just massive tax income owed by these vendors,” declared Paramount City Manager William Holt, who was in the capital to lobby for the bill by Sen. Ralph C. Dills (D-Gardena). By a 9-2 margin, the committee sent the measure to the Ways and Means Committee.

The legislation is supported by the cities of Paramount and Compton, which stand to gain tax revenue. It is opposed by Modern Development Co., which operates a swap meet at the 27-acre Paramount Drive-In every day of the year except Thanksgiving and Christmas. The company contends that the bill unfairly singles out its swap meet and is merely another chapter in a long-running dispute with the city.

Under current law, the State Board of Equalization may require the operator of a swap meet to direct vendors to have a seller’s permit from the board or demonstrate that items for sale are not subject to sales tax.

As a practical matter, however, checking swap meets is not a high priority. According to Jim Delaney, chief counsel for the Board of Equalization, “It’s just not a big item for us now. It takes too much time to police.”

Dills’ bill would give the Board of Equalization extra weapons to combat alleged abuses at all swap meets and flea markets in Paramount and Compton. Dills seeks to require vendors at such events in the two cities to fill out, in triplicate, forms documenting their sales. At the end of each business day, the sales slips would be collected and reviewed by inspectors from the Board of Equalization stationed at each swap meet and flea market in Paramount and Compton.

Brian Maas, a consultant for the Revenue and Taxation Committee, estimated that it would cost the state about $386,000 to place a total of nine inspectors in the two cities. This cost would be offset by a fee that swap meet operators would pay the Board of Equalization.

If the Dills measure becomes law, Paramount City Manager Holt estimates that between $480,000 and $720,000 a year in additional tax revenues would be collected from swap meets in his city, chiefly the swap meet at the Paramount Drive-In on Paramount Boulevard.

Compton city officials could not be reached for comment, but Dills said they asked that their city, where at least two regular swap meets are held, be included in the measure.

Dills, whose district includes Paramount and part of Compton, told the committee that other small businesses must pay rent and taxes. But, he argued, to “have these more or less fly-by-night people coming in 363 days out of the year really creates havoc in the business community.”

Initially, Dills’ bill would have clamped down on abuses at swap meets and flea markets throughout the state. However, Dills said that because of opposition from the California Swap Meet Owners Assn. he limited the measure’s focus to Paramount and Compton, which had sought the legislation.

Modern Development and the City of Paramount have been at odds for several years over the Paramount Drive-In swap meet. For example, in June, 1985, the council passed an ordinance requiring Modern Development to pay a business license fee of $1 per day for each vendor. The city also required that each vendor pay $1 per day.

Modern Development refused to comply until April, 1986, when it paid more than $335,000 in delinquent taxes to the city.

Meantime, Modern Development filed suit in Los Angeles Superior Court challenging the right of the city to impose the tax. The case was decided in favor of the city in April and is being appealed by Modern Development.

Vaughn Herrick, chief operating officer and vice president of Modern Development, contended that the legislation is part of an effort to drive his firm out of business.

“This is all nothing more than a smoke screen to put us out of business,” Herrick declared in an interview.

Douglas Hrdlicka, president of the California Swap Meet Owners Assn. and president of the Roadium Open Air Market in Torrance, said the legislation is the result of a dispute in Paramount. “Other communities don’t believe as strongly as Paramount that they are losing tax revenue,” he said.

Holt discounted the criticism, asserting that the legislation is “not a vendetta” against Modern Development. Instead, he said, it is “an attempt to get taxes.”