For cargo, cruise and other ships seeking to dock at the ports of Los Angeles or Long Beach, things will soon become more expensive.

Starting Jan. 1, a new regulation from the state Air Resources Board takes effect, requiring that ship operators use low-sulfur or other low-emitting diesel fuels for their auxiliary or diesel-electric engines, which are typically the engines used when ships are docked at port.

As an alternative, vessel operators can hook up to shore-side electric power, as several shipping lines have begun to do at the ports of Los Angeles and Long beach.

Those operators unable to comply with either of these choices must pay a fee to the agency that can range from $13,000 for the first California port visited to $162,000 for five or more California ports visited.

In addition to switching to these less-polluting fuels, vessel operators must begin keeping extensive records on the types of fuels they are using, starting when the vessels enter California waters (24 nautical miles offshore).

All this was summarized in a special notice that the Air Resources Board sent out last week to the shipping, cruise and fishing industries warning them of the impending rule change.

The regulation is part of a much broader strategy by state and local air pollution control officials to clamp down on toxic emissions from the ports. In Los Angeles County, the ports of Los Angeles and Long Beach are the number one source of toxic air contaminants primarily diesel fuel.

However, shippers remain opposed to the Air Resources Board regulation. They are challenging the board’s authority to regulate 24 miles offshore, which they consider international waters.

“Forcing ships to switch to low-sulfur fuels while they are still under full power miles from shore is very complicated and costly, and besides, we believe the state has no jurisdiction to do this,” said T.L. Garrett, vice president with the Pacific Merchant Shipping Association.

Garrett added that some older vessels may not be able to be retrofitted to accommodate the low-sulfur fuels and may be stuck paying the “exorbitant” fees for years, until they are retired.

Rebate Ruckus

In order to drum up consumer interest in their products or clear inventories, manufacturers often run special rebate promotions through retailers that sell their products. They require the retailer to reduce the sale price of the product, and then rebate the retailer directly.

For example, on a flat-panel television that normally retails for $1,499, a retail outlet might be given a $100 rebate from the manufacturer and then be ordered to charge the customer only $1,399 for it. But, there’s a catch.

In California, the storeowner is taxed on both the discounted price and on the rebate received from the manufacturer. Storeowners generally pass the total tax on to the customer. So, on that television sold in Los Angeles for $1,399, the customer is taxed on the original $1,499 retail price to the tune of $123.67, instead of $115.42.

Over the years, sharp consumers have noticed this discrepancy and brought the issue up with retail store managers. Often, rather than fight the customer, the retailer eats the cost of the rebate tax. Several years back, frustrated retailers petitioned the state Board of Equalization to re-examine its rules regarding these manufacturer or “third-party” rebates. The agency finally is doing just that, with agency staff putting forward four alternative proposals.

The key issue appears to center around whether the customer is informed about the details of the rebate. If the customer knows how much the store is receiving in a manufacturer’s rebate before the tax is added on at the register, then two of the proposals call for the entire amount to be taxed. Otherwise, only the reduced sale price charged by the retailer is subject to sales tax, not the rebate from the manufacturer, since the customer only knows the final retail price that he or she is paying.

The other two proposals would keep the current law under which both the discounted retail sales price and the manufacturer’s rebate are subject to sales tax. Retail groups and the California Taxpayers Association both oppose this concept.

In a letter to the Board of Equalization, the California Retailers Association said “sales tax should apply to the agreed upon price between the buyer and seller. Rebates are not part of sales price because they are not ‘agreed to’ by buyer and seller.”

The Board of Equalization has set an “interested parties” meeting on the issue next month in Sacramento; the board itself is expected to take up the matter in November. For more information, log onto the board’s website at http://www.boe.ca.gov/meetings/pdf/IDPRebate.pdf.

Book vs. Tax Incomes

The state Legislature last week passed a bill that would require corporations to document the differences between their “book” and “tax” incomes and report both sets of income to the state Franchise Tax Board.

Many corporations currently report two sets of income: one to their shareholders (“book income”) and one to tax collecting agencies. Often, the figure reported to the tax agencies is significantly lower than the book income.

Democrat lawmakers and organized labor say this bill is crucial because it would alert state tax collectors to revenues that corporations are not counting towards their taxes.

Business groups oppose the bill, saying it adds cumbersome reporting requirements. They also note that the tax income figure is often lower because of depreciation, credits and other legitimate income-reducing measures allowed in the state tax code.

Schwarzenegger, who has in the past tended to side with business on tax issues, has until the last week of September to sign or veto the bill.

Staff reporter Howard Fine can be reached at

[email protected]

or at (323) 549-5225, ext. 227.