BILL NUMBER: AB 71	CHAPTERED
	BILL TEXT

	CHAPTER  890
	FILED WITH SECRETARY OF STATE  OCTOBER 12, 2003
	APPROVED BY GOVERNOR  OCTOBER 12, 2003
	PASSED THE ASSEMBLY  SEPTEMBER 10, 2003
	PASSED THE SENATE  SEPTEMBER 9, 2003
	AMENDED IN SENATE  SEPTEMBER 8, 2003
	AMENDED IN SENATE  SEPTEMBER 4, 2003
	AMENDED IN SENATE  AUGUST 25, 2003
	AMENDED IN SENATE  JULY 24, 2003
	AMENDED IN SENATE  JULY 14, 2003
	AMENDED IN SENATE  JUNE 19, 2003
	AMENDED IN ASSEMBLY  MAY 21, 2003
	AMENDED IN ASSEMBLY  MAY 19, 2003
	AMENDED IN ASSEMBLY  APRIL 10, 2003

INTRODUCED BY   Assembly Member Jerome Horton

                        DECEMBER 13, 2002

   An act to add and repeal Division 8.6 (commencing with Section
22970) of the Business and Professions Code, to add Section 15618.5
to the Government Code, to amend Section 104557 of the Health and
Safety Code, to amend, repeal, and add Section 830.11 of the Penal
Code, and to amend Sections 30436, 30449, 30471, 30473.5, 30474, and
30481 of, to add Sections 30019, 30165.1, 30166.1, 30177.5, and 30482
to, to add and repeal Sections 30435 and 30474.1 of, to add and
repeal Article 2.5 (commencing with Section 30210) of Chapter 4 of
Part 13 of Division 2 of, and to add and repeal Article 5 (commencing
with Section 30355) of Chapter 5 of Part 13 of Division 2 of, the
Revenue and Taxation Code, relating to cigarettes and tobacco
products, and making an appropriation therefor.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 71, Jerome Horton.  Tobacco products:  state and local
government.
   (1) The Cigarette and Tobacco Products Tax Law requires
distributors and wholesalers of cigarette and tobacco products to be
licensed by the State Board of Equalization.  The Cigarette and
Tobacco Products Tax Law also requires a tax imposed by that law with
respect to distributions of cigarettes to be paid by distributors
through the use of stamps or meter register settings, and requires
that these stamps or meter register settings be affixed to each
package of cigarettes sold.  Existing law further provides that the
possession, selling, or buying of false or fraudulent stamps or meter
register settings with a tax value greater than $750 is a crime.
   This bill would create the California Cigarette and Tobacco
Products Licensing Act of 2003 to provide for the licensure by the
State Board of Equalization of manufacturers, distributors,
wholesalers, importers, and retailers of cigarette or tobacco
products that are engaged in business in California.  The bill would
prohibit retailers, manufacturers, distributors, and wholesalers from
distributing or selling those cigarette and tobacco products unless
they are licensed.  The bill would authorize the board to suspend or
revoke the license of any manufacturer, distributor, wholesaler,
importer, or retailer of tobacco products that is in violation of the
bill's provisions.  The bill would prohibit a manufacturer,
distributor, wholesaler, importer, retailer, or any other person from
selling counterfeit cigarette and tobacco products and would provide
that a violation of that prohibition is a crime.  The bill would
impose specified fines or imprisonment for possessing, selling, or
buying false or fraudulent cigarette tax stamps.
   The bill also would require manufacturers and importers of
cigarette products that provide those products to distributors or
wholesalers to pay the board a fee for cigarettes sold in this state.

   The bill would require all moneys collected pursuant to its
provisions to be deposited in the Cigarette and Tobacco Products
Compliance Fund, which would be created in the State Treasury, and
all funds therein would be available for appropriation by the
Legislature solely for the purpose of implementing, enforcing, and
administering the California Cigarette and Tobacco Products Licensing
Act of 2003.  This bill would appropriate from that fund the amount
of $11,000,000, subject to specified conditions, for the 2003-04
fiscal year for the purpose of implementing, enforcing, and
administering the California Cigarette and Tobacco Products Licensing
Act of 2003.
   This bill would repeal the California Cigarette and Tobacco
Products Licensing Act of 2003, effective January 1, 2010.
   (2) Existing law provides that all records, with specified
exceptions, of the Department of Motor Vehicles are confidential and
are not open to public inspection.
   This bill would authorize the State Board of Equalization to
obtain copies of photographs of California licensees from the
Department of Motor Vehicles for the purpose of enforcing California'
s tax laws.
   (3) Existing law requires the State Board of Equalization to
administer various taxes and fees, including taxes with respect to
cigarettes and tobacco products, alcoholic beverages, motor vehicle
fuel, and diesel fuel, among others.
   This bill would authorize persons designated by the Executive
Director of the State Board of Equalization to exercise the arrest
powers of a peace officer in the enforcement of the taxes and fees
administered by the State Board of Equalization.  This bill would
repeal this authorization, effective January 1, 2010.
   (4) Under existing law, states' attorneys general and various
tobacco product manufacturers have entered into a Master Settlement
Agreement (MSA), in settlement of various lawsuits, that provides for
the allocation of money to the states and certain territories.  The
state has entered into a memorandum of understanding providing for
the allocation of the state's share of moneys to be received under
the MSA between the state and counties and certain cities in the
state.  Existing law requires any tobacco product manufacturer
selling cigarettes to consumers in California to place specified
amounts into a qualified escrow fund by April 15 of each year.
   This bill would make technical amendments to the provision of the
MSA that governs the release of money placed in qualified escrow
funds.
   This bill would require the Attorney General to develop and post
on the Attorney General's Internet Web site a list of tobacco product
manufacturers that have provided current and accurate certifications
in accordance with the requirements of the bill.  This bill would
require the Attorney General's Web site to also include all brand
families, as defined, that have been listed in the certifications.
The bill would prohibit any tax stamp or meter impression to be
affixed unless the tobacco product manufacturer and brand family in
question is included on the Attorney General's list.  The bill would
give the Attorney General and the board specified authority and
duties in this regard.  This bill would impose specified penalties,
applicable to a tobacco product manufacturer or distributor, for
failure to comply with the various provisions of the bill, including
civil penalties.  The bill would also make it a misdemeanor for a
tobacco product manufacturer to make specified false representations,
or for any person to (a) sell or otherwise distribute cigarettes in
violation of the bill, or (b) acquire, hold, own, possess, transport,
import, or cause cigarettes to be imported in violation of the bill,
thus creating a state-mandated local program.  The bill would deem
it to be unfair competition for any person to affix any tax stamp or
meter impression, or to pay any tax in violation of the requirements
of the bill.  The bill would provide for disgorgement of any profits,
gains, gross receipts, or other benefits from a violation of the
bill, as specified.  The bill would require those moneys to be paid
as restitution, with any residue to be paid into the Tobacco Control
Special Fund created by the bill.
   (5) Existing law requires that certain cigarette and tobacco
products be forfeited to the state under specified circumstances,
upon seizure by the board.
   This bill would add to the forfeiture list cigarette and tobacco
products to which cigarette tax stamps or meter impressions are
affixed in violation of the specified prohibitions under the MSA.
   (6) This bill would also establish procedures under the Cigarette
and Tobacco Products Tax Law for imposing taxes on sellers of
black-market cigarettes and tobacco products, and procedures for the
seizure and sale of property secured by liens for delinquencies under
the Cigarette and Tobacco Products Tax Law.  This bill would repeal
the provisions authorizing those procedures, effective January 1,
2010.
   (7) This bill would provide that this act does not preempt or
supersede any local tobacco control laws or ordinances other than
those laws or ordinances that are related to the collection of the
taxes imposed under the Cigarette and Tobacco Products Tax Law.
   (8) This bill would provide that all revenues and expenses
generated by this act with respect to the taxes imposed under the
Cigarette and Tobacco Products Tax Law shall be allocated in the same
manner as those revenues and expenses are allocated under the
existing Cigarette and Tobacco Products Tax Law.
  (9) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Division 8.6 (commencing with Section 22970) is added
to the Business and Professions Code, to read:

      DIVISION 8.6.  CALIFORNIA CIGARETTE AND TOBACCO PRODUCTS
LICENSING ACT OF 2003
      CHAPTER 1.  GENERAL PROVISIONS AND DEFINITIONS

   22970.  This division shall be known as and may be cited as the
Cigarette and Tobacco Products Licensing Act of 2003.
   22970.1.  The Legislature finds and declares all of the following:

   (a) The State of California has enacted excise taxes on the
distribution of cigarettes and tobacco products to provide funding
for local and state programs, including health services, antismoking
campaigns, cancer research, and education programs.
   (b) Tax revenues have declined by hundreds of millions of dollars
per year due, in part, to unlawful distributions and untaxed sales of
cigarettes and tobacco products conducted by organized crime
syndicates, street gangs, and international terrorist groups.
   (c) The enforcement of California's cigarette and tobacco products
tax laws is necessary to collect millions of dollars in lost tax
revenues each year.
   (d) The licensing of manufacturers, importers, wholesalers,
distributors, and retailers will help stem the tide of untaxed
distributions and illegal sales of cigarettes and tobacco products.
   22970.2.  The board shall administer a statewide program to
license manufacturers, importers, distributors, wholesalers, and
retailers of cigarettes and tobacco products.
   22970.3.  The board may create a Tobacco Tax Compliance Task Force
for the purpose of advising the board on cigarette and tobacco
products tax compliance issues that may include, but not be limited
to, representatives from the following:
   (a) The board.
   (b) The office of the Attorney General.
   (c) The Franchise Tax Board.
   (d) The Department of Alcoholic Beverage Control.
   (e) The State Department of Health Services.
   (f) Federal agencies necessary to coordinate programs to combat
tobacco tax evasion, smuggling, and counterfeiting.
   (g) One person from each of the categories of persons required by
this division to have a license.
   (h) Other states engaged in tobacco tax compliance efforts.
   (i) Local law enforcement agencies.
   22971.  For purpose of this division, the following terms shall
have the following meanings:
   (a) "Board" means the State Board of Equalization.
   (b) "Importer" means an importer as defined in Section 30019 of
the Revenue and Taxation Code.
   (c) "Distributor" means a distributor as defined in Section 30011
of the Revenue and Taxation Code.
   (d) "Manufacturer" means a manufacturer of cigarettes sold in this
state.
   (e) "Retailer" means a person who engages in this state in the
sale of cigarettes or tobacco products directly to the public from a
retail location.  Retailer includes a person who operates vending
machines from which cigarettes or tobacco products are sold in this
state.
   (f) "Retail location" means both of the following:
   (1) Any building from which cigarettes or tobacco products are
sold at retail.
   (2) A vending machine.
   (g) "Wholesaler" means a wholesaler as defined in Section 30016 of
the Revenue and Taxation Code.
   (h) "Cigarette" means a cigarette as defined in Section 30003 of
the Revenue and Taxation Code.
   (i) "License" means a license issued by the board pursuant to this
division.
   (j) "Licensee" means any person holding a license issued by the
board pursuant to this division.
   (k) "Sale" or "sold" means a sale as defined in Section 30006 of
the Revenue and Taxation Code.
   (l) "Tobacco products" means tobacco products as defined in
subdivision (b) of Section 30121 and subdivision (b) of Section
30131.1 of the Revenue and Taxation Code.
   (m) "Unstamped package of cigarettes" means a package of
cigarettes that does not bear a tax stamp as required under Part 13
(commencing with Section 30001) of Division 2 of the Revenue and
Taxation Code, including a package of cigarettes that bears a tax
stamp of another state or taxing jurisdiction, a package of
cigarettes that bears a counterfeit tax stamp, or a stamped or
unstamped package of cigarettes that is marked "Not for sale in the
United States."
   (n) "Person" means a person as defined in Section 30010 of the
Revenue and Taxation Code.
   (o) "Package of cigarettes" means a package as defined in Section
30015 of the Revenue and Taxation Code.
   (p) (1) "Control" or "controlling" means possession, direct or
indirect, of the power:
   (A) To vote 25 percent or more of any class of the voting
securities issued by a person.
   (B) To direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract (other than a commercial contract for goods
or nonmanagement services), or otherwise provided; however, no
individual shall be deemed to control a person solely on account of
being a director, officer, or employee of such person.
   (2) For purposes of subparagraph (B) of this subdivision, a person
who, directly or indirectly, owns, controls, holds, with the power
to vote, or holds proxies representing 10 percent or more of the then
outstanding voting securities issued by another person, is presumed
to control such other person.
   (3) For purposes of this division, the board may determine whether
a person in fact controls another person.
   (q) "Law enforcement agency" means a sheriff, a police department,
or a city, county, or city and county agency or department
designated by the governing body of that agency to enforce this
chapter or to enforce local smoking and tobacco ordinances and
regulations.
   22971.1.  Commencing January 1, 2006, the Bureau of State Audits
shall conduct a performance audit of the licensing and enforcement
provisions of this division, and shall report its findings to the
board and the Legislature by July 1, 2006.  The report shall include,
but not be limited to:
   (a) The actual costs of the program.
   (b) The level of additional revenue generated by the program
compared to the period before its implementation.
   (c) Tax compliance rates.
   (d) The costs of enforcement at the varying levels.
   (e) The appropriateness of penalties assessed in this division.
   (f) The overall effectiveness of enforcement programs.
   22971.2.  The board shall administer and enforce the provisions of
this division and may prescribe, adopt, and enforce rules and
regulations relating to the administration and enforcement of this
division.
   22971.3.  Nothing in this division preempts or supersedes any
local tobacco control law other than those related to the collection
of state taxes.  Local licensing laws may provide for the suspension
or revocation of the local license for any violation of a state
tobacco control law.

      CHAPTER 2.  LICENSE FOR RETAILERS OF CIGARETTES AND TOBACCO
PRODUCTS

   22972.  (a) Commencing June 30, 2004, a retailer shall have in
place and maintain a license to engage in the sale of cigarettes or
tobacco products.  A retailer that owns or controls more than one
retail location shall obtain a separate license for each retail
location, but may submit a single application for those licenses.
   (b) The retailer shall conspicuously display the license at each
retail location in a manner visible to the public.
   (c) A license is not assignable or transferable.  A person who
obtains a license as a retailer who ceases to do business as
specified in the license, or who never commenced business, or whose
license is suspended or revoked, shall immediately surrender the
license to the board.
   (d) A license shall be valid for a 12-month period, and shall be
renewed annually.
   22973.  (a) An application for a license shall be filed on or
before April 15, 2004, on a form prescribed by the board and shall
include the following:
   (1) The name, address, and telephone number of the applicant.
   (2) The business name, address, and telephone number of each
retail location.  For applicants who control more than one retail
location, an address for receipt of correspondence or notices from
the board, such as a headquarters or corporate office of the
retailer, shall also be included on the application and listed on the
license.  Citations issued to licensees shall be forwarded to all
addressees on the license.
   (3) A statement by the applicant affirming that the applicant has
not been convicted of a felony and has not violated and will not
violate or cause or permit to be violated any of the provisions of
this division or any rule of the board applicable to the applicant or
pertaining to the manufacture, sale, or distribution of cigarettes
or tobacco products.  If the applicant is unable to affirm this
statement, the application shall contain a statement by the applicant
of the nature of any violation or the reasons that will prevent the
applicant from complying with the requirements with respect to the
statement.
   (4) If any other licenses or permits have been issued by the board
or the Department of Alcoholic Beverage Control to the applicant,
the license or permit number of such licenses or permits then in
effect.
   (5) A statement by the applicant that the contents of the
application are complete, true, and correct.  Any person who signs a
statement pursuant to this subdivision that asserts the truth of any
material matter that he or she knows to be false is guilty of a
misdemeanor punishable by imprisonment of up to one year in the
county jail, or a fine of not more than one thousand dollars
($1,000), or both the imprisonment and the fine.
   (6) The signature of the applicant.
   (7) Any other information the board may require.
   (b) The board may investigate to determine the truthfulness and
completeness of the information provided in the application.  The
board may issue a license without further investigation to an
applicant for a retail location if the applicant holds a valid
license from the Department of Alcoholic Beverage Control for that
same location.
   (c) The board shall provide electronic means for applicants to
download and submit applications.
   (d) (1) A one-time license fee of one hundred dollars ($100) shall
be submitted with each application.  An applicant that owns or
controls more than one retail location shall obtain a separate
license for each retail location, but may submit a single application
for those licenses with a one-time license fee of one hundred
dollars ($100) per location.
   (2) The one-time fee required by this subdivision does not apply
to an application for renewal of a license for a retail location for
which the one-time license fee has already been paid.
   22973.1.  (a) The board shall issue a license to a retailer upon
receipt of a completed application and payment of the fees prescribed
in Section 22973, unless any of the following apply:
   (1) The retailer, or if the retailer is not an individual, any
person controlling the retailer, has previously been issued a license
that is suspended or revoked by the board for violation of any of
the provisions of this division.
   (2) The application is for a license or renewal of a license for a
retail location that is the same retail location as that of a
retailer whose license was revoked or is subject to revocation
proceedings for violation of any of the provisions of this division,
unless:
   (A) It has been more than five years since a previous license for
the retail location was revoked.
   (B) The person applying for the license provides the board with
documentation demonstrating that the applicant has acquired or is
acquiring the premises or business in an arm's length transaction.
For purposes of this section, an "arm's length transaction" is
defined as a sale in good faith and for valuable consideration that
reflects the fair market value in the open market between two
informed and willing parties, neither under any compulsion to
participate in the transaction.  A sale between relatives, related
companies or partners, or a sale for the primary purpose of avoiding
the effect of the violations of this division that occurred at the
retail location, is presumed not to be made at "arm's length."
   (3) The retailer, or if the retailer is not an individual, any
person controlling the retailer, has been convicted of a felony
pursuant to Section 30473 or 30480 of the Revenue and Taxation Code.

   (4) The retailer does not possess all required permits or licenses
required under the Revenue and Taxation Code.
   (b) (1) Any retailer who is denied a license may petition for a
redetermination of the board's denial of the license within 30 days
after service upon that retailer of the notice of the denial of the
license.  If a petition for redetermination is not filed within the
30-day period, the determination of denial becomes final at the
expiration of the 30-day period.
   (2) Every petition for redetermination shall be in writing and
shall state the specific grounds upon which the petition is founded.
The petition may be amended to state additional grounds at anytime
prior to the date on which the board issues its order or decision
upon the petition for redetermination.
   (3) If the petition for redetermination is filed within the 30-day
period, the board shall reconsider the determination of the denial
and, if the retailer has so requested in the petition, shall grant
the retailer an oral hearing and shall give the retailer at least 10
days' notice of the time and place of the hearing.  The board may
continue the hearing from time to time as may be necessary.
   (4) The order or decision of the board upon a petition for
redetermination becomes final 30 days after mailing of notice
thereof.
   (5) Any notice required by this subdivision shall be served
personally or by mail.  If by mail, the notice shall be placed in a
sealed envelope, with postage paid, addressed to the retailer at the
address as it appears in the records of the board.  The giving of
notice shall be deemed complete at the time of deposit of the notice
in the United States Post Office, or a mailbox, subpost office,
substation or mail chute or other facility regularly maintained or
provided by the United States Postal Service, without extension of
time for any reason.  In lieu of mailing, a notice may be served
personally by delivering to the person to be served and service shall
be deemed complete at the time of such delivery.  Personal service
to a corporation may be made by delivery of a notice to any person
designated in the Code of Civil Procedure to be served for the
corporation with summons and complaint in a civil action.
   22973.2.  The board shall, upon request, provide to the State
Department of Health Services, the office of the Attorney General, a
law enforcement agency, and any agency authorized to enforce local
tobacco control ordinances, access to the board's database of
licenses issued to retailers within the jurisdiction of that agency
or law enforcement agency.  The agencies authorized by this section
to access the board's database shall only access and use the board's
database for purposes of enforcing tobacco control laws and shall
adhere to all state laws, policies, and regulations pertaining to the
protection of personal information and individual privacy.
   22974.  A retailer shall retain purchase invoices that meet the
requirements set forth in Section 22978.4 for all cigarettes or
tobacco products the retailer purchased for a period of four years.
The records shall be kept at the retail location for at least one
year after the purchase.  Invoices shall be made available upon
request during normal business hours for review inspection and
copying by the board or by a law enforcement agency.  Any retailer
found in violation of these requirements or any person who fails,
refuses, or neglects to retain or make available invoices for
inspection and copying in accordance with this section shall be
subject to penalties pursuant to Section 22981.
   22974.3.  (a) Notwithstanding any other provision of this
division, upon discovery by the board or a law enforcement agency
that a retailer or any other person possesses, stores, owns, or has
made a retail sale of an unstamped package of cigarettes, the board
or the law enforcement agency shall be authorized to seize unstamped
packages of cigarettes at the retail, or any other person's location.
  Any cigarettes seized by a law enforcement agency shall be
delivered to the board, or its designee, within seven days, unless
the cigarettes will be destroyed by that law enforcement agency, or
unless the cigarettes are otherwise required to be used as evidence
in an administrative, criminal, or civil proceeding, or as part of an
ongoing law enforcement operation.  Any cigarettes seized by the
board or delivered to the board by a law enforcement agency shall be
deemed forfeited and the board shall comply with procedures set forth
in Part 13 (commencing with Section 30436) of Division 2 of Chapter
7.5 of the Revenue and Taxation Code.  In addition to the inventory
of unstamped packages of cigarettes of a retailer or of any other
person that is subject to forfeiture and seizure, the possession,
storage, ownership, or retail sales of unstamped packages of
cigarettes by a retailer or other person, as applicable, shall
constitute a misdemeanor punishable by the following actions:
   (1) A first violation involving seizure of a total quantity of
less than 20 packages of unstamped cigarettes shall be a misdemeanor
punishable by a fine of one thousand dollars ($1,000) or imprisonment
not to exceed one year in a county jail, or both the fine and
imprisonment.
   (2) A second violation within five years involving a seizure of a
total quantity of less than 20 packages of unstamped cigarettes shall
be a misdemeanor punishable by a fine of not less than two thousand
dollars ($2,000) but not to exceed five thousand dollars ($5,000) or
imprisonment not to exceed one year in a county jail, or both the
fine and imprisonment, and shall also result in the revocation of the
license.
   (3) A first violation involving seizure of a total quantity of 20
packages of unstamped cigarettes or more shall be a misdemeanor
punishable by a fine of two thousand dollars ($2,000) or imprisonment
not to exceed one year in a county jail, or both the fine and
imprisonment.
   (4) A second violation within five years involving seizure of a
quantity of 20 packages of unstamped cigarettes or more shall be a
misdemeanor punishable by a fine of not less than five thousand
dollars ($5,000) but not to exceed fifty thousand dollars ($50,000)
or imprisonment not to exceed one year in a county jail, or both the
fine and imprisonment, and shall also result in the revocation of the
license.
   (b) Upon discovery by the board or a law enforcement agency that a
retailer or any other person possesses, stores, owns, or has made a
retail sale of tobacco products on which tax is due but has not been
paid to the board, the board or law enforcement agency is authorized
to seize such tobacco products at the retail, or any other person's
location.  Any tobacco products seized by a law enforcement agency
shall be delivered to the board, or its designee, within seven days,
unless otherwise required to be used as evidence in an
administrative, criminal, or civil proceeding, or as part of an
ongoing law enforcement operation.  Any tobacco products seized by
the board or delivered to the board by a law enforcement agency shall
be deemed forfeited and the board shall comply with procedures set
forth in Part 13 (commencing with Section 30436) of Division 2 of
Chapter 7.5 of the Revenue and Taxation Code.  It shall be presumed
that tax has not been paid to the board on all tobacco products in
the possession of a retailer or of any other person until the
contrary is established by a proof of payment to the board or by a
purchase invoice that shows that the retailer or other person, as
applicable, paid the tax included purchase price to a licensed
distributor, wholesaler, manufacturer, or importer as described in
Section 22978.4.  The burden of proof that tax has been paid on
tobacco products shall be upon the retailer or the other person, as
applicable, in possession thereof.  Possession of untaxed tobacco
products on which tax is due but has not been paid as required is a
violation of this division and subjects the retailer or other person,
as applicable, to the actions described in Section 22981.
   22974.4.  The board shall revoke the license, pursuant to the
provisions applicable to the revocation of a license as set forth in
Section 30148 of the Revenue and Taxation Code, of any retailer or
any person controlling the retailer that has:
   (a) Been convicted of a felony pursuant to Section 30473 or 30480
of the Revenue and Taxation Code.
   (b) Had any permit or license revoked under any provision of the
Revenue and Taxation Code.
   22974.5.  Any retailer who fails to display a license as required
in Section 22972 shall, in addition to any other applicable penalty,
be liable for a penalty of five hundred dollars ($500).
   22974.7.  In addition to any other civil or criminal penalty
provided by law, upon a finding that a retailer has violated any
provision of this division, the board may take the following actions:

   (a) In the case of the first offense, the board may revoke or
suspend the license or licenses of the retailer pursuant to the
procedures applicable to the revocation of a license set forth in
Section 30148 of the Revenue and Taxation Code.
   (b) In the case of a second or any subsequent offense, in addition
to the action authorized under subdivision (a), the board may impose
a civil penalty in an amount not to exceed the greater of either of
the following:
   (1) Five times the retail value of the cigarettes or tobacco
products.
   (2) Five thousand dollars ($5,000).
   22974.8.  (a) (1) The board shall take action against a retailer,
convicted of a violation of either the Stake Act (Division 8.5
(commencing with Section 22950) or Section 308 of the Penal Code,
according to the schedule set forth in subdivision (b).
   (2) Convictions of violations by a retailer at one retail location
may not be accumulated against other locations of that same
retailer.
   (3) Convictions of violations accumulated against a prior retail
owner at a licensed location may not be accumulated against a new
retail owner at the same retail location.
   (4) Prior to suspending or revoking a retailer's license to sell
cigarette and tobacco products, the board shall notify the retailer.
The notice shall include instructions for appealing the license
suspension or revocation.
   (b) (1) Upon the first conviction of a violation of either the
STAKE Act (Division 8.5 (commencing with Section 22950) or Section
308 of the Penal Code, the retailer shall receive a warning letter
from the board that delineates the circumstances under which a
retailer's license may by suspended or revoked and the amount of time
the license may be suspended or revoked.  The retailer and its
employees shall receive training on tobacco control laws from the
Department of Health Services upon a first conviction.
   (2) Upon the second conviction of a violation of either the STAKE
Act (Division 8.5 (commencing with Section 22950)) or Section 308 of
the Penal Code within 12 months, the retailer shall be subject to a
fine of five hundred dollars ($500).
   (3) Upon the third conviction of a violation of either the STAKE
Act (Division 8.5 (commencing with Section 22950)) or Section 308 of
the Penal Code within 12 months, the retailer shall be subject to a
fine of one thousand dollars ($1,000).
   (4) Upon the fourth to the seventh conviction of a violation of
either the STAKE Act (Division 8.5 (commencing with Section 22950))
or Section 308 of the Penal Code within 12 months, the board shall
suspend the retailer's license to sell cigarette and tobacco products
for 90 days.
   (5) Upon the eighth conviction of a violation of the STAKE Act
(Division 8.5 (commencing with Section 22950) or Section 308 of the
Penal Code within 24 months, the board shall revoke the retailer's
license to sell cigarette and tobacco products.
   (c) The decision of the board to suspend or revoke the retailer's
license may be appealed to the board within 30 days after the notice
of suspension or revocation.  All appeals shall be submitted in
writing.
   (d) The board's authority to take action against retailers, as set
forth in this section, commences on the date of the release of the
results from the survey undertaken by the Department of Health
Services pursuant to Section 22952 of the Business and Professions
Code Section 22952 to comply with Section 1926 of Title XIX of the
federal Public Health Service Act (42 U.S.C.  300x-26), and any
implementing regulations adopted in relation thereto by the United
States Department of Health and Human Services, showing that the
youth purchase survey finds that 13 percent or more of youth were
able to purchase cigarettes.  The board's authority to take action
under this section is inoperative on or after the date of the
subsequent release of the results from the survey showing that less
than 13 percent of youth were able to purchase cigarettes.

      CHAPTER 3.  LICENSE FOR WHOLESALERS AND DISTRIBUTORS OF
CIGARETTES AND TOBACCO PRODUCTS

   22975.  (a) In addition to licenses required pursuant to Part 13
(commencing with Section 30001) of Division 2 of the Revenue and
Taxation Code, commencing June 30, 2004, every distributor and every
wholesaler shall annually obtain and maintain a license to engage in
the sale of cigarettes or tobacco products.
   (b) Licenses shall be valid for a calendar year period upon
payment of the fee prescribed in Section 22977.1, unless surrendered,
suspended, or revoked prior to the end of the calendar year, and may
be renewed each year upon payment of such fee.
   (c) A license is not assignable or transferable.  A person who
obtains a license as a distributor or as a wholesaler who ceases to
do business as specified in the license, or who never commenced
business, or whose license is suspended or revoked, shall immediately
surrender the license to the board.
   22976.  A distributor or a wholesaler that, at the time of
application, holds a valid license issued by the board pursuant to
Section 30140 or 30155 of the Revenue and Taxation Code may be issued
a license without further investigation.
   22977.  (a) An application for a license shall be on a form
prescribed by the board and shall include the following:
                                                   (1) The name,
address, and telephone number of the applicant.
   (2) The business name, address, and telephone number of each
location where cigarettes or tobacco products will be sold.  For
applicants who control more than one location, an address for receipt
of correspondence or notices from the board, such as a headquarters
or corporate office, shall also be included in the application and
listed on the license.  Citations issued to licensees shall be
forwarded to all addressees on the license.
   (3) A statement by the applicant affirming that the applicant has
not been convicted of a felony and has not violated and will not
violate or cause or permit to be violated any of the provisions of
this division or any rule of the board applicable to the applicant or
pertaining to the manufacture, sale, or distribution of cigarettes
or tobacco products.  If the applicant is unable to affirm this
statement, the application shall contain a statement by the applicant
of the nature of any violation or the reasons that will prevent the
applicant from complying with the requirements with respect to the
statement.
   (4) If any other licenses or permits have been issued by the board
or the Department of Alcoholic Beverage Control to the applicant,
the license or permit numbers for such licenses or permits then in
effect.
   (5) A statement by the applicant that the contents of the
application are complete, true, and correct.  Any person who signs a
statement pursuant to this subdivision that asserts the truth of any
material matter that he or she knows to be false is guilty of a
misdemeanor punishable by imprisonment of up to one year in the
county jail, or a fine of not more than one thousand dollars
($1,000), or both the imprisonment and the fine.
   (6) Signature of the applicant.
   (7) Any other information the board may require.
   (b) The board may investigate to determine the truthfulness and
completeness of the information provided in the application.
   (c) The board shall provide electronic means for applicants to
download and submit applications.
   22977.1.  (a) Every distributor and every wholesaler shall file an
application, as prescribed in Section 22977, on or before April 15,
2004.  Each application shall be accompanied by a fee of one thousand
dollars ($1,000) for each location.  The fee shall be for a calendar
year and may not be prorated.  Subject to meeting the requirements
of this section and Section 22977.2, the board shall issue a license.

   (b) Every distributor and every wholesaler who commences business
after the last day of May 2004, or who commences selling or
distributing cigarettes or tobacco products at a new or different
place of business in this state after the last day of May 2004, shall
file with the board an application as prescribed in Section 22977 at
least 30 days prior to commencing such business or commencing such
sales or distributions; and all distributors and all wholesalers that
fail to timely file an application for a license under subdivision
(a) shall file with the board an application as prescribed in Section
22977.  Each application shall be accompanied by a fee of one
thousand dollars ($1,000) for each location.  The fee shall be for a
calendar year and may not be prorated.  Subject to Section 22977.2,
the board, within 30 days after receipt of an application and payment
of the proper fee shall issue a license.
   (c) For calendar years beginning on and after January 1, 2005,
every distributor and every wholesaler shall file an application for
renewal of the license prescribed in Section 22977, accompanied with
a fee of one thousand dollars ($1,000) for each location where
cigarettes and tobacco products are sold, in the form and manner as
prescribed by the board.
   22977.2.  (a) The board shall issue a license to a distributor or
a wholesaler upon receipt of a completed application and payment of
the fee prescribed in Section 22977.1, unless any of the following
apply:
   (1) The distributor or the wholesaler, or if the distributor or
the wholesaler is not an individual, any person controlling the
distributor or the wholesaler, has previously been issued a license
that is suspended or revoked by the board for violation of any of the
provisions of this division.
   (2) The application is for a license or renewal of a license for a
distributor or a wholesaler, whose license is revoked or revocation
is pending, unless:
   (A) It has been more than five years since a distributor's or a
wholesaler's previous license was revoked.
   (B) The person applying for the license provides the board with
documentation demonstrating that the applicant has acquired or is
acquiring the business in an arm's length transaction.  For purposes
of this section, an "arm's length transaction" is defined as a sale
in good faith and for valuable consideration that reflects the fair
market value in the open market between two informed and willing
parties, neither under any compulsion to participate in the
transaction.  A sale of the business between relatives, related
companies or partners, or a sale for the primary purpose of avoiding
the effect of the violations of state tobacco control laws that were
committed by the distributor or wholesaler is presumed not to be made
at "arm's length."
   (3) The distributor or the wholesaler, or if the distributor or
the wholesaler is not an individual, any person controlling the
distributor or the wholesaler has been convicted of a felony pursuant
to Section 30473 or 30480 of the Revenue and Taxation Code.
   (b) (1) Any distributor or any wholesaler who is denied a license
may petition for a redetermination of the board's denial of the
license within 30 days after service upon that distributor or that
wholesaler of the notice of the denial of the license.  If a petition
for redetermination is not filed within the 30-day period, the
determination of denial becomes final at the expiration of the 30-day
period.
   (2) Every petition for redetermination shall be in writing and
shall state the specific grounds upon which the petition is founded.
The petition may be amended to state additional grounds at anytime
prior to the date on which the board issues its order or decision
upon the petition for redetermination.
   (3) If the petition for redetermination is filed within the 30-day
period, the board shall reconsider the determination of the denial
and, if the distributor or the wholesaler has so requested in the
petition, shall grant the distributor or wholesaler an oral hearing
and shall give the distributor or the wholesaler at least 10 days'
notice of the time and place of the hearing.  The board may continue
the hearing from time to time as may be necessary.
   (4) The order or decision of the board upon a petition for
redetermination becomes final 30 days after mailing of notice
thereof.
   (5) Any notice required by this subdivision shall be served
personally or by mail.  If by mail, the notice shall be placed in a
sealed envelope, with postage paid, addressed to the distributor or
the wholesaler at the address as it appears in the records of the
board.  The giving of notice shall be deemed complete at the time of
deposit of the notice in the United States Post Office, or a mailbox,
subpost office, substation or mail chute or other facility regularly
maintained or provided by the United States Postal Service, without
extension of time for any reason.  In lieu of mailing, a notice may
be served personally by delivering to the person to be served and
service shall be deemed complete at the time of such delivery.
Personal service to a corporation may be made by delivery of a notice
to any person designated in the Code of Civil Procedure to be served
for the corporation with summons and complaint in a civil action.
   22978.  The board shall, upon request, provide to the State
Department of Health Services, the office of the Attorney General, a
law enforcement agency, and any agency authorized to enforce local
tobacco control ordinances, access to the board's database of
licenses issued to distributors and wholesalers for locations within
the jurisdiction of that agency or law enforcement agency.  The
agencies authorized by this section to access the board's database
shall only access and use the board's database for purposes of
enforcing tobacco control laws and shall adhere to all state laws,
policies, and regulations pertaining to the protection of personal
information and individual privacy.
   22978.1.  All distributors and all wholesalers shall retain
purchase records that meet the requirements set forth in Section
22978.5 for all cigarettes or tobacco products purchased.  The
records shall be maintained for a period of one year from the date of
purchase on the distributor's or the wholesaler's premises
identified in the license, and thereafter, the records shall be made
available for inspection by the board or a law enforcement agency for
a period of four years.  Any distributor or any wholesaler found in
violation of these requirements, or any person who fails, refuses, or
neglects to retain or make available invoices for inspection and
copying in accordance with this section shall be subject to penalties
pursuant to Section 22981.
   22978.2.  (a) Notwithstanding any other provision of this
division, upon discovery by the board or a law enforcement agency
that a distributor possesses, stores, owns, or has made a sale of an
unstamped package of cigarettes bearing a counterfeit California
state tax stamp or that a wholesaler possesses, stores, owns, or has
made a sale of an unstamped package of cigarettes, the board or the
law enforcement agency shall be authorized to seize the unstamped
packages of cigarettes at the distributor's or the wholesaler's
location.  Any cigarettes seized by a law enforcement agency shall be
delivered to the board, or its designee, within seven days, unless
otherwise required to be used as evidence in an administrative,
criminal, or civil proceeding, or as part of an ongoing law
enforcement investigation.  Any cigarettes seized by the board or
delivered to the board by a law enforcement agency shall be deemed
forfeited and the board shall comply with procedures set forth in
Part 13 (commencing with Section 30436) of Division 2 of Chapter 7.5
of the Revenue and Taxation Code.  In addition to the distributor's
or wholesaler's inventory of unstamped packages of cigarettes being
subject to seizure and forfeiture, the possession, storage, ownership
or sale by a distributor or wholesaler of the unstamped package of
cigarettes in the manner described above, shall constitute a
misdemeanor punishable by the following actions:
   (1) A first violation involving seizure of a total quantity of
less than 20 unstamped packages of cigarettes shall be a misdemeanor
punishable by a fine of one thousand dollars ($1,000) or imprisonment
not to exceed one year in a county jail, or both the fine and
imprisonment.
   (2) A second violation within five years involving seizure of a
total quantity of less than 20 unstamped packages of cigarettes shall
be a misdemeanor punishable by a fine of not less than two thousand
dollars ($2,000) but not to exceed five thousand dollars ($5,000) or
imprisonment not to exceed one year in a county jail, or both the
fine and imprisonment, and shall also result in the revocation of the
license.
   (3) A first violation involving seizure of a total quantity of 20
unstamped packages of cigarettes or more shall be a misdemeanor
punishable by a fine of two thousand dollars ($2,000) or imprisonment
not to exceed one year in a county jail, or both the fine and
imprisonment.
   (4) A second violation within five years involving seizure of a
total quantity of 20 unstamped packages of cigarettes or more shall
be a misdemeanor punishable by a fine of not less than five thousand
dollars ($5,000) but not to exceed fifty thousand dollars ($50,000)
or imprisonment not to exceed one year in a county jail, or both the
fine and imprisonment, and shall also result in the revocation of the
license.
   (b) Upon discovery by the board or a law enforcement agency that a
distributor or a wholesaler possesses, stores, owns, or has made a
sale of tobacco products on which tax is due but has not been paid to
the board, or its designee, the board or law enforcement agency is
authorized to seize such tobacco products at the distributor or
wholesaler location.  Any tobacco products seized by a law
enforcement agency shall be delivered to the board within seven days,
unless otherwise required to be used as evidence in an
administrative, criminal, or civil proceeding, or as part of an
ongoing law enforcement operation.  Any tobacco products seized by
the board or delivered to the board by a law enforcement agency shall
be deemed forfeited and the board shall comply with procedures set
forth in Part 13 (commencing with Section 30436) of Division 2 of
Chapter 7.5 of the Revenue and Taxation Code.  It shall be presumed
that tax has not been paid to the board on all tobacco products in
the possession of a distributor or a wholesaler until the contrary is
established by the distributor's proof of payment to the board or by
a purchase invoice that shows that the wholesaler paid the tax
included purchase price to a licensed distributor, wholesaler,
manufacturer, or importer as described in Section 22978.4.  The
burden of proof that tax has been paid on tobacco products shall be
upon the distributor or wholesaler in possession thereof.  Possession
by a distributor or a wholesaler of tobacco products on which tax is
due but has not been paid as required is a violation of this
division and subjects the distributor or wholesaler to the actions
described in Section 22981.
   22978.4.  (a) Each distributor and each wholesaler shall include
the following information on each invoice for the sale of cigarettes
or tobacco products:
   (1) The name, address, and telephone number of the distributor or
wholesaler.
   (2) The license number of the distributor or the wholesaler as
provided by the board.
   (3) The amount of excise taxes due to the board by the distributor
on the sale of cigarettes and tobacco products.
   (4) The name, address, and license number of the retailer,
distributor, or wholesaler to whom cigarettes or tobacco products are
sold.
   (5) An itemized listing of the cigarettes or tobacco products
sold.
   (b) Each invoice for the sale of cigarettes or tobacco products
shall be legible and readable.
   (c) Failure to comply with the requirements of this section shall
be a misdemeanor subject to penalties pursuant to Section 22981.
   22978.5.  (a) Each distributor and each wholesaler of cigarette
and tobacco products subject to licensing under this chapter shall
maintain accurate and complete records relating to the sale of those
products, including, but not limited to, receipts, invoices, and
other records as may be required by the board, during the past four
years with invoices for the past year to be maintained on the
premises for which the license was issued, and shall make these
records available upon request by a the board or a law enforcement
agency.
   (b) Failure of a distributor or a wholesaler to comply with this
section shall be a misdemeanor subject to penalties pursuant to
Section 22981.
   22978.6.  The board shall revoke the license, pursuant to the
provisions applicable to the revocation of a license as set forth in
Section 30148 of the Revenue and Taxation Code, of any distributor or
any wholesaler or any person controlling any distributor or any
wholesaler that has:
   (a) Been convicted of a felony pursuant to Section 30473 or 30480
of the Revenue and Taxation Code.
   (b) Had any permit or license revoked under any provision of the
Revenue and Taxation Code.
   22978.7.  In addition to any other civil or criminal penalty
provided by law, upon a finding that any distributor or any
wholesaler has violated any provision of this division, the board may
take the following actions:
   (a) In the case of the first offense, the board may revoke or
suspend the license or licenses of the distributor or the wholesaler
pursuant to the procedures applicable to the revocation of a license
set forth in Section 30148 of the Revenue and Taxation Code.
   (b) In the case of a second or any subsequent offense, in addition
to the action authorized under subdivision (a), the board may impose
a civil penalty in an amount not to exceed the greater of either of
the following:
   (1) Five times the retail value of the cigarettes or tobacco
products.
   (2) Five thousand dollars ($5,000).

      CHAPTER 4.  LICENSE AND ADMINISTRATION FEE FOR MANUFACTURERS
AND IMPORTERS

   22979.  (a) Commencing on January 1, 2004, every manufacturer and
every importer, as defined in subdivision (b) of Section 22971, shall
obtain and maintain a license to engage in the sale of cigarettes.
In order to be eligible for obtaining and maintaining a license under
this division, a manufacturer or importer shall do all of the
following in the manner specified by the board:
   (1) Submit to the board a list of all brand families that they
manufacture or import.
   (2) Update the list of all brand families that they manufacture or
import whenever a new or additional brand is manufactured or
imported, or a listed brand is no longer manufactured or imported.
   (3) Consent to jurisdiction of the California courts for the
purpose of enforcement of this division and appoint a registered
agent for service of process in this state and identify the
registered agent to the board.
   (b) In order to be eligible for obtaining and maintaining a
license under this division, a manufacturer or importer that is a
"tobacco product manufacturer" in subdivision (i) of Section 104556
of the Health and Safety Code, shall do all of the following in the
manner specified by the board:
   (1) Certify to the board that it is a "participating manufacturer"
as defined in subsection II(jj) of the "Master Settlement Agreement"
(MSA), or is in full compliance with paragraph (2) of subdivision
(a) of Section 104557 of the Health and Safety Code.  Any person who
makes a certification pursuant to this subdivision that asserts the
truth of any material matter that he or she knows to be false is
guilty of a misdemeanor punishable by imprisonment of up to one year
in the county jail, or a fine of not more than one thousand dollars
($1,000), or both the imprisonment and the fine.
   (2) Submit to the board a list of all brand families that fit
under the category applicable to the manufacturer or importer, in
accordance with the following:
   (A) Brand families that are to be counted, in the unit volume and
market shares determined pursuant to subsections II(z) and II(mm) of
the MSA and Exhibit E thereto, in calculating the manufacturer's
annual payments under the MSA.
   (B) Brand families that are to be counted in calculating the
manufacturer's escrow deposits under paragraph (2) of subdivision (a)
of Section 104557 of the Health and Safety Code.
   (C) The manufacturer or importer shall update the list whenever a
new or additional brand is manufactured or imported or a listed brand
is no longer manufactured or imported.
   (c) The board may not grant or permit the maintenance of a license
to any manufacturer or an importer of cigarettes that does not
affirmatively certify, both at the time the license is granted and
annually thereafter, that all packages of cigarettes manufactured or
imported by that person and distributed in this state fully comply
with subdivision (b) of Section 30163 of the Revenue and Taxation
Code, and that the cigarettes contained in those packages are the
subject of filed reports that fully comply with all requirements of
the federal Cigarette Labeling and Advertising Act (15 U.S.C. Sec.
13355a et seq.) for the reporting of ingredients added to cigarettes.

   (d) (1) Any manufacturer or any importer who is denied a license
may petition for a redetermination of the board's denial of the
license within 30 days after service upon that manufacturer or that
importer of the notice of the denial of the license.  If a petition
for redetermination is not filed within the 30-day period, the
determination of denial becomes final at the expiration of the 30-day
period.
   (2) Every petition for redetermination shall be in writing and
shall state the specific grounds upon which the petition is founded.
The petition may be amended to state additional grounds at anytime
prior to the date on which the board issues its order or decision
upon the petition for redetermination.
   (3) If the petition for redetermination is filed within the 30-day
period, the board shall reconsider the determination of the denial
and, if the manufacturer or the importer has so requested in the
petition, shall grant an oral hearing and shall give the manufacturer
or the importer at least 10 days' notice of the time and place of
the hearing.  The board may continue the hearing from time to time as
may be necessary.
   (4) The order or decision of the board upon a petition for
redetermination becomes final 30 days after mailing of notice
thereof.
   (5) Any notice required by this subdivision shall be served
personally or by mail.  If by mail, the notice shall be placed in a
sealed envelope, with postage paid, addressed to the manufacturer or
the importer at the address as it appears in the records of the
board.  The giving of notice shall be deemed complete at the time of
deposit of the notice in the United States Post Office, or a mailbox,
subpost office, substation or mail chute or other facility regularly
maintained or provided by the United States Postal Service, without
extension of time for any reason.  In lieu of mailing, a notice may
be served personally by delivering to the person to be served and
service shall be deemed complete at the time of such delivery.
Personal service to a corporation may be made by delivery of a notice
to any person designated in the Code of Civil Procedure to be served
for the corporation with summons and complaint in a civil action.
   22979.1.  (a) An application for a license by a manufacturer or by
an importer shall be on a form prescribed by the board and shall
include the following:
   (1) The name, address, and telephone number of the applicant.  The
business name, address, and telephone number of the corporate
offices.  Citations issued to licensees shall be forwarded to all
addressees on the license.
   (2) License number for any other valid licenses or permits issued
by the board.
   (3) Signature of the applicant under oath to verify application
information.
   (4) The name, address, and telephone number of the person
designated by the manufacturer or the importer as its agent for
receipt of service of process in this state.
   (5) Any other information the board may require.
   (b) The board may conduct an inquiry to determine whether the
applicant complies with the provisions of this division.
   (c) The board shall provide electronic means for applicants to
download and submit applications.
   22979.2.  (a) On or before January 1, 2004, every manufacturer and
every importer shall pay to the board an administration fee.  The
amount of the administration fee shall be one cent ($0.01) per
package of cigarettes (1) manufactured or imported by the
manufacturer or the importer and (2) shipped into this state during
the 2001 calendar year as reported to the board.  The board shall
notify each manufacturer and each importer of the amount due under
this section.
   (b) This section shall apply to every manufacturer and every
importer required to be licensed pursuant to Section 22979.  All
manufacturers and all importers that may become eligible for
licensure on or after December 1, 2003, shall be notified by the
board of the appropriate fee due and shall pay that fee within 90
days of notification.
   (c) All manufacturers and all importers that begin operations in
the state after enactment of this division shall be charged a fee
commensurate with their respective market share of (1) cigarettes
manufactured or imported by the manufacturer and (2) sold in this
state during the next calendar year as estimated by the board.  The
fee shall be at an amount not less than that paid pursuant to
subdivision (a) by the smallest manufacturer, but may not be more
than that paid by the eighth largest manufacturer.
   (d) The board shall administer this fee in accordance with the Fee
Collection Procedures Law, Part 30 (commencing with Section 55001)
of Division 2 of the Revenue and Taxation Code.
   22979.3.  The board shall, upon request, provide to the State
Department of Health Services, the office of the Attorney General, a
law enforcement agency, and any agency authorized to enforce local
tobacco control ordinances, access to the board's database of
licenses issued to manufacturers and importers for locations within
the jurisdiction of that agency or law enforcement agency.  The
agencies authorized by this section to access the board's database
shall only access and use the board's database for purposes of
enforcing tobacco control laws and shall adhere to all state laws,
policies, and regulations pertaining to the protection of personal
information and individual privacy.
   22979.4.  All manufacturers and importers shall retain purchase
records that meet the requirements set forth in Section 22979.5 for
all cigarettes or tobacco products purchased and other records
required by the board.  The records shall be maintained for a period
of one year from the date of purchase on the manufacturer's or
importer's premises identified in the license, and thereafter, the
records shall be made available for inspection by the board or a law
enforcement agency for a period of four years.  Any manufacturer or
importer found in violation of these requirements, or any person who
fails, refuses, or neglects to retain or make available invoices for
inspection and copying in accordance with this section shall be
subject to penalties pursuant to Section 22981.
   22979.5.  (a) Each manufacturer and each importer of cigarette and
tobacco products subject to licensing under this chapter shall
maintain accurate and complete records relating to the sale of those
products, including, but not limited to, receipts, invoices, and
other records as may be required by the board, during the past four
years with invoices for the past year to be maintained on the
premises for which the license was issued, and shall make these
records available upon request by a representative of the board or a
law enforcement agency.

    (b) Failure of a manufacturer or an importer to comply with this
section shall be a misdemeanor subject to penalties pursuant to
Section 22981.
   22979.6.  (a) Each manufacturer and each importer shall include
the following information on each invoice for the sale for
distribution, wholesale, or retail sale of cigarettes or tobacco
products:
   (1) The name, address, and telephone number of the manufacturer,
or importer.
   (2) The license number of the manufacturer or importer as provided
by the board.
   (3) The name, address, and license number of the person to whom
cigarettes or tobacco products are sold.
   (4) An itemized listing of the cigarettes or tobacco products
sold.
   (b) Each invoice for the sale of cigarettes or tobacco products
shall be legible and readable.
   (c) Failure to comply with the requirements of this section shall
be a misdemeanor subject to penalties pursuant to Section 22981.
   22979.7.  In addition to any other civil or criminal penalty
provided by law, upon a finding that a manufacturer or importer has
violated any provision of this division, the board may take the
following actions:
   (a) In the case of the first offense, the board may revoke or
suspend the license or licenses of the manufacturer or importer
pursuant to the procedures applicable to the revocation of a license
set forth in Section 30148 of the Revenue and Taxation Code.
   (b) In the case of a second or any subsequent offense, in addition
to the action authorized under subdivision (a), the board may impose
a civil penalty in an amount not to exceed the greater of either of
the following:
   (1) Five times the retail value of the cigarettes or tobacco
products defined as cigarettes under this section.
   (2) Five thousand dollars ($5,000).

      CHAPTER 5.  INSPECTIONS, PROHIBITIONS, AND PENALTIES

   22980.  (a) (1) Any peace officer, or board employee granted
limited peace officer status pursuant to paragraph (6) of subdivision
(a) of Section 830.11 of the Penal Code, upon presenting appropriate
credentials, is authorized to enter any place as described in
paragraph (3) and to conduct inspections in accordance with the
following paragraphs, inclusive.
   (2) Inspections shall be performed in a reasonable manner and at
times that are reasonable under the circumstances, taking into
consideration the normal business hours of the place to be entered.
   (3) Inspections may be at any place at which cigarettes or tobacco
products are sold, produced, or stored or at any site where evidence
of activities involving evasion of cigarette or tobacco products tax
may be discovered.
   (4) Inspections shall be requested or conducted no more than once
in a 24-hour period.
   (b) Any person that refuses to allow an inspection shall be
subject to the penalties imposed pursuant to Section 22981.
   22980.1.  (a) No manufacturer shall sell cigarettes to a
distributor, wholesaler, importer, retailer, or any other person who
is not licensed pursuant to this division or whose license has been
suspended or revoked.
   (b) No distributor, wholesaler, or importer shall sell cigarettes
or tobacco products to a retailer, wholesaler, distributor, or any
other person who is not licensed pursuant to this division or whose
license has been suspended or revoked.
   (c) No retailer, distributor, wholesaler, or importer shall
purchase packages of cigarettes from a manufacturer who is not
licensed pursuant to this division or whose license has been
suspended or revoked.
   (d) No retailer, distributor, wholesaler, or importer shall
purchase cigarettes or tobacco products from any person who is
required to be licensed pursuant to this division but who is not
licensed or whose license has been suspended or revoked.
   (e) Each separate sale to, or by, a retailer, wholesaler,
distributor, importer, manufacturer, or any other person who is not
licensed pursuant to this division shall constitute a separate
violation.
   (f) No manufacturer, distributor, wholesaler, or importer may sell
cigarette or tobacco products to any retailer or wholesaler whose
license has been suspended or revoked unless all outstanding debts of
that retailer or wholesaler that are owed to a wholesaler or
distributor for cigarette or tobacco products are paid and the
license of that retailer or wholesaler has been reinstated by the
board.  Any payment received from a retailer or wholesaler shall be
credited first to the outstanding debt for cigarettes or tobacco
products and must be immediately reported to the board.  The board
shall determine the debt status of a suspended retailer or wholesaler
licensee 25 days prior to the reinstatement of the license.
   (g) No importer, distributor, or wholesaler, or distributor
functioning as a wholesaler, or retailer, shall purchase, obtain, or
otherwise acquire any package of cigarettes to which a stamp or meter
impression may not be affixed in accordance with subdivision (b) of
Section 30163 of the Revenue and Taxation Code, or any cigarettes
obtained from a manufacturer or importer that cannot demonstrate full
compliance with all requirements of the federal Cigarette Labeling
and Advertising Act (15 U.S.C. Sec. 13335a et seq.) for the reporting
of ingredients added to cigarettes.
   (h) Failure to comply with the provisions of this section shall be
a misdemeanor subject to penalties pursuant to Section 22981.
   22980.2.  (a) A person or entity that engages in the business of
selling cigarettes or tobacco products in this state without a
license or after a license has been suspended or revoked, and each
officer of any corporation that so engages in business, is guilty of
a misdemeanor punishable as provided in Section 22981.
   (b) Each day after notification by a law enforcement agency that a
manufacturer, wholesaler, distributor, importer, retailer, or any
other person required to be licensed under this act offers cigarette
and tobacco products for sale or exchange without a valid license for
the location from which they are offered for sale shall constitute a
separate violation.
   (c) Continued sales after a notification of suspension or
revocation shall constitute a violation of Section 22981, and shall
result in the seizure of all cigarettes and tobacco products in the
possession of the person by the board or a law enforcement agency.
Any cigarettes and tobacco products seized by the board or by a law
enforcement agency shall be deemed forfeited.
   22980.3.  (a) Licenses issued pursuant to this division shall be
subject to suspension or revocation for violations of the provisions
of this division or the Revenue and Taxation Code as provided in this
section.
   (1) In addition to any applicable fines or penalties for a
violation, upon first conviction of a violation, a licensee shall
receive a written notice from the board detailing the suspension and
revocation provisions of this act.  At its discretion, the board may
also suspend a license for up to 30 days.
   (2) In addition to any applicable fines or penalties for a
violation, upon a second conviction of a violation within four years
of a previous violation the license shall be revoked.
   (b) The date of the occurrence of a violation shall be used to
calculate the duration between subsequent violations.  A violation
shall be noted in the license record at the board only after judicial
conviction or final adjudication of a violation.  Upon updating a
record for a violation triggering a suspension, the board shall serve
the licensee with a notice of suspension and shall order the
licenseholder to immediately cease the sale of cigarettes or tobacco
products.
   (c) Upon notice of suspension, the board shall serve the licensee
with a notice of suspension and shall order the licensee to
immediately cease the sale of cigarettes or tobacco products.
Continued sales after the notification of suspension shall constitute
a violation of the licensing provisions of this division and shall
result in the revocation of a license.
   (d) Upon completion of a suspension period, a license shall be
reinstated by the board upon certification that all outstanding debts
of that retailer or wholesaler that are owed to a wholesaler or
distributor for the purchase of cigarette and tobacco products are
paid.
   (e) After a revocation, a previously licensed applicant may apply
for a new license after six months.  The board may, at its
discretion, issue a new license.
   (f) Upon updating a license record for a violation, suspension, or
revocation to a license of a person or entity that owns or controls
more than one location, the board shall send notice in writing of the
violations, suspensions, or revocations within 15 days of the board'
s action to the address included in the application and listed on the
license for receipt of correspondence or notices from the board.
   (g) Upon suspension or revocation of a license pursuant to this
section, the board shall notify all licensed distributors and
wholesalers by electronic mail within 48 hours of the suspension or
revocation of that license.  All licensed distributors and
wholesalers shall provide the board and shall update, as necessary,
an electronic mail address that the board can use for purposes of
making the notifications required by this subdivision.
   (h) Violations by a licensee at one location may not be
accumulated against other locations of that same licensee.
Violations accumulated against a prior owner at a licensed location
may not be accumulated against a new owner at the same licensed
location.
   (i) For purposes of this section, a violation includes violations
of the Revenue and Taxation Code relating to cigarettes and tobacco
products, and violations of this division.  Only one violation per
discrete action shall be counted towards a suspension or revocation
of a license.
   22981.  Any violation of this division by any person, except as
otherwise provided, is a misdemeanor.  Each offense shall be punished
by a fine not to exceed five thousand dollars ($5,000), or
imprisonment not exceeding one year in a county jail, or both the
fine and imprisonment.  The court shall order any fines assessed be
deposited in the Cigarette and Tobacco Products Compliance Fund.
   22982.  Any prosecution for a violation of any of the penal
provisions of this division shall be instituted within four years
after the commission of the offense.

      CHAPTER 6.  DISPOSITION OF FUNDS

   22990.  (a) All moneys collected pursuant to this division shall
be deposited in the Cigarette and Tobacco Products Compliance Fund,
which is hereby created in the State Treasury.  No moneys in the
Cigarette and Tobacco Products Compliance Fund shall be used to
supplant state or local General Fund money for any purpose.
   (b) All moneys in the Cigarette and Tobacco Products Compliance
Fund are available for expenditure, upon appropriation by the
Legislature, solely for the purpose of implementing, enforcing, and
administering the California Cigarette and Tobacco Products Licensing
Act of 2003.
   22991.  The amount of eleven million dollars ($11,000,000) is
appropriated from the Cigarette and Tobacco Products Compliance Fund
during the 2003-04 fiscal year to the State Board of Equalization for
the purpose of implementing, enforcing, and administering the
California Cigarette and Tobacco Products Licensing Act of 2003,
subject to the following provisions:
   (a) Spending under the appropriation made by this subdivision is
limited solely to revenues in the fund that are derived from fees
imposed on cigarette and tobacco product manufacturers, wholesalers,
distributors, importers, and retailers.
   (b) Of the total amount appropriated under this subdivision, five
million four hundred thousand dollars ($5,400,000) is available for
reimbursement to the Department of Justice through an interagency
agreement with the board for investigation and enforcement
assistance.
   (c) The expenditure of any funds from the appropriation made by
this subdivision shall require the prior approval of the Director of
Finance.  The amounts appropriated may be approved for expenditure on
an allotment basis and shall be limited to the amounts necessary to
carry out the operating and staffing plans for the implementation of
the California Cigarette and Tobacco Products Licensing Act of 2003
as approved by the Department of Finance.  The Department of Finance
shall notify the Joint Legislative Budget Committee of its approval
of any expenditure authorization 30 days prior to that approval.

      CHAPTER 7.  DURATION OF DIVISION

   22995.  This division shall remain in effect until January 1,
2010, and as of that date shall be repealed.
  SEC. 2.  Section 15618.5 is added to the Government Code, to read:

   15618.5.  Notwithstanding Section 1808.5 of the Vehicle Code, the
board, as a board, individually, or through its staff, may obtain
copies of fullface engraved pictures or photographs of licensees
directly from the Department of Motor Vehicles for the purposes of
enforcing the Revenue and Taxation Code.
  SEC. 3.  Section 104557 of the Health and Safety Code is amended to
read:
   104557.  (a) Any tobacco product manufacturer selling cigarettes
to consumers within the state, whether directly or through a
distributor, retailer or similar intermediary or intermediaries,
after the date of enactment of this article shall do one of the
following:
   (1) Become a participating manufacturer as that term is defined in
Section II(jj) of the Master Settlement Agreement and generally
perform its financial obligations under the Master Settlement
Agreement; or
   (2) Place into a qualified escrow fund by April 15 of the year
following the year in question the following amounts, as such amounts
are adjusted for inflation:
   (A) For 1999:  $0.0094241 per unit sold during that year, after
the date of the enactment of this article.
   (B) For 2000:  $0.0104712 per unit sold during that year.
   (C) For each of 2001 and 2002:  $0.0136125 per unit sold during
the year in question.
   (D) For each of 2003 through 2006:  $0.0167539 per unit sold
during the year in question.
   (E) For each of 2007 and each year thereafter:  $0.0188482 per
unit sold during the year in question.
   (b) Any tobacco product manufacturer that places funds into escrow
pursuant to paragraph (2) of subdivision (a) shall receive the
interest or other appreciation on the funds as earned.  The funds,
other than the interest or other appreciation, shall be released from
escrow only under the following circumstances:
   (1) To pay a judgment or settlement on any released claim brought
against that tobacco product manufacturer by the state or any
releasing party located or residing in the state.  Funds shall be
released from escrow under this subdivision (i) in the order in which
they were placed into escrow and (ii) only to the extent and at the
time necessary to make payments required under that judgment or
settlement.
   (2) To the extent that a tobacco product manufacturer establishes
that the amount it was required to place into escrow on account of
units sold in this state in a particular year was greater than the
Master Settlement Agreement payments, as determined pursuant to
section IX(i) of the agreement including after the final
determination of all adjustments, that the manufacturer would have
been required to make on account of the units sold had it been a
participating manufacturer, the excess shall be released from escrow
and revert back to that tobacco product manufacturer; or
   (3) To the extent not released from escrow under paragraph (1) or
(2) of subdivision (b), funds shall be released from escrow and
revert back to the tobacco product manufacturer 25 years after the
date on which they were placed into escrow.
   (c) Each tobacco product manufacturer that elects to place funds
into escrow pursuant to paragraph (2) of subdivision (a) shall
annually certify to the Attorney General that it is in compliance
with paragraph (2) of subdivision (a), and subdivision (b).  The
Attorney General may bring a civil action on behalf of the state
against any tobacco product manufacturer that fails to place into
escrow the funds required under this section.  Any tobacco product
manufacturer that fails in any year to place into escrow the funds
required under this section shall:
   (1) Be required within 15 days to place the funds into escrow as
shall bring it into compliance with this section.  The court, upon a
finding of a violation of paragraph (2) of subdivision (a), or
subdivision (b), may impose a civil penalty to be paid to the General
Fund of the state in an amount not to exceed 5 percent of the amount
improperly withheld from escrow per day of the violation and in a
total amount not to exceed 100 percent of the original amount
improperly withheld from escrow.
   (2) In the case of a knowing violation, be required within 15 days
to place the funds into escrow as shall bring it into compliance
with this section.  The court, upon a finding of a knowing violation
of paragraph (2) of subdivision (a), or subdivision (b), may impose a
civil penalty to be paid to the General Fund in an amount not to
exceed 15 percent of the amount improperly withheld from escrow per
day of the violation and in a total amount not to exceed 300 percent
of the original amount improperly withheld from escrow.
   (3) In the case of a second knowing violation, be prohibited from
selling cigarettes to consumers within the state, whether directly or
through a distributor, retailer, or similar intermediary, for a
period not to exceed two years.
   (d) Each failure to make an annual deposit required under this
section shall constitute a separate violation.
  SEC. 4.  Section 830.11 of the Penal Code is amended to read:
   830.11.  (a) The following persons are not peace officers but may
exercise the powers of arrest of a peace officer as specified in
Section 836 and the power to serve warrants as specified in Sections
1523 and 1530 during the course and within the scope of their
employment, if they receive a course in the exercise of those powers
pursuant to Section 832.  The authority and powers of the persons
designated under this section shall extend to any place in the state:

   (1) Persons employed by the Department of Financial Institutions
designated by the Commissioner of Financial Institutions, provided
that the primary duty of these persons shall be the enforcement of,
and investigations relating to, the provisions of law administered by
the Commissioner of Financial Institutions.
   (2) Persons employed by the Department of Real Estate designated
by the Real Estate Commissioner, provided that the primary duty of
these persons shall be the enforcement of the laws set forth in Part
1 (commencing with Section 10000) and Part 2 (commencing with Section
11000) of Division 4 of the Business and Professions Code.  The Real
Estate Commissioner may designate persons under this section, who at
the time of their designation, are assigned to the Special
Investigations Unit, internally known as the Crisis Response Team.
   (3) Persons employed by the State Lands Commission designated by
the executive officer, provided that the primary duty of these
persons shall be the enforcement of the law relating to the duties of
the State Lands Commission.
   (4) Persons employed as investigators of the Investigations Bureau
of the Department of Insurance, who are designated by the Chief of
the Investigations Bureau, provided that the primary duty of these
persons shall be the enforcement of the Insurance Code and other laws
relating to persons and businesses, licensed and unlicensed by the
Department of Insurance, who are engaged in the business of
insurance.
   (5) Persons employed as investigators and investigator supervisors
of the Consumer Services Division or the Rail Safety and Carrier
Division of the Public Utilities Commission who are designated by the
commission's executive director and approved by the commission,
provided that the primary duty of these persons shall be the
enforcement of the law as that duty is set forth in Section 308.5 of
the Public Utilities Code.
   (6) (A) Persons employed by the State Board of Equalization,
Investigations Division, who are designated by the board's executive
director, provided that the primary duty of these persons shall be
the enforcement of laws administered by the State Board of
Equalization.
   (B) Persons designated pursuant to this paragraph are not entitled
to peace officer retirement benefits.
   (b) Notwithstanding any other provision of law, persons designated
pursuant to this section may not carry firearms.
   (c) Persons designated pursuant to this section shall be included
as "peace officers of the state" under paragraph (2) of subdivision
(c) of Section 11105 for the purpose of receiving state summary
criminal history information and shall be furnished that information
on the same basis as peace officers of the state designated in
paragraph (2) of subdivision (c) of Section 11105.
   (d) This section shall remain in effect until January 1, 2010, and
as of that date shall be repealed.
  SEC. 5.  Section 830.11 is added to the Penal Code, to read:
   830.11.  (a) The following persons are not peace officers but may
exercise the powers of arrest of a peace officer as specified in
Section 836 and the power to serve warrants as specified in Sections
1523 and 1530 during the course and within the scope of their
employment, if they receive a course in the exercise of those powers
pursuant to Section 832.  The authority and powers of the persons
designated under this section shall extend to any place in the state:

   (1) Persons employed by the Department of Financial Institutions
designated by the Commissioner of Financial Institutions, provided
that the primary duty of these persons shall be the enforcement of,
and investigations relating to, the provisions of law administered by
the Commissioner of Financial Institutions.
   (2) Persons employed by the Department of Real Estate designated
by the Real Estate Commissioner, provided that the primary duty of
these persons shall be the enforcement of the laws set forth in Part
1 (commencing with Section 10000) and Part 2 (commencing with Section
11000) of Division 4 of the Business and Professions Code.  The Real
Estate Commissioner may designate persons under this section, who at
the time of their designation, are assigned to the Special
Investigations Unit, internally known as the Crisis Response Team.
   (3) Persons employed by the State Lands Commission designated by
the executive officer, provided that the primary duty of these
persons shall be the enforcement of the law relating to the duties of
the State Lands Commission.
   (4) Persons employed as investigators of the Investigations Bureau
of the Department of Insurance, who are designated by the Chief of
the Investigations Bureau, provided that the primary duty of these
persons shall be the enforcement of the Insurance Code and other laws
relating to persons and businesses, licensed and unlicensed by the
Department of Insurance, who are engaged in the business of
insurance.
   (5) Persons employed as investigators and investigator supervisors
of the Consumer Services Division or the Rail Safety and Carrier
Division of the Public Utilities Commission who are designated by the
commission's executive director and approved by the commission,
provided that the primary duty of these persons shall be the
enforcement of the law as that duty is set forth in Section 308.5 of
the Public Utilities Code.
   (b) Notwithstanding any other provision of law, persons designated
pursuant to this section may not carry firearms.
   (c) Persons designated pursuant to this section shall be included
as "peace officers of the state" under paragraph (2) of subdivision
(c) of Section 11105 for the purpose of receiving state summary
criminal history information and shall be furnished that information
on the same basis as peace officers of the state designated in
paragraph (2) of subdivision (c) of Section 11105.
   (d) This section shall become operative on January 1, 2010.
  SEC. 6.  Section 30019 is added to the Revenue and Taxation Code,
to read:
   30019.  "Importer" means any purchaser for resale in the United
States of cigarettes manufactured outside of the United States.
  SEC. 7.  Section 30165.1 is added to the Revenue and Taxation Code,
to read:
   30165.1.  (a) The following definitions shall apply for purposes
of this section:
   (1) "Board" means the State Board of Equalization.
   (2) "Brand family" means all styles of cigarettes sold under the
same trademark and differentiated from one another by means of
additional modifiers, including, but not limited to, "menthol,"
"lights," "kings," and "100s" and includes any brand name, alone or
in conjunction with any other word, trademark, logo, symbol, motto,
selling message, recognizable pattern of colors, or any other indicia
of product identification identical or similar to, or identifiable
with, a previously known brand of cigarettes.
   (3) "Cigarette" has the same meaning as in subdivision (d) of
Section 104556 of the Health and Safety Code and includes tobacco
products defined as a cigarette under that subdivision.
   (4) "Distributor" has the same meaning as in Section 30011.
   (5) "MSA" means the Master Settlement Agreement, as defined in
subdivision (e) of Section 104556 of the Health and Safety Code.
   (6) "Nonparticipating manufacturer" means any tobacco product
manufacturer that is not a participating manufacturer.
   (7) "Participating manufacturer" has the same meaning as in
subsection II(jj) of the MSA.
   (8) "Qualified escrow fund" has the same meaning as in subdivision
(f) of Section 104556 of the Health and Safety Code.
   (9) "Tobacco product manufacturer" has the same meaning as in
subdivision (i) of Section 104556 of the Health and Safety Code.
   (10) "Units sold" has the same meaning as in subdivision (j) of
Section 104556 of the Health and Safety Code.
   (b) Every tobacco product manufacturer whose cigarettes are sold
in this state, whether directly or through a distributor, retailer,
or similar intermediary or intermediaries, shall execute and deliver
on a form and in the manner prescribed by the Attorney General a
certification to the Attorney General no later than the 30th day of
April each year that, as of the date of the certification, the
tobacco product manufacturer is either a participating manufacturer,
or is in full compliance with Article 3 (commencing with Section
104555) of Chapter 1 of Part 3 of Division 103 of the Health and
Safety Code, including all installment payments
                            required by that article and this
section, and any regulations promulgated pursuant thereto.  Any
person who makes a certification pursuant to this subdivision that
asserts the truth of any material matter that he or she knows to be
false is guilty of a misdemeanor punishable by imprisonment of up to
one year in the county jail, or a fine of not more than one thousand
dollars ($1,000), or both the imprisonment and the fine.
   (1) A participating manufacturer shall include in its
certification a complete list of its brand families.  The
participating manufacturer shall update the list 30 days prior to any
addition to or modification of its brand families by executing and
delivering a supplemental certification to the Attorney General.
   (2) A nonparticipating manufacturer shall include in its
certification a complete list of all of its brand families, in
accordance with the following requirements:
   (A) Separately listing brand families of cigarettes and the number
of units sold for each brand family that were sold in the state
during the preceding calendar year.
   (B) Separately listing all of its brand families that have been
sold in the state at any time during the current calendar year.
   (C) Indicating by an asterisk any brand family sold in the state
during the preceding calendar year that is no longer being sold in
the state as of the date of the certification.
   (D) Identifying by name and address any other manufacturer,
including all fabricators or makers of the brand families in the
preceding or current calendar year in a form, manner, and detail as
required by the Attorney General.  The nonparticipating manufacturer
shall update the list 30 days prior to any change in a fabricator for
any brand family or any addition to or modification of its brand
families by executing and delivering a supplemental certification to
the Attorney General.
   (3) In the case of a nonparticipating manufacturer, the
certification shall further certify all of the following:
   (A) That the nonparticipating manufacturer is registered to do
business in the state, or has appointed a resident agent for service
of process and provided notice thereof as required by subdivision
(f).
   (B) That the nonparticipating manufacturer has done all of the
following:
   (i) Established and continues to maintain a qualified escrow fund
as that term is defined in subdivision (f) of Section 104556 of the
Health and Safety Code and implementing regulations.
   (ii) Executed a qualified escrow agreement that has been reviewed
and approved by the Attorney General and that governs the qualified
escrow fund.
   (iii) If the nonparticipating manufacturer is not the fabricator
or maker of the cigarettes, that the escrow agreement, certification,
reports, and any other forms required by Article 3 (commencing with
Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health
and Safety Code and implementing regulations are signed by the
company that fabricates or makes the cigarettes and in the manner
required by the Attorney General.
   (C) That the nonparticipating manufacturer is in full compliance
with Article 3 (commencing with Section 104555) of Chapter 1 of Part
3 of Division 103 of the Health and Safety Code, including paragraph
(2) of subdivision (a) of Section 104557 of the Health and Safety
Code, this section, and any regulations promulgated pursuant thereto.

   (D) That the manufacturer has provided all of the following:
   (i) The name, address, and telephone number of the financial
institution where the nonparticipating manufacturer has established
the qualified escrow fund required pursuant to Article 3 (commencing
with Section 104555) of Chapter 1 of Part 3 of Division 103 of the
Health and Safety Code and all regulations promulgated thereto.
   (ii) The account number of the qualified escrow fund and
subaccount number for the State of California.
   (iii) The amount the nonparticipating manufacturer placed in the
fund for cigarettes sold in the state during the preceding calendar
year, the date and amount of each deposit, and any confirming
evidence or verification as may be deemed necessary by the Attorney
General.
   (iv) The amounts and dates of any withdrawal or transfer of funds
the nonparticipating manufacturer made at any time from the fund or
from any other qualified escrow fund into which it ever made escrow
payments pursuant to Article 3 (commencing with Section 104555) of
Chapter 1 of Part 3 of Division 103 of the Health and Safety Code and
all regulations promulgated thereto.
   (4) (A) A tobacco product manufacturer may not include a brand
family in its certification unless either of the following is true:
   (i) In the case of a participating manufacturer, the participating
manufacturer affirms that the brand family is to be deemed to be its
cigarettes for purposes of calculating its payments under the MSA
for the relevant year, in the volume and shares determined pursuant
to the MSA.
   (ii) In the case of a nonparticipating manufacturer, the
nonparticipating manufacturer affirms that the brand family is to be
deemed to be its cigarettes for purposes of Article 3 (commencing
with Section 104555) of Chapter 1 of Part 3 of Division 103 of the
Health and Safety Code, including paragraph (2) of subdivision (a) of
Section 104557 of the Health and Safety Code, and any regulations
promulgated pursuant thereto and this section.
   (B) Nothing in this section shall be construed as limiting or
otherwise affecting the state's right to maintain that a brand family
constitutes cigarettes of a different tobacco product manufacturer
for purposes of calculating payments under the MSA or for purposes of
Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of
Division 103 of the Health and Safety Code and any regulations
promulgated pursuant thereto.
   (5) A tobacco product manufacturer shall maintain all invoices and
documentation of sales and other information relied upon for the
certification for a period of five years, unless otherwise required
by law to maintain them for a longer period of time.
   (c) Not later than June 30, 2004, the Attorney General shall
develop and publish on its Internet Web site a directory listing of
all tobacco product manufacturers that have provided current, timely,
and accurate certifications conforming to the requirements of
subdivision (b) and all brand families that are listed in the
certifications, except as specified below.
   (1) The Attorney General may not include or retain in the
directory the name or brand families of any nonparticipating
manufacturer that fails to provide the required certification or
whose certification the Attorney General determines is not in
compliance with subdivision (b), unless the Attorney General has
determined that the violation has been cured to the satisfaction of
the Attorney General.
   (2) Neither a tobacco product manufacturer nor brand family shall
be included or retained in the directory if the Attorney General
concludes that either of the following is true:
   (A) In the case of a nonparticipating manufacturer, any escrow
deposit required pursuant to Section 104557 of the Health and Safety
Code for any period for any brand family, whether or not listed by
the nonparticipating manufacturer, has not been fully deposited into
a qualified escrow fund governed by a qualified escrow agreement that
has been approved by the Attorney General.
   (B) Any outstanding final judgment, including interest thereon,
for violations of Article 3 (commencing with Section 104555) of
Chapter 1 of Part 3 of Division 103 of the Health and Safety Code,
this section, and any regulations promulgated pursuant thereto, has
not been fully satisfied for the brand family and the manufacturer.
   (3) The Attorney General shall update the directory as necessary
in order to correct mistakes and to add or remove a tobacco product
manufacturer or brand family to keep the directory in conformity with
the requirements of this section.  The Attorney General shall
promptly provide distributors with written notice of each tobacco
product manufacturer and brand family that the Attorney General has
added to, or excluded or removed from the list.
   (4) Every distributor shall provide to the Attorney General and
update, as necessary, an electronic mail address for the purpose of
receiving any notifications as may be required by this section.
   (5) The Attorney General shall provide each tobacco product
manufacturer that has provided all certifications and other
information required by this section with a written acknowledgment of
receipt within seven business days after receiving the
certifications and other materials.  Each tobacco product
manufacturer shall provide to each distributor to whom it sells or
ships cigarettes, or any tobacco product defined as a cigarette under
this section, a copy of each acknowledgment of receipt provided to
the manufacturer by the Attorney General.  Upon request, the Attorney
General shall provide any distributor with a copy of the most recent
written acknowledgment of receipt provided to the tobacco product
manufacturer.
   (d) (1) The Attorney General may exclude or remove from the list
required by subdivision (c) a tobacco product manufacturer or any of
its brand families, based on a determination that the manufacturer is
not a participating manufacturer and has not made all escrow
payments required by paragraph (2) of subdivision (a) of Section
104557 of the Health and Safety Code, in accordance with that
subdivision, or has not complied with this section.  Before the
exclusion or removal may take effect, the Attorney General shall
notify the manufacturer of this determination.
   (2) Upon receiving notice from the Attorney General pursuant to
paragraph (1), the manufacturer may challenge the Attorney General's
determination as erroneous, and may seek relief from the
determination, by filing a petition for writ of mandate pursuant to
Section 1085 of the Code of Civil Procedure for that purpose in the
Superior Court for the County of Sacramento, or as otherwise provided
by law.  The filing of the petition shall operate to stay the
Attorney General's determination, if the manufacturer has paid into
escrow the full amount of any deficiency in the escrow payments that
the Attorney General has determined the tobacco product manufacturer
was required to have made under paragraph (2) of subdivision (a) of
Section 104557 of the Health and Safety Code, including any
installment payments required under subdivision (h), pending final
resolution of the action.
   (e) (1) No person shall affix, or cause to be affixed, any tax
stamp or meter impression to a package of cigarettes pursuant to
subdivision (a) of Section 30163, or pay the tax levied pursuant to
Sections 30123 and 30131.2 on a tobacco product defined as a
cigarette under this section, unless the brand family of the
cigarettes or tobacco product, and the tobacco product manufacturer
that makes or sells the cigarettes or tobacco product, are included
on the list posted by the Attorney General pursuant to subdivision
(c).
   (2) No person shall sell, offer, or possess for sale in this
state, or import for personal consumption in this state, cigarettes
of a tobacco product manufacturer or brand family not included in the
directory.
   (3) No person shall do either of the following:
   (A) Sell or distribute cigarettes that the person knows or should
know are intended to be distributed in violation of paragraphs (1)
and (2).
   (B) Acquire, hold, own, possess, transport, import, or cause to be
imported cigarettes that the person knows or should know are
intended to be distributed in violation of paragraphs (1) and (2).
   (f) (1) Any nonresident or foreign nonparticipating manufacturer
that has not registered to do business in the state as a foreign
corporation or business entity shall, as a condition precedent to
having its brand families listed or retained in the directory,
appoint and continually engage without interruption the services of
an agent in this state to act as agent for the service of process on
whom all process, and any action or proceeding against it concerning
or arising out of the enforcement of this section, Article 3
(commencing with Section 104555) of Chapter 1 of Part 3 of Division
103 of the Health and Safety Code, and any regulations promulgated
pursuant thereto, may be served in any manner authorized by law.
This service shall constitute legal and valid service of process on
the nonparticipating manufacturer.  The nonparticipating manufacturer
shall provide the name, address, telephone number, and proof of the
appointment and availability of the agent to the satisfaction of the
Attorney General.
   (2) The nonparticipating manufacturer shall provide notice to the
Attorney General 30 calendar days prior to termination of the
authority of an agent and shall further provide proof to the
satisfaction of the Attorney General of the appointment of a new
agent no less than five calendar days prior to the termination of an
existing agent appointment.  In the event an agent terminates an
agency appointment, the nonparticipating manufacturer shall notify
the Attorney General of said termination within five calendar days
and shall include proof to the satisfaction of the Attorney General
of the appointment of a new agent.
   (3) Any nonparticipating manufacturer whose products are sold in
this state without appointing or designating an agent as herein
required shall be deemed to have appointed the Secretary of State as
its agent, as provided in Section 2105 of the Corporations Code, and
may be proceeded against in courts of this state by service of
process upon the Secretary of State.  However, the appointment of the
Secretary of State pursuant to this provision as the agent for
service of process does not satisfy the condition precedent specified
in paragraph (1) to having its brand families listed or retained in
the directory.
   (g) (1) Not later than 25 days after the end of each calendar
quarter, and more frequently if so directed by the board or the
Attorney General, each distributor shall submit any information as
the board or Attorney General requires to facilitate compliance with
this section, including, but not limited to, a list by brand family
of the total number of cigarettes or in the case of roll your own,
the total ounces for which the distributor affixed stamps during the
previous calendar month or otherwise paid the tax due for those
cigarettes.  The distributor shall maintain, and shall make available
to the board and the Attorney General, all invoices and
documentation of sales of all nonparticipating manufacturer
cigarettes and any other information relied upon in reporting to the
board and the Attorney General for a period of five years.
   (2) Notwithstanding Section 30455, the board is authorized to
disclose to the Attorney General any information received under this
part for purposes of determining compliance with and enforcing the
provisions of this section and Article 3 (commencing with Section
104555) of Chapter 1 of Part 3 of Division 103 of the Health and
Safety Code, and any regulations promulgated pursuant thereto.  The
board and Attorney General shall share with each other the
information received under this section, and may share that
information with other federal, state, or local agencies, only for
purposes of enforcement of this section, Article 3 (commencing with
Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health
and Safety Code, and any regulations promulgated pursuant thereto, or
corresponding laws of other states.
   (3) At any time, the Attorney General may require from the
nonparticipating manufacturer proof from the financial institution in
which the manufacturer has established a qualified escrow fund for
the purpose of compliance with Article 3 (commencing with Section
104555) of Chapter 1 of Part 3 of Division 103 of the Health and
Safety Code, and any regulations promulgated pursuant thereto, of the
amount of money in the fund being held on behalf of the state and
the dates of deposits, and listing the amounts of all withdrawals
from the fund and the dates thereof.
   (4) In addition to the information required to be submitted
pursuant to this section or Article 3 (commencing with Section
104555) of Chapter 1 of Part 3 of Division 103 of the Health and
Safety Code and any regulations promulgated pursuant thereto, the
board or the Attorney General may require a retailer, wholesaler,
distributor, or tobacco product manufacturer to submit any additional
information, including, but not limited to, samples of the packaging
or labeling of each brand family, as is necessary to enable the
Attorney General to determine whether a tobacco product manufacturer
is in compliance with this section, or Article 3 (commencing with
Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health
and Safety Code, and any regulations promulgated pursuant thereto.
   (h) To promote compliance with this section, the Attorney General
may promulgate regulations requiring a tobacco product manufacturer
subject to the requirements of paragraph (2) of subdivision (a) of
Section 104557 to make the escrow deposits required in quarterly or
other specified installments during the year in which the sales
covered by the deposits are made.  The Attorney General may require
production of information sufficient to enable the Attorney General
to determine the adequacy of the amount of the installment deposit.
   (i) (1) In addition to any other civil or criminal penalty
provided by law, upon a finding that a distributor has violated
subdivision (e), or paragraph (1) of subdivision (g), the board may
take the following actions:
   (A) In the case of the first offense, the board may revoke or
suspend the license or licenses of the distributor pursuant to the
procedures applicable to the revocation of a license set forth in
Section 30148.
   (B) In the case of a second or any subsequent offense, in addition
to the action authorized under subparagraph (A), the board may
impose a civil penalty in an amount not to exceed the greater of
either of the following:
   (i) Five times the retail value of the cigarettes or tobacco
products defined as cigarettes under this section.
   (ii) Five thousand dollars ($5,000).
   (2) A distributor in any action for a violation of subdivision (e)
shall have a defense provided that either of the following is true:

   (A) At the time of the violation, the cigarettes or tobacco
products claimed to be the subject of the alleged violation belonged
to a brand family that was included on the list required by
subdivision (c).
   (B) At the time of the violation, the distributor possessed a copy
of the Attorney General's most recent written acknowledgment of
receipt of the certifications and other information required as a
condition of including the brand family on the list required by
subdivision (c).
   (3) The defense described in subparagraph (B) of paragraph (2) is
not available to a distributor if, at the time of the violation, the
Attorney General had provided the distributor with written notice
that the brand family had been excluded or removed from the list
required by subdivision (c), or the distributor failed to provide the
Attorney General with a current address for the receipt of written
notice through electronic mail as required by paragraph (4) of
subdivision (c).
   (4) A violation of paragraph (3) of subdivision (e) shall
constitute a misdemeanor.
   (j) If a distributor affixes a stamp or meter impression to a
package of cigarettes under subdivision (a) of Section 30163, or pays
the tax levied under Sections 30123 and 30131.2 on a tobacco product
defined as a cigarette under this section, during the period between
the date on which the brand family of the cigarettes or tobacco
product was excluded or removed from the list required by subdivision
(c) and the date on which the distributor received notice of the
exclusion or removal under paragraph (4) of subdivision (c), then
both of the following shall apply:
   (1) The distributor shall be entitled to a credit for the tax paid
by the distributor with respect to the cigarette or tobacco product
to which the stamp or meter impression was affixed, or the tax paid
during that period.  The distributor shall comply with regulations
prescribed by the board regarding refunds and credits that are
adopted pursuant to Section 30177.5.  If the distributor has sold the
cigarette or tobacco product to a wholesaler or retailer, and has
received payment from the wholesaler or retailer, the distributor
shall provide the credit to the wholesaler or retailer.
   (2) The brand family may not be included on or restored to the
list until the tobacco product manufacturer has reimbursed the
distributor for the cost to the distributor of the cigarettes or
tobacco product to which the stamp or meter impression was affixed,
or the tax paid, during that period.
   (k) Any tobacco product manufacturer that falsely represents any
of the following to any person shall be guilty of a misdemeanor for
each false representation:
   (1) Any information required under subdivision (b).
   (2) That the tobacco product manufacturer is a participating
manufacturer.
   (3) That the tobacco product manufacturer or any other person has
made any or all escrow payments required by paragraph (2) of
subdivision (a) of Section 104557 of the Health and Safety Code, if
applicable to the manufacturer.
   (4) That it has complied with subdivision (b), or with paragraph
(1) of subdivision (g), if applicable to the manufacturer.
   (l) A violation of subdivision (e) shall constitute unfair
competition under Section 17200 of the Business and Professions Code.

   (m) No person shall be issued a distributor's license, pursuant to
Section 30140, unless that person has certified in writing that the
person will comply fully with this section.  Any person who makes a
certification pursuant to this subdivision that asserts the truth of
any material matter that he or she knows to be false is guilty of a
misdemeanor punishable by imprisonment of up to one year in the
county jail, or a fine of not more than one thousand dollars
($1,000), or both the imprisonment and the fine.
   (n) For the year 2003, if the effective date of the act that added
this section is later than March 16, 2003, the first report of
distributors required by paragraph (1) of subdivision (g) shall be
due 30 days after that effective date, the certifications by a
tobacco product manufacturer described in subdivision (b) shall be
due 45 days after that effective date, and the directory described in
subdivision (c) shall be published or made available within 90 days
after that effective date.
   (o) The Attorney General may adopt rules and regulations to
implement this section.  The rules and regulations may establish
procedures for including in the list described in subdivision (c)
tobacco product manufacturers that are not participating
manufacturers and were not required to make escrow payments under
paragraph (2) of subdivision (a) of Section 104557 of the Health and
Safety Code, for sales made during any preceding calendar year, and
brand families of those manufacturers.  The rules and regulations may
also establish procedures for seizure and destruction of cigarettes
forfeited to the state pursuant to Section 30436 or Section 30449,
including, but not limited to, the state facilities that may be used
for the destruction of contraband cigarettes.  Nothing in this
section shall affect the authority of local law enforcement and local
government officials to seize and destroy contraband under existing
state or local law.  The regulations adopted to effect the purposes
of this section are emergency regulations in accordance with Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.  For purposes of that chapter, including
Section 11349.6 of the Government Code, the adoption of the
regulations shall be considered by the Office of Administrative Law
to be necessary for the immediate preservation of the public peace,
health and safety, and general welfare.  Notwithstanding subdivision
(e) of Section 11346.1 of the Government Code, the regulations shall
be repealed 180 days after their effective date, unless the adopting
authority or agency complies with that chapter, as provided in
subdivision (e) of Section 11346.1 of the Government Code.
   (p) In any action brought by the state to enforce this section,
the state shall be entitled to recover the costs of investigation,
expert witness fees, costs of the action, and reasonable attorney's
fees.
   (q) Unless otherwise expressly provided, the remedies or penalties
provided by this section are cumulative to each other and to the
remedies or penalties available under all other laws of this state.
  SEC. 8.  Section 30166.1 is added to the Revenue and Taxation Code,
to read:
   30166.1.  No later than July 1, 2005, the board shall submit a
report to the Legislature that evaluates the average actual costs,
including labor for applying indicia or impressions, bonding,
warehousing, and leasing stamping equipment, including case cutters
and packers, associated with applying stamps or meter impressions to
cigarette packages.  This report shall be updated every two years.
  SEC. 9.  Section 30177.5 is added to the Revenue and Taxation Code,
to read:
   30177.5.  (a) The board shall credit to a distributor that is
entitled to the credit authorized by paragraph (1) of subdivision (j)
of Section 30165.1, the denominated value, less any discounts
authorized by this part, of the stamps or meter impressions purchased
and affixed to those packages of cigarettes that are subject to the
provisions of subdivision (j) of Section 30165.1.
   (b) The board shall credit to a distributor that is entitled to a
credit authorized by paragraph (1) of subdivision (j) of Section
30165.1, the amount of taxes paid by that distributor, pursuant to
Article 2 (commencing with Section 30121) and Article 3 (commencing
with Section 30131), with respect to the tobacco products that are
subject to the provisions of subdivision (j) of Section 30165.1.
  SEC. 10.  Article 2.5 (commencing with Section 30210) is added to
Chapter 4 of Part 13 of Division 2 of the Revenue and Taxation Code,
to read:

      Article 2.5.  Payment by Unlicensed Persons

   30210.  If any person becomes a cigarette or tobacco products
distributor without first securing a license, the tax, and applicable
penalties and interest, if any, become immediately due and payable
on account of all cigarettes or tobacco products distributed.  All
                                        cigarettes or tobacco
products manufactured in this state or transported to this state, and
no longer in the possession of the unlicensed distributor, are
considered to have been distributed.
   30211.  The board shall forthwith ascertain as best it may the
amount of the cigarettes or tobacco products distributed and shall
determine immediately the tax on that amount, adding to the tax a
penalty of 25 percent of the amount of tax or five hundred dollars
($500), whichever is greater, and shall issue a jeopardy
determination to the unlicensed person pursuant to Section 30241 and
give the unlicensed person notice per Section 30244 of the Cigarette
and Tobacco Products Tax Law.  However, where the board determines
that the failure to secure a license was due to reasonable cause, the
penalty may be waived.  Sections 30242 and 30243 shall be applicable
with respect to the finality of the determination and the right of
the unlicensed person to petition for a redetermination.
   Any person seeking to be relieved of the penalty shall file with
the board a signed statement setting forth the facts upon which he or
she bases the claim for relief.  Any person who signs a statement
pursuant to this section that asserts the truth of any material
matter that he or she knows to be false is guilty of a misdemeanor
punishable by imprisonment of up to one year in the county jail, or a
fine of not more than one thousand dollars ($1,000), or both the
imprisonment and the fine.
   30212.  The board shall forthwith collect the tax, penalty, and
interest due from the unlicensed person by seizure and sale of
property in the manner prescribed for the collection of a delinquent
monthly tax.
   30213.  In the suit, a copy of the jeopardy determination
certified by the board shall be prima facie evidence that the
unlicensed person is indebted to the state in the amount of the tax,
penalties, and interest computed as prescribed by Section 30223.
   30214.  The foregoing remedies of the state are cumulative.
   30215.  No action taken pursuant to this article relieves the
unlicensed person in any way from the penal provisions of this part.

   30216.  This article shall remain in effect until January 1, 2010,
and as of that date shall be repealed.
  SEC. 11.  Article 5 (commencing with Section 30355) is added to
Chapter 5 of Part 13 of Division 2 of the Revenue and Taxation Code,
to read:

      Article 5.  Seizure and Sale

   30355.  Whenever any person is delinquent in the payment of the
obligations imposed under this part, the board or its authorized
representative may seize any property, real or personal, subject to
the lien of the tax and thereafter sell the property, or a sufficient
part of it, at public auction to pay the tax due together with any
interest and penalties imposed for the delinquency and any costs
incurred on account of the seizure and sale.
   30356.  Notice of the sale and the time and place thereof shall be
given in writing at least 20 days before the date set for the sale
to the delinquent person and to all persons who have an interest of
record in the property seized.  The notice shall be personally served
or enclosed in an envelope addressed to the person at his or her
last known residence or place of business in this state.  If not
personally served, the notice shall be deposited in the United States
mail, postage prepaid.  The notice shall be published pursuant to
Section 6063 of the Government Code, in a newspaper of general
circulation published in the city in which the property or a part
thereof is situated if any part thereof is situated in a city or, if
not, in a newspaper of general circulation published in the county in
which the property or a part thereof is located.  Notice shall also
be posted in both of the following manners:
   (a) One public place in the city in which the interest in property
is to be sold if it is to be sold in a city or, if not to be sold in
a city, one public place in the county in which the interest in the
property is to be sold.
   (b) One conspicuous place on the property.  The notice shall
contain a description of the property to be sold, a statement of the
amount due, including tax, penalties, interest, and costs, the name
of the person, and the further statement that unless the amount is
paid on or before the time fixed in the notice of sale, the property,
or so much of it as may be necessary, will be sold in accordance
with law and the notice.
   30357.  At any sale the board or its authorized agent shall sell
the property in accordance with the law and the notice and shall
deliver to the purchaser a bill of sale for the personal property and
a deed for any real property sold.  The bill of sale or deed vests
title in the purchaser.  The unsold portion of any property seized
may be left at the place of sale at the risk of the taxpayer.
   30358.  If upon any sale the moneys received exceed the amount due
to the state from the taxpayer, the board shall return the excess to
the taxpayer and obtain his or her receipt.  If any person having an
interest in or lien upon the property files with the board prior to
the sale notice of his or her interest or lien, the board shall
withhold payment of any excess pending a determination of the rights
of the respective parties to the excess moneys by a court of
competent jurisdiction.  If for any reason the receipt of the
taxpayer is not available, the board shall deposit the excess moneys
with the Controller, as trustee for the taxpayer, his or her heirs,
successors, or assigns.
   30359.  This article shall remain in effect until January 1, 2010,
and as of that date shall be repealed.
  SEC. 12.  Section 30435 is added to the Revenue and Taxation Code,
to read:
   30435.  (a) An employee of the board, upon presentation of the
appropriate identification and credentials, is authorized to enter
into, and conduct an inspection of any building, facility, site, or
place described in subdivision (b).
   (b) Any building, facility, site, or place at which cigarette or
tobacco products are sold, produced, or stored, or any building,
facility, site, or place for which there is evidence of either the
evasion of the taxes imposed under this part, or the failure to
comply with the requirements of the Master Settlement Agreement, as
defined in subdivision (e) of Section 104556 of the Health and Safety
Code, including, but not limited to, Section 30165.1.
   (c) Any inspection performed under the authority of this section
shall be performed in a reasonable manner and at a reasonable time,
taking into consideration the normal business hours of the building,
facility, site, or place that is inspected.
   (d) Any person that refuses to allow an inspection authorized
under this section is subject to the penalty imposed by Section
30471.
   (e) This section shall remain in effect until January 1, 2010, and
as of that date shall be repealed.
  SEC. 13.  Section 30436 of the Revenue and Taxation Code is amended
to read:
   30436.  The following property, upon seizure by the board, is
hereby forfeited to the state:
   (a) Cigarettes or tobacco products transported upon the highways,
roads, or streets of this state in violation of Section 30431 or
Section 30432.
   (b) Cigarettes not contained in packages to which are affixed
California cigarette tax stamp or meter impressions or tobacco
products upon which the tobacco products surtax has not been paid,
which are offered for sale, possessed, kept, stored, or owned by any
person with the intent of the person to sell the cigarettes or
tobacco products without payment of the taxes imposed by this part.
   (c) Any cigarette or tobacco product vending machine, together
with the cigarettes, tobacco products, money or other contents
thereof, that has been loaded, in whole or in part, with packages of
cigarettes that do not have California cigarette tax stamps or meter
impressions affixed or tobacco products upon which the tobacco
products surtax has not been paid.
   (d) Cigarettes contained in packages to which are affixed
California cigarette tax stamps or meter impressions in violation of
Section 30163.
   (e) Cigarettes or tobacco products to which are affixed California
cigarette tax stamps or meter impressions, or for which tax is paid
pursuant to Sections 30123 and 30131.2, in violation of Section
30165.1, regardless of whether the violation is subject to the
defense described in paragraph (2) of subdivision (i) of Section
30165.1.
  SEC. 14.  Section 30449 of the Revenue and Taxation Code is amended
to read:
   30449.  (a) Except as provided in subdivision (b), (c), or (d),
any property, except money, forfeited to the state under this chapter
shall be sold by the board at public auction.  Notice of the sale
shall be given by posting a written notice of the time and place of
sale in three public places in the county where the property is to be
sold for not less than five days nor more than 10 days before the
sale.  If the board is unable to sell any property forfeited to the
state under this part or, if the board determines that the property
is unsalable, it may destroy that property.
   (b) Any property forfeited to the state pursuant to subdivision
(e) of Section 30436 shall be destroyed.
   (c) Any cigarettes forfeited to the state pursuant to subdivision
(b) of Section 30436 shall be destroyed.
   (d) Any cigarettes or tobacco products forfeited to the state
pursuant to Division 8.6 (commencing with Section 22970) of the
Business and Professions Code shall be destroyed.
   (e)  A record shall be kept of all property destroyed pursuant to
this section showing the nature of the property, the quantity, the
reason for, and the manner of destruction.  The proceeds of the sale
and any money forfeited to the state shall be deposited in the State
Treasury to the credit of the General Fund.
  SEC. 15.  Section 30471 of the Revenue and Taxation Code is amended
to read:
   30471.  Any person who fails or refuses to file any report
required to be made, or who fails or refuses to furnish a
supplemental report or other data required by the board, or who fails
or refuses to allow an inspection by the board, pursuant to Section
30435, or who renders a false or fraudulent report is guilty of a
misdemeanor and subject to a fine not to exceed one thousand dollars
($1,000) for each offense.
  SEC. 16.  Section 30473.5 of the Revenue and Taxation Code is
amended to read:
   30473.5.  (a) Any person who possesses, sells, or offers to sell,
or buys or offers to buy, any false or fraudulent stamps or meter
impressions provided for or authorized under this part in a quantity
of less than 2,000 is guilty of a misdemeanor, punishable by a fine
not to exceed five thousand dollars ($5,000) or imprisonment not
exceeding one year in a county jail, or by both the fine and
imprisonment.
   (b) Any person who possesses, sells, or offers to sell, or buys or
offers to buy any false or fraudulent stamps or meter impressions
provided for or authorized under this part in a quantity of 2,000 or
greater, is guilty of a misdemeanor, punishable by a fine not to
exceed fifty thousand dollars ($50,000) or imprisonment not exceeding
one year in a county jail, or by both the fine and imprisonment.
The court shall order any fines assessed be deposited in the
Cigarette and Tobacco Products Compliance Fund.
   (c) The board shall destroy any stamps seized under this section.

  SEC. 17.  Section 30474 of the Revenue and Taxation Code is amended
to read:
   30474.  (a) Any person who knowingly possesses, or keeps, stores,
or retains for the purpose of sale, or sells or offers to sell, any
package of cigarettes to which there is not affixed the stamp or
meter impression required to be affixed under this part, when those
cigarettes have been obtained from any source whatever, is guilty of
a misdemeanor and shall for each offense be fined an amount not to
exceed one thousand dollars ($1,000) or be imprisoned for a period
not to exceed one year in the county jail, or, at the discretion of
the court, be subject to both the fine and imprisonment in the county
jail.
   (b) In addition to the fine or sentence, or both, each person
convicted under this section shall pay one hundred dollars ($100) for
each carton of 200 cigarettes, or portion thereof, if that person
knowingly possessed, or kept, stored, or retained for the purpose of
sale, or sold or offered for sale in violation of this section, as
determined by the court.  The court shall direct that 50 percent of
the penalty assessed be transmitted to the local prosecuting
jurisdiction, to be allocated for costs of prosecution, and 50
percent of the penalty assessed be transmitted to the State Board of
Equalization.
   (c) This section does not apply to a licensed distributor that
possesses, keeps, stores, or retains cigarettes before the necessary
stamp or meter impression is affixed.
  SEC. 18.  Section 30474.1 is added to the Revenue and Taxation
Code, to read:
   30474.1.  (a) Notwithstanding any other provision of law, the sale
or possession for sale of counterfeit tobacco products, or the sale
or possession for sale of counterfeit cigarettes by a manufacturer,
importer, distributor, wholesaler, or retailer shall result in the
seizure of the product by the board or any law enforcement agency and
shall constitute a misdemeanor punishable as follows:
   (1) A violation with a total quantity of less than two cartons of
cigarettes shall be a misdemeanor punishable by a fine not to exceed
five thousand dollars ($5,000), or imprisonment not to exceed one
year in a county jail, or both the fine and the imprisonment, and
shall also result in the revocation by the board of the manufacturer,
distributor, or wholesale license.
   (2) A violation with a quantity of two cartons of cigarettes or
more shall be a misdemeanor punishable by a fine not to exceed fifty
thousand dollars ($50,000) or imprisonment not to exceed one year in
a county jail, or both the fine and imprisonment, and shall also
result in the revocation by the board of the manufacturer,
distributor, or wholesaler license.
   (b) A court shall consider a defendant's ability to pay when
imposing fines pursuant to this section.
   (c) For the purposes of this section, counterfeit cigarette and
tobacco products include cigarette and tobacco products that have
false manufacturing labels, false or fraudulent stamps or meter
impressions, or a combination thereof.
   (d) The board shall seize and destroy any cigarettes or other
tobacco products forfeited to the state under this section.
   (e) This section shall remain in effect until January 1, 2010, and
as of that date shall be repealed.
  SEC. 19.  Section 30481 of the Revenue and Taxation Code is amended
to read:
   30481.  Any prosecution for violation of any of the penal
provisions of this part shall be instituted within six years after
commission of the offense.
  SEC. 20.  Section 30482 is added to the Revenue and Taxation Code,
to read:
   30482.  Any person convicted of a crime under this part may be
charged the costs of investigation and prosecution at the discretion
of the court.
   All moneys remitted to the board under this part shall be
transmitted to the Treasurer who shall deposit it into the State
Treasury and credit it to the Cigarette Tax Fund.
  SEC. 21.  Nothing in this act preempts or supersedes any local
tobacco control law or ordinance other than those laws or ordinances
that are related to the collection of state taxes.  Local licensing
laws or ordinances may provide for the suspension or revocation of
licenses issued by a local government or agency for a violation of
the laws imposed under the Cigarette and Tobacco Products Tax Law
(Part 13 (commencing with Section 30001) of Division 2 of the Revenue
and Taxation Code).
  SEC. 22.  All revenues and expenses generated by this act with
respect to the taxes imposed under the Cigarette and Tobacco Products
Tax Law (Part 13 (commencing with Section 30001) of Division 2 of
the Revenue and Taxation Code), shall be allocated in the same manner
as those revenues and expenses are allocated under the Cigarette and
Tobacco Products Tax Law as that law read on the effective date of
this act.
  SEC. 23.  The provisions of this act are severable.  If any
provision of this act or its application is held invalid, that
invalidity does not affect other provisions or applications that can
be given effect without the invalid provision or application.
  SEC. 24.  If the amendments to paragraph (2) of subdivision (b) of
Section 104557 of the Health and Safety Code made by Section 3 of
this act are held by a court of competent jurisdiction to be
unconstitutional, Section 3 of this act shall be deemed repealed, and
paragraph (2) of subdivision (b) of Section 104557 of the Health and
Safety Code shall be deemed to be in the form as it existed prior to
the amendments made to that section by Section 3 of this act.
Neither a holding of unconstitutionality of the provisions of Section
3 of this act, nor an implied repeal of the amendments to paragraph
(2) of subdivision (b) of Section 104557 of the Health and Safety
Code made by Section 3 of this act shall affect, impair, or
invalidate any other portion of Section 104557 of the Health and
Safety Code, or the application of that section to any other person
or circumstance, and those remaining portions of Section 104557 of
the Health and Safety Code shall at all times continue in full force
and effect.
  SEC. 25.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.