BILL NUMBER: AB 892 CHAPTERED 10/04/05 CHAPTER 512 FILED WITH SECRETARY OF STATE OCTOBER 4, 2005 APPROVED BY GOVERNOR OCTOBER 4, 2005 PASSED THE ASSEMBLY SEPTEMBER 7, 2005 PASSED THE SENATE SEPTEMBER 6, 2005 AMENDED IN SENATE SEPTEMBER 2, 2005 INTRODUCED BY Assembly Member Cogdill FEBRUARY 18, 2005 An act to amend Sections 22978.4, 22978.7, 22979.2, 22979.7, and 22980.2 of the Business and Professions Code, and to add Section 30361.5 to the Revenue and Taxation Code, relating to cigarettes and tobacco products. LEGISLATIVE COUNSEL'S DIGEST AB 892, Cogdill Cigarettes and tobacco products. (1) The California Cigarette and Tobacco Products Licensing Act of 2003 provides 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 and prohibits retailers, manufacturers, distributors, and wholesalers from distributing or selling those cigarette and tobacco products unless they are in compliance with those licensure requirements. The act requires each distributor and each wholesaler to include certain information on each invoice for the sale of cigarettes or tobacco products, including a statement that all California cigarette and tobacco product taxes are included in the total amount of the invoice. The act provides that failure to comply with that requirement constitutes a misdemeanor. This bill would provide that a distributor that is also a retailer shall include either the above tax statement on each invoice for the sale of cigarettes or tobacco products or the amount of excise taxes due to the board by the distributor on the sale of cigarettes and tobacco products. In the case of other distributors and wholesalers, this bill would require these parties to include the amount of excise taxes due to the board on these invoices. Additionally, this bill would require a distributor or wholesaler to include the date the cigarettes or tobacco products are sold on each invoice. By changing the definition of a crime, this bill would impose a state-mandated local program. (2) The act authorizes the board or a law enforcement agency to seize any cigarettes or tobacco products that do not meet the act's requirements. Upon a finding that any distributor, wholesaler, manufacturer, or importer has violated any provision of the act, the act authorizes the board, upon a 1st offense, to revoke or suspend the license or licenses of the distributor, wholesaler, manufacturer, or importer, and, upon a 2nd or any subsequent offense, impose a civil penalty in an amount not to exceed the greater of 5 times the retail value of the cigarettes or tobacco products or $5,000. This bill would clarify that, upon a 2nd or subsequent offense, the board is authorized to impose a civil penalty in an amount not to exceed the greater of 5 times the retail value of the seized cigarettes or tobacco products or $5,000. (3) The act requires all manufacturers and all importers that begin operations in the state after January 1, 2004, to be charged an administration fee commensurate with their respective market share of cigarettes manufactured or imported by the manufacturer, and sold in this state during the next calendar year as estimated by the board. This bill would clarify that all manufacturers and all importers that begin operations in the state after January 1, 2004, shall be charged a fee commensurate with their respective market share of cigarettes manufactured or imported by the manufacturer or importer, and sold in this state during the next calendar year as estimated by the board. (4) Existing provisions within the act establish procedures for the seizure of cigarettes and tobacco products from a seller after a notification of suspension or revocation of their license. This bill would specify that the State Board of Equalization or a law enforcement agency is empowered to seize cigarettes and tobacco products from unlicensed persons for the continued sales of cigarettes and tobacco products without a license. (5) The State Board of Equalization administers various tax and fee programs, including the Sales and Use Tax Law and the Cigarette and Tobacco Products Tax Law. The tax and fee programs administered by the board generally require any person who collects tax or fee reimbursement in excess of the amount due to either refund the excess to their customer or remit the excess to the state. This bill would apply these reimbursement provisions to the taxes imposed under the Cigarette and Tobacco Products Tax Law. (6) 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. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 22978.4 of the Business and Professions Code is amended to read: 22978.4. (a) Except as otherwise provided in paragraph (7), 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. (6) The date the cigarette or tobacco products are sold. (7) Notwithstanding paragraph (3), a distributor that is also a retailer or manufacturer shall include either one of the following on each invoice for the sale of cigarettes or tobacco products: (A) A statement that reads: "All California cigarette and tobacco product taxes are included in the total amount of this invoice." (B) The amount of excise taxes due to the board by the distributor on the distribution of cigarettes and tobacco products. (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. SEC. 2. Section 22978.7 of the Business and Professions Code is amended to read: 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 seized cigarettes or tobacco products. (2) Five thousand dollars ($5,000). SEC. 3. Section 22979.2 of the Business and Professions Code is amended to read: 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 or the importer 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. SEC. 4. Section 22979.7 of the Business and Professions Code is amended to read: 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 seized cigarettes or tobacco products defined as cigarettes under this section. (2) Five thousand dollars ($5,000). SEC. 5. Section 22980.2 of the Business and Professions Code is amended to read: 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 the board or 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 without a license or 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. SEC. 6. Section 30361.5 is added to the Revenue and Taxation Code, to read: 30361.5. When an amount represented by a person to a customer as constituting reimbursement for taxes upon the distribution of tobacco products pursuant to this part is computed upon an amount that is not taxable or is in excess of the tax amount and is actually paid by the customer to the person, the amount so paid shall be returned by the person to the customer upon notification by the State Board of Equalization or the customer that an excess has been ascertained. If the person fails or refuses to do so, the amount so paid, if knowingly or mistakenly computed by the person upon an amount that is not subject to the tax imposed by this part or that is in excess of the tax amount, shall be remitted by that person to this state. Those amounts remitted to the state by the person shall be credited by the board to any amounts due and payable from that customer that are subject to this part and that are based on the same activity, and the balance, if any, shall constitute an obligation due from the person to this state. SEC. 7. 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.