BILL NUMBER: AB 2733 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 15, 2010
AMENDED IN ASSEMBLY MAY 12, 2010
INTRODUCED BY Assembly Member Ruskin
( Coauthor: Senator Padilla
)
FEBRUARY 19, 2010
An act to amend Sections 22971 22973.1, 22977.2, 22979, 22980.2,
and 22980.3 of, and to add Sections 22971.5, 22980.4, and 22980.5 to,
the Business and Professions Code, relating to cigarette and tobacco
products.
LEGISLATIVE COUNSEL'S DIGEST
AB 2733, as amended, Ruskin. Cigarettes and tobacco products.
Existing law, 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. The act prohibits retailers,
manufacturers, distributors, and wholesalers from distributing or
selling those cigarette and tobacco products unless they are
licensed. The act authorizes 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 act's
provisions. Violation of the act is a misdemeanor.
This bill would, among other things, prohibit the transfer of
title or possession of cigarettes or tobacco products without
consideration, exchange, or barter if the cigarettes or tobacco
products had been purchased for resale under a license issued
pursuant to the act and the transfer occurs during the suspension or
after revocation of the license. It would also prohibit specified
displays of cigarettes or tobacco products. It would impose
require prescribed notices to be posted when a
license has been suspended or revoked by the board, and would make
violation of these notice posting requirements subject to
a civil penalty. By adding a new crime, this bill would impose a
state-mandated local program.
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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22971 of the Business and Professions Code is
amended to read:
22971. For purposes of this division, the following terms shall
have the following meanings:
(a) "Board" means the State Board of Equalization.
(b) "Brand family" has the same meaning as that term is defined in
paragraph (2) of subdivision (a) of Section 30165.1 of the Revenue
and Taxation Code.
(c) "Cigarette" means a cigarette as defined in Section 30003 of
the Revenue and Taxation Code.
(d) (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 as otherwise provided;
however, no individual shall be deemed to control a person solely on
account of being a director, officer, or employee of that person.
(2) For purposes of subparagraph (B) of paragraph (1), 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 that other person.
(3) For purposes of this division, the board may determine whether
a person in fact controls another person.
(e) "Display for sale" means the placement of cigarettes or
tobacco products in a vending machine or in retail stock for the
purpose of selling or gifting the cigarettes or tobacco products. For
purposes of this definition, the clear and easily visible display of
cigarettes or tobacco products shall create a rebuttable presumption
that either were displayed for sale.
(f) "Distributor" means a distributor as defined in Section 30011
of the Revenue and Taxation Code.
(g) "Gifting" means any transfer of title or possession without
consideration, exchange, or barter, in any manner or by any means, of
cigarettes or tobacco products that have been purchased for resale
under a license issued pursuant to this division if the transfer
occurs while the license is suspended or after the effective date of
its revocation.
(h) "Importer" means an importer as defined in Section 30019 of
the Revenue and Taxation Code.
(i) "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.
(j) "License" means a license issued by the board pursuant to this
division.
(k) "Licensee" means any person holding a license issued by the
board pursuant to this division.
(l) "Manufacturer" means a manufacturer of cigarettes or tobacco
products sold in this state.
(m) "Notice" or "notification" means, unless as otherwise
provided, the written notice or notification provided to a licensee
by the board by either actual delivery to the licensee or by
first-class mail addressed to the licensee at the address on the
license.
(n) "Package of cigarettes" means a package as defined in Section
30015 of the Revenue and Taxation Code.
(o) "Person" means a person as defined in Section 30010 of the
Revenue and Taxation Code.
(p) "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.
(q) "Retail location" means both of the following:
(1) Any building from which cigarettes or tobacco products are
sold at retail.
(2) A vending machine.
(r) "Sale" or "sold" means a sale as defined in Section 30006 of
the Revenue and Taxation Code.
(s) "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.
(t) "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."
(u) "Wholesaler" means a wholesaler as defined in Section 30016 of
the Revenue and Taxation Code.
SEC. 2. Section 22971.5 is added to the Business and Professions
Code, to read:
22971.5. Any notice required by this division 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 licensee 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 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 complaints in a civil action.
SEC. 3. Section 22973.1 of the Business and Professions Code is
amended to read:
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.
SEC. 4. Section 22977.2 of the Business and Professions Code is
amended to read:
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.
SEC. 5. Section 22979 of the Business and Professions Code is
amended to read:
22979. (a) Every manufacturer and every importer ,
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.
1331 et seq.) for the reporting of ingredients added to cigarettes.
For purposes of the federal Cigarette Labeling and Advertising Act
requirement, cigars weighing three pounds or less per 1,000 are
excluded from the definition of cigarette.
(d) A license issued to a manufacturer or an importer under this
division is only valid with respect to the manufacturer or importer
designated on the license and may not be transferred or assigned to
another manufacturer or importer.
(e) Any manufacturer or importer that is issued a license under
this division that does not commence business in the manner specified
or designated in the license, ceases to do business in the manner
specified or designated in the license, or is notified that the
license is suspended or revoked, shall immediately surrender that
license to the board.
(f) (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.
SEC. 6. 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 either
without a valid license or after a license has been
suspended or revoked , and each officer of any corporation that
so engages in this 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 division 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 or continued gifting
gifting of cigarettes and tobacco products either without a
valid license shall be subject to the penalty provided in
Section 22981, or after a notification of suspension
or revocation shall constitute a violation p unishable as
provided in 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. 7. Section 22980.3 of the Business and Professions Code is
amended to read:
22980.3. (a) Licenses issued pursuant to this division shall be
subject to suspension or revocation for violations 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 division. 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.
(c) 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 licensee to cease the sale, gifting,
and or displaying for sale of
cigarettes or tobacco products for the period of the suspension. The
notice of suspension shall inform the licensee of the effective dates
of the suspension.
(d) Continued sales or gifting of cigarettes or tobacco products
after the effective date of the suspension shall constitute a
violation of this division and result in the revocation of a
license.
(e) 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
cigarettes and tobacco products are paid.
(f) Upon updating a record for a violation triggering a
revocation, the board shall serve the licensee with a notice of
revocation and shall order the licensee to cease the sale, gifting,
and or displaying for sale of
cigarettes or tobacco products on and after the effective date of the
revocation. The notice of revocation shall inform the licensee of
the effective date of the revocation.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
(k) 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
toward a suspension or revocation of a license.
SEC. 8. Section 22980.4 is added to the Business and Professions
Code, to read:
22980.4. A person who, after receiving a notice of suspension or
revocation, continues to display for sale cigarettes or tobacco
products shall be subject to a civil penalty of one thousand dollars
($1,000) for each offense. A violation of this section shall
not be ($1,000) for each offense, and shall not be
subject to Section 22981.
SEC. 9. Section 22980.5 is added to the Business and Professions
Code, to read:
22980.5. (a) A retailer whose license has been suspended or
revoked by order of the board shall conspicuously post a notice at
both of the following locations:
(1) Each public entrance to the retail location. The notice shall
directly face any person who enters the retail location and shall not
be obstructed from view or placed at a height of less than four feet
or greater than nine feet from the floor.
(2) Each cash register and other point of retail sale. The notice
shall be posted so as to be readily viewable by a person standing at
or approaching the cash register or other point of retail sale. The
notice shall directly face the purchaser and shall not be obstructed
from view or placed at a height of less than four feet or greater
than nine feet from the floor.
(b) The notices described in this section shall be in the size and
form prescribed by the board. The notice shall be provided by the
board and may be reproduced in the same size and form in order to
comply with subdivision (a).
(c) A retailer whose license was suspended shall post the notice
at the retail location that was the subject of the suspension for the
duration of the suspension.
(d) A retailer whose license was revoked shall post the notice at
the retail location that was the subject of the revocation for a
30-day period from the effective date of the revocation.
(e) Every retailer who fails to post the notices as required by
this section, who alters the notice provided by the board, or who
removes the notice before the posting period required in subdivision
(c) or (d), as appropriate, expires, shall be subject,
notwithstanding Section 22981, to a civil penalty of one thousand
dollars ($1,000) for each offense.
SEC. 10. 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.