California Legislature—2013–14 Regular Session

Assembly Bill No. 1785

Introduced by Assembly Member Garcia

February 18, 2014

An act to amend Section 30165.1 of the Revenue and Taxation Code, relating to tobacco.

LEGISLATIVE COUNSEL’S DIGEST

AB 1785, as introduced, Garcia. Cigarette and Tobacco Products Tax Law: Master Settlement Agreement: information sharing.

Existing law regulates the promotion and sale of cigarette and other tobacco products in this state, and requires any tobacco product manufacturer selling cigarettes to consumers within the state that is a participating manufacturer, as defined in the Master Settlement Agreement (MSA), or a non-participating manufacturer that makes required escrow payments to provide annual certifications to the Attorney General for purposes of a directory. Under the MSA, states’ attorneys general and various tobacco product manufacturers have entered into an agreement, in settlement of various lawsuits against those manufacturers, for recovery of the states’ tobacco-related health care costs, which provides for the allocation of money to the states and certain territories.

Existing law authorizes the State Board of Equalization to disclose to the Attorney General any information received under the Cigarette and Tobacco Products Tax Law for purposes of determining compliance with, and enforcing specified provisions of, that law, laws relating to the Master Settlement Agreement, and any regulations promulgated pursuant thereto.

This bill would authorize the board to disclose to the Attorney General any information received under the Cigarette and Tobacco Products Tax Law for purposes of determining compliance with and enforcing the Master Settlement Agreement.

Existing law requires the board and Attorney General to share with each other specified information, and allows that information to be shared with other federal, state, or local agencies for purposes of enforcement of specified laws.

This bill would authorize this information also to be shared for purposes of determining compliance with, and enforcement of, specified laws and the Master Settlement Agreement. This bill would allow the Attorney General to share that information with any data clearinghouse or other entity performing duties under the Master Settlement Agreement.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 30165.1 of the Revenue and Taxation
Code is amended 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
that has made all payments calculated by the independent auditor
to be due under the Master Settlement Agreement, except to the
extent the participating manufacturer is disputing any of the
payments, 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. A tobacco product manufacturer
located outside of the United States shall provide to the Attorney
General and keep current, the names, and addresses, including
electronic mail addresses, of all importers that sell or will be selling
their cigarettes in this state and shall cause each importer to provide
to the Attorney General a copy of a valid importer permit issued
by the United States Treasury, Alcohol and Tobacco Tax and Trade
Bureau, and the importer license issued by the board. The importers
who sell or will be selling their cigarettes in this state shall obtain
and maintain a license as an importer in compliance with Division
8.6 (commencing with Section 22970) of the Business and
Professions 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.

(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 both of the following:

(i)  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.

(ii) Division 8.6 (commencing with Section 22970) of the
Business and Professions Code, and any regulations promulgated
pursuant thereto. The nonparticipating manufacturer shall also
provide a copy of a valid, corresponding federal permit issued by
the United States Treasury, Alcohol and Tobacco Tax and Trade
Bureau.

(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.

(E) In the case of a nonparticipating manufacturer located
outside the United States, that the manufacturer has provided a
declaration in a form prescribed by the Attorney General from
each of its importers into the United States of any of its brand
families to be sold in California, that the importer accepts joint
and several liability with the nonparticipating manufacturer for all
escrow deposits due in accordance with Article 3 (commencing
with Section 104555), for all penalties assessed in accordance with
Article 3 (commencing with Section 104555) of Chapter 1 of Part
3 of Division 103 of the Health and Safety Code, and for payment
of all fees, costs, attorney’s fees, penalties, and refunds imposed
or required under this section, including, but not limited to, all
refunds resulting from the removal of the manufacturer or any of
its brand families from the directory. The declaration shall appoint
for the declarant a resident agent for service of process in California
in accordance with subdivision (f) and affirm that it has caused
every importer that will sell its tobacco products in this state to
obtain and maintain a license as an importer pursuant to Division
8.6 (commencing with Section 22970) of the Business and
Professions Code.

(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 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 the following:

(A) Any participating manufacturer that fails to provide the
required certification or to make a payment calculated by the
independent auditor to be due from it under the Master Settlement
Agreement except to the extent that it is disputing the payment.

(B) 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.

(C) A tobacco product manufacturer that does not hold a valid
and current manufacturer’s license under Section 22979 of the
Business and Professions Code, including, but not limited to, a
manufacturer whose license has been revoked under subdivision
(g) of Section 22979 of the Business and Professions Code.

(2) Neither a tobacco product manufacturer nor brand family
shall be included or retained in the directory if the Attorney General
concludes that any 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, Sections 30101.7 and 30165.2, and any regulations
promulgated pursuant thereto, has not been fully satisfied for the
brand family and the manufacturer.

(C) In the case of a nonparticipating manufacturer by reason of
the business plan, business history, trade connections, or
compliance and payment history in California or any other state
of any of the principals thereof, the nonparticipating manufacturer
fails to provide reasonable assurance that it will comply with the
requirements of this section, Section 30165.2, and Article 3
(commencing with Section 104555) of Chapter 1 of Part 3 of
Division 103 of the Health and Safety Code. As used in this section,
“reasonable assurance” may include information and
documentation establishing to the satisfaction of the Attorney
General that a failure to pay in California or elsewhere was the
result of a good faith dispute over the payment obligation.

(D) In the case of a nonparticipating manufacturer, the
manufacturer has knowingly failed to disclose any material
information required or knowingly made any material false
statements in the certification of any supporting information or
documentation provided.

(E) If the manufacturer or its importer, as defined in Section
30019, engages in delivery sales and the manufacturer fails to
provide or fails to cause his or her importer to provide reasonable
assurances that the delivery seller has fully complied with all
requirements of applicable federal and state law, including, but
not limited to, all of the following:

(i) The Prevent All Cigarette Trafficking Act of 2009 (PACT
Act; Public Law 111-154).

(ii) The Jenkins Act (Chapter 10A (commencing with Section
375) of Title 15 of the United States Code).

(iii) The requirements of Section 30101.7.

(iv) All stamping, marking, and labeling requirements, including,
but not limited to, Section 30163, and any other information or
indicia requirements imposed by state or federal law.

(v) All other state laws generally applicable to the sale and
distribution of tobacco products.

(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, Section 30165.2, and Article
3 (commencing with Section 104555) of Chapter 1 of Part 3 of
Division 103 of the Health and Safety Code. The Attorney General
shall promptly provide distributors and wholesalers 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.

(A) When the Attorney General’s office informs a manufacturer
that it will recommend to the Attorney General that the
manufacturer or brand family be delisted for cause, the office shall
transmit by electronic mail, or other practicable means, a copy of
the notice of the pending administrative action to the manufacturer,
all licensed distributors and wholesalers, and to any retailer or
other person who has provided an electronic mail address to the
Attorney General for this purpose.

(B) A licensed distributor may purchase, stamp, or sell, and a
licensed wholesaler may purchase or sell, products affected by the
notice of pending administrative action for no more than 40 days
following issuance of the notice of pending administrative action.
Prior to the sale of a product affected by the notice of pending
administrative action, and no later than seven days after the notice
of pending administrative action, a distributor or wholesaler shall
notify each of its existing customers of the pending administrative
action.

(C) Upon removal from the directory of a tobacco product
manufacturer or brand family, the Attorney General shall transmit
by electronic mail, or other practicable means, a notice of removal,
to the manufacturer, all licensed distributors and wholesalers, and
to any retailer or other person who has provided an electronic mail
address to the Attorney General for this purpose. No later than
seven days after issuance of the notice of removal, a distributor or
wholesaler shall provide each of its existing customers a copy of
the notice of removal.

(D) Notwithstanding subdivision (e), a licensed retailer may
possess, transport, and sell the tax-stamped cigarettes of a
manufacturer or brand family affected by the notice of removal
for no more than 60 days following the effective date of the
manufacturer or brand family’s removal from the directory.

(E) After 60 days following removal from the directory the
cigarettes of a manufacturer or brand family identified in the notice
of removal are contraband and are subject to seizure and destruction
under subdivision (e) of Section 30436 and subdivision (b) of
Section 30449, and may not be purchased or sold in California.

(F) In the event the Attorney General declines to remove a
tobacco product manufacturer or brand family from the directory
following issuance of the notice of pending administrative action
described in subparagraph (A), the Attorney General shall notify
by electronic mail, or other practicable means, the manufacturer,
all licensed distributors and wholesalers, and any retailer or other
person who has provided an electronic mail address to the Attorney
General for this purpose, of the decision not to pursue
administrative action. No later than seven days after issuance of
this notice, a distributor or wholesaler shall provide each of its
existing customers a copy of this notice, and the purchase,
stamping, and sales restrictions imposed by subparagraph (B) shall
have no further effect.

(G) Upon request of the Attorney General, the board shall
provide the Attorney General all electronic mail addresses for
licensed distributors, wholesalers, and retailers in its possession.

(4) Newly qualified and elevated-risk nonparticipating
manufacturers shall file with the Attorney General a surety bond
in a form and manner directed by the Attorney General.

(A) Notwithstanding any other law, if a newly qualified
nonparticipating manufacturer is to be listed in the directory or if
the Attorney General reasonably determines that any
nonparticipating manufacturer who has filed a certification pursuant
to subdivision (b) poses an elevated risk for noncompliance with
this section, Section 30165.2, Part 13 (commencing with Section
30001) of Division 2, or with Article 3 (commencing with Section
104555) of Chapter 1 of Part 3 of Division 103 of the Health and
Safety Code, neither the nonparticipating manufacturer nor any of
its brand families shall be included in the directory unless and until
the nonparticipating manufacturer, or its United States importer
that undertakes joint and several liability for the manufacturer’s
performance in accordance with subparagraph (E) of paragraph
(3) of subdivision (b), has posted a bond in accordance with this
section.

(B) The bonds shall be posted by a corporate surety located
within the United States in an amount equal to the greater of fifty
thousand dollars ($50,000) or the amount of escrow the
manufacturer in either its current or predecessor form was required
to deposit as a result of the largest of its most recent five calendar
year’s sales in California. The bond shall be written in favor of
the State of California and shall be conditioned on the performance
by the nonparticipating manufacturer, or its United States importer
that undertakes joint and several liability for the manufacturer’s
performance in accordance with subparagraph (E) of paragraph
(3) of subdivision (b), of all its duties and obligations under 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 payment of all state taxes for the sale or distribution of
cigarettes and tobacco products in this state during the year in
which the certification is filed and the next succeeding calendar
year. The bond may be drawn upon by the board or the Attorney
General to cover unsatisfied escrow obligations, tax obligations,
claims for penalties, claims for monetary damages, and any other
liabilities that are subject to the licensee’s claim of sovereign
immunity against enforcement of the laws specified above.

(C) A nonparticipating manufacturer may be deemed to pose
an elevated risk for noncompliance with this section, Section
30165.2, or Article 3 (commencing with Section 104555) of
Chapter 1 of Part 3 of Division 103 of the Health and Safety Code
if:

(i) The nonparticipating manufacturer or any affiliate thereof
has failed to deposit fully the amount due on an escrow obligation
with respect to any state at any time during the calendar year or
within the past three calendar years unless either of the following
occur:

(I) The manufacturer did not underdeposit knowingly or
recklessly and the manufacturer promptly cured the underdeposit
within 180 days of notice of it.

(II) The underdeposit or lack of deposit is the subject of a good
faith dispute as documented to the satisfaction of the Attorney
General and the underdeposit is cured within 180 days of entry of
a final order establishing the amount of the required escrow deposit.

(ii) Any state has removed the manufacturer or its brands or
brand families or an affiliate or any of the affiliate’s brands or
brand families from the state’s tobacco directory for noncompliance
with a state escrow deposit or tobacco tax law at any time during
the calendar year or within the past three calendar years.

(iii) Any state has litigation pending against, or an unsatisfied
final judgment against, the manufacturer or any affiliate thereof
for escrow or for penalties, fees, costs, refunds, or attorney’s fees
related to noncompliance with state escrow laws.

(iv) The nonparticipating manufacturer sells its cigarettes or
tobacco products directly to consumers via remote or other
non-face-to-face means.

(v) A state or federal court determining that the nonparticipating
manufacturer has violated any tobacco tax or tobacco control law
or engaged in unfair business practice or unfair competition.

(vi) Any state has suspended or revoked its license to engage
in any aspect of tobacco business.

(vii) Any state or federal court has determined that it failed to
comply with state or federal law imposing marking, labeling, and
stamping requirements or requiring information to be affixed to,
or contained in, the labels, markings, or packaging.

(viii) The nonparticipating manufacturer fails to submit or
complete any required forms, documents, certification, or notices,
in a timely manner or, to the satisfaction of the Attorney General
or the State Board of Equalization.

(D) As used in this section, “newly qualified nonparticipating
manufacturer” means a nonparticipating manufacturer that has not
previously been listed in the California Tobacco Directory. These
manufacturers may be required to post a bond in accordance with
this section for the first three years of their listing, or longer if they
have been determined to pose an elevated risk for noncompliance.

(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 that has provided
the required certification and made all payments calculated by the
independent auditor to be due from it under the Master Settlement
Agreement, except to the extent that it is disputing the payment,
or in the case of a nonparticipating manufacturer, 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, Section
30165.2, or the tobacco product manufacturer has not complied
with any state or federal delivery sales laws applicable to sales
and distribution of tobacco products in this state. 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 participating manufacturer
has made all payments calculated by the independent auditor to
be due from it under the Master Settlement Agreement, except to
the extent that it is disputing payment, or if a nonparticipating
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,
ship or otherwise distribute into or within 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. Any
nonparticipating manufacturer located outside of the United States
shall, as an additional condition precedent to having its brand
families listed or retained in the directory, cause each of its
importers into the United States of any of its brand families to be
sold in California to appoint and continually engage without
interruption the services of an agent in the state in accordance with
this section. All obligations of a nonparticipating manufacturer
imposed by this section with respect to appointment of its agent
shall likewise apply to importers with respect to appointment of
their agents.

(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.

(4) For each nonparticipating manufacturer located outside the
United States, each importer into the United States of any
nonparticipating manufacturer’s brand families that are sold in
California shall bear joint and several liability with the
nonparticipating manufacturer for deposit of all escrow due under
Section 104557 of the Health and Safety Code, payment of all
costs and attorney’s fees imposed in accordance with Section
104557 of the Health and Safety Code, and payment of all fees,
costs, attorney’s fees, penalties, and refunds imposed or required
by this section or Section 30165.2. Each manufacturer and
importer, that sells or intends to sell cigarettes in California, shall
obtain and maintain a license as a manufacturer or importer in
compliance with Division 8.6 (commencing with Section 22970)
of the Business and Professions Code. Each nonparticipating
manufacturer and its importers shall report in the manner, including
electronically, as required by the Attorney General, all cigarettes
and tobacco products sold in this state each month, including, but
not limited to, the quantity, including tobacco weight and number
of cigarette sticks, the wholesale cost and sale price of each brand
family. Any manufacturer or importer that fails to file the report
as required by the Attorney General shall be liable for a civil
penalty in an amount not to exceed the greater of either of the
following:

(A) Five times the retail value of the cigarettes, loose tobacco
and smokeless tobacco, or tobacco products defined as cigarettes
under this section that were not reported as required by the
Attorney General.

(B) Five thousand dollars ($5,000).

(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.
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, Sections 30101.7 and
30165.2, begin delete and end delete 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 begin insert , and the MSA end insert .
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 begin delete agencies, end delete begin insert agencies.
The Attorney General may also share that information with any
data clearinghouse or other entity performing duties related to
the MSA. That information shall be shared end insert only for begin insert the end insert purposes
of begin insert determining compliance with and end insert enforcement of this section,
begin insert Sections 30101.7 and 30165.2, end insert 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 begin insert , and the MSA end insert .

(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 Attorney General may require a retailer, wholesaler, distributor,
importer, 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 or importer has complied, is in compliance, and, if
applicable pursuant to subparagraph (C) of paragraph (2) of
subdivision (c), has provided reasonable assurance that it will
comply or continue to comply with this section, Section 30165.2,
Part 8 (commencing with Section 14950) of Division 12 of the
Health and Safety Code, 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.

(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 person 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 issued to the person by the board,
pursuant to the procedures applicable to the revocation of a license
set forth in Sections 30148 and 30158, and Section 22980.3 of the
Business and Professions Code. Each stamp affixed and each sale
or offer to sell cigarettes in violation of subdivision (e) shall
constitute a separate violation.

(B) In the case of a second or any subsequent offense that the
board determines to be a violation of subdivision (e), 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) The Attorney General or his or her authorized representative
shall have the authority to:

(1) Conduct audits and investigations of the following:

(A) A nonparticipating manufacturer and its importers.

(B) Exclusive distributors, retailers, stamping agents, and
wholesalers, as defined in Division 8.6 (commencing with Section
22970) of the Business and Profession Code, and this part.

(C) Persons or entities engaged in delivery sales as defined in
Section 30101.7.

(2) Upon reasonable cause to believe that a violation of this
article or of Article 3 (commencing with Section 104555) of
Chapter 1 of Part 3 of Division 103 of the Health and Safety Code,
or of Section 22963 of the Business and Professions Code, or of
Section 30101.7, has occurred or is reasonably likely to occur,
issue subpoenas, compel the attendance of witnesses, administer
oaths, certify to official acts, take depositions within and without
the state, as now provided by law, and compel the production of
pertinent books, payrolls, accounts, papers, records, documents,
and testimony relevant to investigations. If a person refuses,
without good cause, to be examined or to answer a legal and
pertinent question, or to produce a document or other evidence
when ordered to do so by the Attorney General or his or her
authorized representative, the Attorney General or his or her
authorized representative may apply to the superior court of the
county where the person is in attendance or located, upon affidavit,
for an order returnable in no less than two nor more than five days,
directing the person to show cause why he or she should not be
examined, answer a legal or pertinent question or produce a
document, record or other evidence. Upon the hearing, if the court
determines that the person, without good cause, has refused to be
examined or to answer legal or pertinent questions, or to produce
a document, record, or other evidence, the court may order
compliance with the subpoena and assess all costs and reasonable
attorney’s fees against the person. If the motion for an order is
granted and the person thereafter fails to comply with the order,
the court may make orders as are provided for by law. Subpoenas
shall be served and witness fees and mileage paid as allowed in
civil cases in the courts of the State of California.

(r) In any action regarding a violation of this article or of Article
3 (commencing with Section 104555) of Chapter 1 of Part 3 of
Division 103 of the Health and Safety Code, or of Section 22963
of the Business and Professions Code, or of Section 30101.7, or
of Section 17200 of the Business and Professions Code, reports
submitted to the board pursuant to Section 30182 or Section
22978.1, 22978.4, or 22978.5 of the Business and Professions
Code, shall be admissible in evidence and shall be presumed to
accurately state the number of cigarettes stamped during the time
period by the stamping agent that submitted the report absent a
contrary showing by the nonparticipating manufacturer or importer.
Nothing in this section shall be construed as limiting or otherwise
affecting the right of the state to maintain that reports are incorrect
or do not accurately reflect a nonparticipating manufacturer’s sales
in the state during the time period in question, and the presumption
shall not apply in the event the state does so maintain.

(s) In any action regarding a violation of this article or of Article
3 (commencing with Section 104555) of Chapter 1 of Part 3 of
Division 103 of the Health and Safety Code, or of Section 22963
of the Business and Professions Code, or of Section 30101.7, or
of Section 17200 of the Business and Professions Code, sufficient
notice of the action to the alleged violator shall be given by
complaint written in the English language. The state shall not be
required to bear any expense of translating complaint into another
language.

(t) 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.