SB 768, as amended, De León. Cigarette and tobacco products taxes: California Tobacco Tax Act of 2014.
The Cigarette and Tobacco Products Tax Law, the violation of which is a crime, imposes a tax on every distributor of cigarettes and tobacco products at specified rates, including additional taxes imposed under the Tobacco Tax and Health Protection Act of 1988 (Proposition 99) and the California Families and Children Act of 1998 (Proposition 10). A provision of that law imposes a tax upon the distribution of tobacco products at a tax rate that is equivalent to the combined rate of all taxes imposed on cigarettes, which is deposited in specified accounts.
This bill would, on or after the first day of the first calendar quarter commencing more than 90 days on or after the effective date of the bill, impose an additional tax on the distribution of cigarettes at the rate of $0.10 for each cigarette distributed; would require a dealer and a wholesaler to file a return with the State Board of Equalization showing the number of cigarettes in its possession or under its control on that date, and impose a related floor stock tax; and would require a licensed cigarette distributor to file a return with the board and pay a cigarette indicia adjustment tax for cigarette tax stamps in its possession or under its control on that date. Because the bill would impose an additional tax on cigarettes under the Cigarette and Tobacco Products Tax Law, it would increase the tax upon the distribution of tobacco products under that law.
The bill would
begin deleterequire, not later than December 1 of the 2nd year following a specified date, and each 2nd December 1 thereafter, the State Board of Equalization to review the cigarette taxes imposed by other states, determine the 5 highest taxes imposed by other states, and calculate the median tax per cigarette. The bill would increaseend delete the tax on the distribution of cigarettes, as specified, begin delete if the median of the 5 highest taxes imposed by other states is greater than a specified amountend delete.
The bill would provide that the revenues collected from the additional tax be deposited in the California Tobacco Tax Act of 2014 Fund created by this bill, which would be a continuously appropriated fund, and transferred into the Tobacco Prevention and Education Account, the Tobacco Disease Related Health Care Account, and the Tobacco Law Enforcement Account to be expended for specified purposes. Because the California Tobacco Tax Act of 2014 Fund
begin delete isend delete a continuously appropriated fund, the bill would make an appropriation.
The bill would require moneys in the California Tobacco Tax Act of 2014 Fund to be transferred from the fund to the California Children and Families First Trust Fund, which is a continuously appropriated fund, the Cigarette and Tobacco Products Surtax Fund, the Breast Cancer Fund, and the General Fund, as necessary to offset revenue decreases to those funds directly resulting from imposition of additional taxes by these provisions. Because this bill would require funds to be transferred to a continuously appropriated fund, it would make an appropriation.
Because this bill would impose new requirements under the Cigarette and Tobacco Products Tax Law, the violation of which is a crime, it 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 include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.
This bill would provide that no reimbursement is required by this act for a specified reason.end delete
This bill would take effect immediately as a tax levy.
Vote: 2⁄3. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
The Legislature hereby finds and declares all of
3(a) Tobacco use is the single most preventable cause of death
4and disease in California, claiming the lives of more than
begin delete 35,000end delete
5 people every year. California still has approximately 3.4
6million adult smokers and
begin delete 300,000end delete youth smokers.
7(b) The inevitable
begin delete health, environmental, and economicend delete costs of smoking come to begin delete over $22end delete for every pack
9of cigarettes sold in California.
10(c) Tobacco use costs Californians more than
begin delete $9.6end delete billion
11in medical expenses every year. The cost of lost
12productivity due to tobacco use adds an additional estimated $8.5
13billion to the annual economic consequences of smoking in
15(d) The treatment of cancer, heart disease and stroke, lung
16disease, diabetes, and other diseases related to tobacco use
17continues to impose a significant burden upon California’s
18overstressed health care system, including publicly funded health
20(e) In 2013-14, it is estimated that the General Fund cost of
21publicly funded health care programs to the state will be more than
22$15 billion. In 2013-14, it is estimated that publicly funded health
23care programs will provide health care coverage to more than 1.4
24million families and more than 700,000 children. At the same time,
25hundreds of thousands of families and children go without any
26medical coverage due to financial constraints upon the state and
27local government budgets and recent cutbacks in publicly funded
28health care programs.
P4 1(f) A recent cost-benefit analysis concluded that if states
2followed the United States Centers for Disease Control and
3Prevention’s Best Practices for Comprehensive Tobacco Control
4Programs 2007 funding guidelines, up to 14 to 20 times the cost
5of program implementation could be saved through reduced
6medical and productivity costs as well as reduced Medicaid costs.
7(g) The California Tobacco Tax Act of 2014 will help fund the
8comprehensive California Tobacco Control Program designed to
9change social norms about tobacco and discourage individuals
10from taking up smoking and the use of other tobacco products
11through educational programs, thereby saving the state and local
12governments significant money now and in the future.
13(h) Tobacco tax increases are an appropriate way to mitigate
14the impacts of tobacco-related diseases and improve existing
15programs providing for quality and access to health care services
16for families and children.
17(i) An increase in the tobacco tax will have an immediate effect
18on smoking and is the most appropriate mechanism to fund services
19to prevent tobacco use, help people quit smoking, and discourage
20many people from taking up smoking.
21(j) California taxes cigarettes at only $0.87 per pack, and ranks
2233rd in tobacco tax rates, reflecting one of the lowest tobacco taxes
23in the United States. Thirty states have cigarette tax rates of $1 per
24pack or higher, and California is well below other west coast states
25(Washington: $3.025, Oregon: $1.18, and Arizona: $2). California
26last raised its tobacco tax in 1998.
27(k) The burden of smoking is not equally shared across
28California populations and communities. Tobacco use rates are
29much higher than the general population in African Americans,
30white men, Korean men, enlisted military personnel, lesbian, gay,
31bisexual and transgender, young adult, rural, and low-income
33(l) A reinvigorated tobacco control program will allow targeted
34public health and research efforts to combat the tobacco industry’s
35predatory marketing to ethnic groups, driving down smoking rates
36and ultimately reducing heart disease, stroke, lung disease, and
37cancer in these California communities, which together represent
38more than half of our state’s residents.
Section 30104 of the Revenue and Taxation Code is
40amended to read:
The taxes imposed by this part shall not apply to the
2sale of cigarettes or tobacco products by a distributor to a common
3carrier engaged in interstate or foreign passenger service or to a
4person authorized to sell cigarettes or tobacco products on the
5facilities of the carrier. Whenever cigarettes or tobacco products
6are sold by distributors to common carriers engaged in interstate
7or foreign passenger service for use or sale on facilities of the
8carriers, or to persons authorized to sell cigarettes or tobacco
9products on those facilities, the tax imposed under this part shall
10not be levied with respect to the sales of the cigarettes or tobacco
11products by the distributors, but a tax is hereby levied upon the
12carriers or upon the persons authorized to sell cigarettes or tobacco
13products on the facilities of the carriers, as the case may be, for
14the privilege of making sales in California at the same rate as set
15forth under this part. Those common carriers and authorized
16persons shall pay the tax imposed by this section and file reports
17with the board, as provided in Section 30186.
Section 30108 of the Revenue and Taxation Code is
19amended to read:
(a) Every distributor engaged in business in this state
21and selling or accepting orders for cigarettes or tobacco products
22with respect to the sale of which the tax imposed under this part
23is inapplicable shall, at the time of making the sale or accepting
24the order or, if the purchaser is not then obligated to pay the tax
25with respect to his or her distribution of the cigarettes or tobacco
26products, at the time the purchaser becomes so obligated, collect
27the tax from the purchaser, if the purchaser is other than a licensed
28distributor, and shall give to the purchaser a receipt therefor in the
29manner and form prescribed by the board.
30(b) Every person engaged in business in this state and making
31gifts of untaxed cigarettes or tobacco products as samples with
32respect to which the tax imposed under this part is inapplicable
33shall, at the time of making the gift or, if the donee is not then
34obligated to pay the tax with respect to his or her distribution of
35the cigarettes or tobacco products, at the time the donee becomes
36so obligated, collect the tax from the donee, if the donee is other
37than a licensed distributor, and shall give the donee a receipt
38therefor in the manner and form prescribed by the board. This
39section shall not apply to those distributions of cigarettes or tobacco
begin delete whichend delete are exempt from tax under Section 30105.5.
P6 1(c) “Engaged in business in the state” means and includes any
2of the following:
3(1) Maintaining, occupying, or using, permanently or
4temporarily, directly or indirectly, or through a subsidiary, or agent,
5by whatever name called, an office, place of distribution, sales or
6sample room or place, warehouse or storage place, or other place
8(2) Having any representative, agent, salesperson, canvasser or
9solicitor operating in this state under the authority of the distributor
10or its subsidiary for the purpose of selling, delivering, or the taking
11of orders for cigarettes or tobacco products.
12(d) The taxes required to be collected by this section constitute
13debts owed by the distributor, or other person required to collect
14the taxes, to the state.
Article 2.5 (commencing with Section 30130.50) is
16added to Chapter 2 of Part 13 of Division 2 of the Revenue and
17Taxation Code, to read:
For the purposes of this article:
22(a) “Cigarette” has the same meaning as in Section 30003 as it
23read on January 1, 2013.
24(b) “Tobacco products” includes, but is not limited to, all forms
25of cigars, smoking tobacco, chewing tobacco, snuff, and any other
26articles or products made of, or containing at least 50 percent,
27tobacco, but does not include cigarettes.
(a) In addition to any other taxes imposed upon the
29distribution of cigarettes, there shall be imposed an additional tax
30upon every distributor of cigarettes at the rate of one hundred mills
31($0.10) for each cigarette distributed on or after the first day of
32the first calendar quarter commencing more than 90 days after the
33effective date of this act.
34(b) (1) To offset the effects of inflation and further reduce
35smoking prevalence, on or before March 1 of each year, the State
36Board of Equalization shall calculate the percentage increase in
37the California Consumer Price Index for all items
begin delete ofend delete December
38of the prior calendar year over the December of the preceding
39calendar year immediately preceding the prior calendar year. Each
40fiscal year, the tax imposed by subdivision (a) on the distribution
P7 1of cigarettes and tobacco products shall be adjusted by the State
2Board of Equalization to reflect the
3 California Consumer Price Index for all items
begin delete percentage increaseend delete,
4if any. The adjusted tax shall be effective during the state’s next
6(2) In no event shall the tax be less than the tax imposed under
7this part as of the effective date of this act.
(a) (1) Every dealer and wholesaler, for the
9privilege of holding or storing cigarettes for sale, use, or
10consumption, shall pay a floor stock tax for each cigarette in its
11possession or under its control in this state at 12:01 a.m. on the
12first day of the first calendar quarter commencing more than 90
13days after the effective date of this act at the rate of one hundred
14mills ($0.10) for each cigarette.
15(2) Every dealer and wholesaler shall file a return with the State
16Board of Equalization on or before the first day of the first calendar
17quarter commencing more than 180 days after the effective date
18of this act on a form prescribed by the State Board of Equalization,
19showing the number of cigarettes in its possession or under its
20control in this state at 12:01 a.m. on the first day of the first
21calendar quarter commencing more than 90 days after the effective
22date of this act. The amount of tax shall be computed and shown
23on the return.
24(b) (1) Every licensed cigarette distributor, for the privilege of
25distributing cigarettes and for holding or storing cigarettes for sale,
26use, or consumption, shall pay a cigarette indicia adjustment tax
27for each California cigarette tax stamp that is affixed to any
28package of cigarettes and for each unaffixed California cigarette
29tax stamp in its possession or under its control at 12:01 a.m. on
30the first day of the first calendar quarter commencing more than
3190 days after the effective date of this act at the following rates:
32(A) Two dollars and fifty cents ($2.50) for each stamp bearing
33the designation “25.”
34(B) Two dollars ($2) for each stamp bearing the designation
36(C) One dollar ($1) for each stamp bearing the designation “10.”
37(2) Every licensed cigarette distributor shall file a return with
38the board on or before the first day of the first calendar quarter
39commencing 180 days after the effective date of this act on a form
40prescribed by the board, showing the number of stamps described
P8 1in subparagraphs (A), (B), and (C) of paragraph (1). The amount
2of tax shall be computed and shown on the return.
3(c) The taxes required to be paid by this section are due and
4payable on or before the first day of the first calendar quarter
5commencing 180 days after the effective date of this act. Payments
6shall be made by remittances payable to the board and the payments
7shall accompany the return and forms required to be filed by this
9(d) Any amount required to be paid by this section that is not
10timely paid shall bear interest at the rate and by the method
11established pursuant to Section 30202 from the first day of the first
12calendar quarter commencing 180 days after the effective date of
13this act, until paid, and shall be subject to determination, and
14redetermination, and any penalties provided with respect to
15determinations and redeterminations.
(a) The State Board of Equalization shall determine
17within one year of the effective date of this act, and annually
18thereafter, the effect that the additional taxes imposed on cigarettes
19by this article, and the resulting increase in the tax on tobacco
20products required by subdivision (b) of Section 30123, have on
21the consumption of cigarettes and tobacco products in this state.
22To the extent that a decrease in consumption is determined by the
23State Board of Equalization to be a direct result of the additional
24tax imposed by this article, or the resulting increase in the tax on
25tobacco products required by subdivision (b) of Section 30123,
26the State Board of Equalization shall determine the fiscal effect
27the decrease in consumption has on the Cigarette and Tobacco
28Products Surtax Fund created by Section 30122 (Proposition 99
29as approved by the voters at the November 8, 1988, statewide
30general election), the Breast Cancer Fund created by Section
3130461.6, the California Children and Families Trust Fund created
32by Section 30131 (Proposition 10 as approved by the voters at the
33November 3, 1998, statewide general election), and the General
34Fund with respect to revenues derived from Section 30101.
35(b) Funds shall be transferred from the California Tobacco Tax
36Act of 2014 Fund to the Cigarette and Tobacco Products Surtax
37Fund, the Breast Cancer Fund, the California Children and Families
38Trust Fund, and the General Fund, to offset the revenue decrease
39directly resulting from imposition of additional taxes by this article.
P9 1(c) Transfers under this section shall be made by the board at
2times as the board determines necessary to further the intent of
(a) The California Tobacco Tax Act of 2014 Fund
5is hereby established in the State Treasury for the purposes set
6forth in this article. All revenues, less refunds, derived from the
7taxes imposed by this article shall be deposited in the California
8Tobacco Tax Act of 2014 Fund.
9(b) Moneys in the California Tobacco Tax Act of 2014 Fund,
10less moneys transferred pursuant to Section 30130.53, shall be
11transferred as follows:
12(1) ___ percent to the Tobacco Prevention and Education
13Account, which is hereby created in the California Tobacco Tax
14Act of 2014 Fund.
15(2) ___ percent to the Tobacco Disease Related Health Care
16 Account, which is hereby created in the California Tobacco Tax
17Act of 2014 Fund.
18(3) ___ percent to the Tobacco Law Enforcement Account,
19which is hereby created in the California Tobacco Tax Act of 2014
21(c) Funds deposited into the California Tobacco Tax Act of
222014 Fund may be placed into the Pooled Money Investment
23Account for investment only, and interest earned shall be credited
24to the fund and deposited, apportioned, and expended only in
begin delete the act that added this sectionend delete and its
27(d) Notwithstanding any other law, the California Tobacco Tax
28Act of 2014 Fund is a trust fund established solely to carry out the
begin delete of this actend delete and all revenues
30 deposited into the California Tobacco Tax Act of 2014 Fund,
31together with interest earned by the fund, are hereby continuously
begin delete for the purposes of the act that added this sectionend delete
33 without regard to fiscal year
begin delete and shallend delete
be expended only in
34accordance with this
begin delete actend delete and its purposes.
35(e) Notwithstanding any other law, the taxes imposed by
begin delete the and the revenue derived
36act that added this sectionend delete
37therefrom, including investment interest, shall not be considered
38to be part of the General Fund, as that term is used in Chapter 1
39(commencing with Section 16300) of Part 2 of Division 4 of the
40Government Code, shall not be considered General Fund revenue
P10 1for purposes of Section 8 of Article XVI of the California
2Constitution, and its implementing statutes, and shall not be
3considered “moneys to be applied by the state for the support of
4school districts and community college districts” pursuant to
5Section 8 of Article XVI of the California Constitution, and its
7(f) Notwithstanding any other law, revenues deposited into the
8California Tobacco Tax Act of 2014 Fund, and any interest earned
9by the fund, shall only be used for the specific purposes set forth
begin delete Section 30130.55end delete. Revenues deposited into California
11Tobacco Tax Act of 2014 Fund shall not be subject to
12appropriation, reversion, or transfer by the Legislature, the
13Governor, the Director of Finance, or the Controller for any other
14purpose, nor shall the funds be loaned to the General Fund or any
15other fund of the state or any local government fund.
16(g) All revenues deposited into the California Tobacco Tax Act
17of 2014 Fund shall be
begin delete appropriated andend delete expended only for the
18purposes expressed in this article, and shall be used only to
19supplement existing levels of service and not to fund existing levels
20of service. Moneys in the fund shall not be used to supplant state
21or local general fund moneys for any purpose.
After transferring the moneys as required pursuant
23to subdivision (b) of Section 30130.53 and pursuant to subdivision
24(b) of Section 30130.54, the Controller shall
begin delete appropriateend delete
25 the moneys from the accounts in the California Tobacco Tax Act
26of 2014 Fund as follows:
27(a) The Tobacco Prevention and Education Account shall be
28allocated to supplement tobacco prevention and control programs
30(1) __ percent to the State Department of Public Health.
31(2) __ percent to the State Department of Education.
32(3) ___percent to the University of California.
begin deleteThe end deleteTobacco Disease Related Health Care
34Account shall be allocated to the State Department of Health Care
35Services to improve existing programs to provide quality and
36access to health care programs for families and children pursuant
37to Chapter 7 (commencing with Section 14000) to Chapter 8.9
38(commencing with Section 14700), inclusive, of Part 3 of Division
399 of the Welfare and Institutions Code.
begin deleteThe end deleteTobacco Law Enforcement Account shall
2be allocated to the State Board of Equalization, Department of
3Justice, and the State Department of Public Health for the purpose
4of supplementing funding for the enforcement of laws that regulate
5the distribution and sale of cigarettes and other tobacco products,
6including, but not limited to, laws that prohibit cigarette smuggling,
7counterfeiting, selling untaxed tobacco, selling tobacco without a
8proper license and selling tobacco to minors, and enforcing
9tobacco-related laws, court judgments, and settlements.
10(d) Not more than 2 percent of the funds received from the
11California Tobacco Tax Act of 2014 Fund shall be used by any
12department for administrative costs.
13(e) The Department of Justice, the State Department of Public
14Health, the State Department of Education, the State Department
15of Health Care Services, and the University of California shall, on
16an annual basis, publish on their respective Internet Web sites an
17accounting of moneys received from the California Tobacco Tax
18Act of 2014 Fund and how the moneys were spent.
Section 30181 of the Revenue and Taxation Code is
20amended to read:
begin deleteWhen end deleteany tax imposed upon cigarettes under this
22part is not paid through the use of stamps or meter impressions,
23the tax shall be due and payable monthly on or before the 25th day
24of the month following the calendar month in which a distribution
25of cigarettes occurs, or in the case of a sale of cigarettes on the
26facilities of a common carrier for which the tax is imposed pursuant
27to Section 30104, the tax shall be due and payable monthly on or
28before the 25th day of the month following the calendar month in
29which a sale of cigarettes on the facilities of the carrier occurs.
30(b) Each distributor of tobacco products shall file a return in the
31form, as prescribed by the board,
begin delete whichend delete may include, but not
32be limited to, electronic media respecting the distributions of
33tobacco products and their wholesale cost during the preceding
34month, and any other information as the board may require to carry
35out this part. The return shall be filed with the board on or before
36the 25th day of the calendar month following the close of the
37monthly period for which it relates, together with a remittance
38payable to the board, of the amount of tax, if any, due under Article
392 (commencing with Section 30121) or Article 3 (commencing
40with Section 30131) of Chapter 2 for that period.
P12 1(c) To facilitate the administration of this part, the board may
2require the filing of the returns for longer than monthly periods.
3(d) Returns shall be authenticated in a form or pursuant to
4methods as may be prescribed by the board.
No reimbursement is required by this act pursuant to
6Section 6 of Article XIII B of the California Constitution because
7the only costs that may be incurred by a local agency or school
8district will be incurred because this act creates a new crime or
9infraction, eliminates a crime or infraction, or changes the penalty
10for a crime or infraction, within the meaning of Section 17556 of
11the Government Code, or changes the definition of a crime within
12the meaning of Section 6 of Article XIII B of the California
This act provides for a tax levy within the meaning of
15Article IV of the Constitution and shall go into immediate effect.