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 require the board, each fiscal year, to adjust the tax on the distribution of cigarettes, as specified, based upon the percentage increase in the California Consumer Price Index for all items, if any.end 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 would be 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 provide that no reimbursement is required by this act for a specified reason.
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 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 36,000
5people every year. California still has approximately 3.4 million
6adult smokers and 200,000 youth smokers.
7(b) The inevitable health care costs of smoking come to almost
8$10 for every pack of cigarettes sold in California.
9(c) Tobacco use costs Californians more than $9.1 billion in
10tobacco-related medical expenses every year. The cost of lost
11productivity due to tobacco use adds an additional estimated $8.5
12billion to the annual economic consequences of smoking in
14(d) The treatment of cancer, heart disease and stroke, lung
15disease, diabetes, and other diseases related to tobacco use
16continues to impose a significant burden upon California’s
17overstressed health care system, including publicly funded health
19(e) In 2013-14, it is estimated that the General Fund cost of
20publicly funded health care programs to the state will be more than
21$15 billion. In 2013-14, it is estimated that publicly funded health
22care programs will provide health care coverage to more than 1.4
23million families and more than 700,000 children. At the same time,
24hundreds of thousands of families and children go without any
25medical coverage due to financial constraints upon the state and
26local government budgets and recent cutbacks in publicly funded
27health care programs.
28(f) A recent cost-benefit analysis concluded that if states
29followed the United States Centers for Disease Control and
30Prevention’s Best Practices for Comprehensive Tobacco Control
31Programs 2007 funding guidelines, up to 14 to 20 times the cost
32of program implementation could be saved through reduced
33medical and productivity costs as well as reduced Medicaid costs.
34(g) The California Tobacco Tax Act of 2014 will help fund the
35comprehensive California Tobacco Control Program designed to
P4 1change social norms about tobacco and discourage individuals
2from taking up smoking and the use of other tobacco products
3through educational programs, thereby saving the state and local
4governments significant money now and in the future.
5(h) Tobacco tax increases are an appropriate way to mitigate
6the impacts of tobacco-related diseases and improve existing
7programs providing for quality and access to health care services
8for families and children.
9(i) An increase in the tobacco tax will have an immediate effect
10on smoking and is the most appropriate mechanism to fund services
11to prevent tobacco use, help people quit smoking, and discourage
12many people from taking up smoking.
13(j) California taxes cigarettes at only $0.87 per pack, and ranks
1433rd in tobacco tax rates, reflecting one of the lowest tobacco taxes
15in the United States. Thirty states have cigarette tax rates of $1 per
16pack or higher, and California is well below other west coast states
17(Washington: $3.025, Oregon: $1.18, and Arizona: $2). California
18last raised its tobacco tax in 1998.
19(k) The burden of smoking is not equally shared across
20California populations and communities. Tobacco use rates are
21much higher than the general population in African Americans,
22white men, Korean men, enlisted military personnel, lesbian, gay,
begin delete bisexualend delete and transgender, young adult, rural, and
25(l) A reinvigorated tobacco control program will allow targeted
26public health and research efforts to combat the tobacco industry’s
27predatory marketing to ethnic groups, driving down smoking rates
28and ultimately reducing heart disease, stroke, lung disease, and
29cancer in these California communities, which together represent
30more than half of our state’s residents.
Section 30104 of the Revenue and Taxation Code is
32amended to read:
The taxes imposed by this part shall not apply to the
34sale of cigarettes or tobacco products by a distributor to a common
35carrier engaged in interstate or foreign passenger service or to a
36person authorized to sell cigarettes or tobacco products on the
37facilities of the carrier. Whenever cigarettes or tobacco products
38are sold by distributors to common carriers engaged in interstate
39or foreign passenger service for use or sale on facilities of the
40carriers, or to persons authorized to sell cigarettes or tobacco
P5 1products on those facilities, the tax imposed under this part shall
2not be levied with respect to the sales of the cigarettes or tobacco
3products by the distributors, but a tax is hereby levied upon the
4carriers or upon the persons authorized to sell cigarettes or tobacco
5products on the facilities of the carriers, as the case may be, for
6the privilege of making sales in California at the same rate as set
7forth under this part. Those common carriers and authorized
8persons shall pay the tax imposed by this section and file reports
9with the board, as provided in Section 30186.
Section 30108 of the Revenue and Taxation Code is
11amended to read:
(a) Every distributor engaged in business in this state
13and selling or accepting orders for cigarettes or tobacco products
14with respect to the sale of which the tax imposed under this part
15is inapplicable shall, at the time of making the sale or accepting
16the order or, if the purchaser is not then obligated to pay the tax
17with respect to his or her distribution of the cigarettes or tobacco
18products, at the time the purchaser becomes so obligated, collect
19the tax from the purchaser, if the purchaser is other than a licensed
20distributor, and shall give to the purchaser a receipt therefor in the
21manner and form prescribed by the board.
22(b) Every person
engaged in business in this state and making
23gifts of untaxed cigarettes or tobacco products as samples with
24respect to which the tax imposed under this part is inapplicable
25shall, at the time of making the gift or, if the donee is not then
26obligated to pay the tax with respect to his or her distribution of
27the cigarettes or tobacco products, at the time the donee becomes
28so obligated, collect the tax from the donee, if the donee is other
29than a licensed distributor, and shall give the donee a receipt
30therefor in the manner and form prescribed by the board. This
31section shall not apply to those distributions of cigarettes or tobacco
32products that are exempt from tax under Section 30105.5.
33(c) “Engaged in business in the state” means and includes any
34of the following:
35(1) Maintaining, occupying, or using, permanently or
36temporarily, directly or indirectly, or through a subsidiary, or agent,
37by whatever name called, an office, place of distribution, sales or
38sample room or place, warehouse or storage place, or other place
P6 1(2) Having any representative, agent, salesperson,
begin delete canvasserend delete
2 or solicitor operating in this state under the authority
3of the distributor or its subsidiary for the purpose of selling,
4delivering, or the taking of orders for cigarettes or tobacco
6(d) The taxes required to be collected by this section constitute
7debts owed by the distributor, or other person required to collect
8the taxes, to the state.
Article 2.5 (commencing with Section 30130.50) is
10added to Chapter 2 of Part 13 of Division 2 of the Revenue and
11Taxation Code, to read:
For the purposes of this article:
16(a) “Cigarette” has the same meaning as in Section 30003 as it
17read on January 1, 2013.
18(b) “Tobacco products” includes, but is not limited to, all forms
19of cigars, smoking tobacco, chewing tobacco, snuff, and any other
20articles or products made of, or containing at least 50 percent,
21tobacco, but does not include cigarettes.
begin delete(a)end delete begin delete end deleteIn addition to any other taxes imposed upon the
23distribution of cigarettes, there shall be imposed an additional tax
24upon every distributor of cigarettes at the rate of one hundred mills
25($0.10) for each cigarette distributed on or after the first day of
26the first calendar quarter commencing more than 90 days after the
27effective date of this act.
28(b) (1) To offset the effects of inflation and further reduce
29smoking prevalence, on or before March 1 of each year, the State
30Board of Equalization shall calculate the percentage increase in
31the California Consumer Price Index for all items in December of
32the prior calendar year over the December of the preceding calendar
33year immediately preceding the prior calendar year. Each fiscal
34year, the tax imposed by subdivision (a) on the distribution of
35cigarettes and tobacco products shall be adjusted by the State Board
36of Equalization to reflect the percentage increase in the California
37Consumer Price Index for all items, if any. The adjusted tax shall
38be effective during the state’s next fiscal year.
39(2) In no event shall the tax be less than the tax imposed under
40this part as of the effective date of this act.
(a) (1) Every dealer and wholesaler, for the
2privilege of holding or storing cigarettes for sale, use, or
3consumption, shall pay a floor stock tax for each cigarette in its
4possession or under its control in this state at 12:01 a.m. on the
5first day of the first calendar quarter commencing more than 90
6days after the effective date of this act at the rate of one hundred
7mills ($0.10) for each cigarette.
8(2) Every dealer and wholesaler shall file a return with the State
9Board of Equalization on or before the first day of the first calendar
10quarter commencing more than 180 days after the effective date
11of this act on a form prescribed by the State Board of Equalization,
12showing the number of cigarettes in its possession or under its
13control in this state at 12:01 a.m. on the first day of the first
14calendar quarter commencing more than 90 days after the effective
15date of this act. The amount of tax shall be computed and shown
16on the return.
17(b) (1) Every licensed cigarette distributor, for the privilege of
18distributing cigarettes and for holding or storing cigarettes for sale,
19use, or consumption, shall pay a cigarette indicia adjustment tax
20for each California cigarette tax stamp that is affixed to any
21package of cigarettes and for each unaffixed California cigarette
22tax stamp in its possession or under its control at 12:01 a.m. on
23the first day of the first calendar quarter commencing more than
2490 days after the effective date of this act at the following rates:
25(A) Two dollars and fifty cents ($2.50) for each stamp bearing
26the designation “25.”
27(B) Two dollars ($2) for each stamp bearing the designation
29(C) One dollar ($1) for each stamp bearing the designation “10.”
30(2) Every licensed cigarette distributor shall file a return with
31the board on or before the first day of the first calendar quarter
32commencing 180 days after the effective date of this act on a form
33prescribed by the board, showing the number of stamps described
34in subparagraphs (A), (B), and (C) of paragraph (1). The amount
35of tax shall be computed and shown on the return.
36(c) The taxes required to be paid by this section are due and
37payable on or before the first day of the first calendar quarter
38commencing 180 days after the effective date of this act. Payments
39shall be made by remittances payable to the board and the payments
P8 1shall accompany the return and forms required to be filed by this
3(d) Any amount required to be paid by this section that is not
4timely paid shall bear interest at the rate and by the method
5established pursuant to Section 30202 from the first day of the first
6calendar quarter commencing 180 days after the effective date of
7this act, until paid, and shall be subject to determination, and
8redetermination, and any penalties provided with respect to
9determinations and redeterminations.
(a) The State Board of Equalization shall determine
11within one year of the effective date of this act, and annually
12thereafter, the effect that the additional taxes imposed on cigarettes
13by this article, and the resulting increase in the tax on tobacco
14products required by subdivision (b) of Section 30123, have on
15the consumption of cigarettes and tobacco products in this state.
16To the extent that a decrease in consumption is determined by the
17State Board of Equalization to be a direct result of the additional
18tax imposed by this article, or the resulting increase in the tax on
19tobacco products required by subdivision (b) of Section 30123,
20the State Board of Equalization shall determine the fiscal effect
21the decrease in consumption has on the Cigarette and Tobacco
22Products Surtax Fund created by Section 30122 (Proposition 99
23as approved by the voters at the November 8, 1988, statewide
24general election), the Breast Cancer Fund created by Section
2530461.6, the California Children and Families Trust Fund created
26by Section 30131 (Proposition 10 as approved by the voters at the
27November 3, 1998, statewide general election), and the General
28Fund with respect to revenues derived from Section 30101.
29(b) Funds shall be transferred from the California Tobacco Tax
30Act of 2014 Fund to the Cigarette and Tobacco Products Surtax
31Fund, the Breast Cancer Fund, the California Children and Families
32Trust Fund, and the General Fund, to offset the revenue decrease
33directly resulting from imposition of additional taxes by this article.
34(c) Transfers under this section shall be made by the board at
35times as the board determines necessary to further the intent of
(a) The California Tobacco Tax Act of 2014 Fund
38is hereby established in the State Treasury for the purposes set
39forth in this article. All revenues, less refunds, derived from the
P9 1taxes imposed by this article shall be deposited in the California
2Tobacco Tax Act of 2014 Fund.
3(b) Moneys in the California Tobacco Tax Act of 2014 Fund,
4less moneys transferred pursuant to Section 30130.53, shall be
5transferred as follows:
6(1) ___ percent to the Tobacco Prevention and Education
7Account, which is hereby created in the California Tobacco Tax
8Act of 2014 Fund.
9(2) ___ percent to the Tobacco Disease Related Health Care
10 Account, which is hereby created in the California Tobacco Tax
11Act of 2014 Fund.
12(3) ___ percent to the Tobacco Law Enforcement Account,
13which is hereby created in the California Tobacco Tax Act of 2014
15(c) Funds deposited into the California Tobacco Tax Act of
162014 Fund may be placed into the Pooled Money Investment
17Account for investment only, and interest earned shall be credited
18to the fund and deposited, apportioned, and expended only in
19accordance with this article and its purposes.
20(d) Notwithstanding any other law, the California Tobacco Tax
21Act of 2014 Fund is a trust fund established solely to carry out the
22purposes set forth in this article and all revenues deposited into
23the California Tobacco Tax Act of 2014 Fund, together with
24interest earned by the fund, are hereby continuously appropriated
25without regard to fiscal year to be expended only in accordance
26with this article and its purposes.
27(e) Notwithstanding any other law, the taxes imposed by this
28article and the revenue derived therefrom, including investment
29interest, shall not be considered to be part of the General Fund, as
30that term is used in Chapter 1 (commencing with Section 16300)
31of Part 2 of Division 4 of the Government Code, shall not be
32considered General Fund revenue for purposes of Section 8 of
33Article XVI of the California Constitution, and its implementing
34statutes, and shall not be considered “moneys to be applied by the
35state for the support of school districts and community college
36districts” pursuant to Section 8 of Article XVI of the California
37Constitution, and its implementing statutes.
38(f) Notwithstanding any other law, revenues deposited into the
39California Tobacco Tax Act of 2014 Fund, and any interest earned
40by the fund, shall only be used for the specific purposes set forth
P10 1in this article. Revenues deposited into California Tobacco Tax
2Act of 2014 Fund shall not be subject to appropriation, reversion,
3or transfer by the Legislature, the Governor, the Director of
4Finance, or the Controller for any other purpose, nor shall the funds
5be loaned to the General Fund or any other fund of the state or any
6local government fund.
7(g) All revenues deposited into the California Tobacco Tax Act
8of 2014 Fund shall be expended only for the purposes expressed
9in this article, and shall be used only to supplement existing levels
10of service and not to fund existing levels of service. Moneys in
11the fund shall not be used to supplant state or local general fund
12moneys for any purpose.
After transferring the moneys as required pursuant
14to subdivision (b) of Section 30130.53 and pursuant to subdivision
15(b) of Section 30130.54, the Controller shall allocate the moneys
16from the accounts in the California Tobacco Tax Act of 2014 Fund
18(a) The Tobacco Prevention and Education Account shall be
19allocated to supplement tobacco prevention and control programs
21(1) __ percent to the State Department of Public Health.
22(2) __ percent to the State Department of Education.
23(3) ___percent to the University of California.
24(b) Funds in the Tobacco Disease Related Health Care Account
25shall be allocated to the State Department of Health Care Services
26to improve existing programs to provide quality and access to
27health care programs for families and children pursuant to Chapter
287 (commencing with Section 14000) to Chapter 8.9 (commencing
29with Section 14700), inclusive, of Part 3 of Division 9 of the
30Welfare and Institutions Code.
31(c) Funds in the Tobacco Law Enforcement Account shall be
32allocated to the State Board of Equalization, Department of
33Justice, and the State Department of Public Health for the purpose
34of supplementing funding for the enforcement of laws that regulate
35the distribution and sale of cigarettes and other tobacco products,
36including, but not limited to, laws that prohibit cigarette smuggling,
37counterfeiting, selling untaxed tobacco, selling tobacco without a
begin delete licenseend delete and selling tobacco to minors, and enforcing
39tobacco-related laws, court judgments, and settlements.
P11 1(d) Not more than 2 percent of the funds received from the
2California Tobacco Tax Act of 2014 Fund shall be used by any
3department for administrative costs.
4(e) The Department of Justice, the State Department of Public
5Health, the State Department of Education, the State Department
6of Health Care Services, and the University of California shall, on
7an annual basis, publish on their respective Internet Web sites an
8accounting of moneys received from the California Tobacco Tax
9Act of 2014 Fund and how the moneys were spent.
Section 30181 of the Revenue and Taxation Code is
11amended to read:
(a) If any tax imposed upon cigarettes under this part
13is not paid through the use of stamps or meter impressions, the tax
14shall be due and payable monthly on or before the 25th day of the
15month following the calendar month in which a distribution of
16cigarettes occurs, or in the case of a sale of cigarettes on the
17facilities of a common carrier for which the tax is imposed pursuant
18to Section 30104, the tax shall be due and payable monthly on or
19before the 25th day of the month following the calendar month in
20which a sale of cigarettes on the facilities of the carrier occurs.
21(b) Each distributor of tobacco products shall file a return in the
22form, as prescribed by the board, that may include, but not be
23limited to, electronic media respecting the distributions of tobacco
24products and their wholesale cost during the preceding month, and
25any other information as the board may require to carry out this
26part. The return shall be filed with the board on or before the 25th
27day of the calendar month following the close of the monthly
28period for which it relates, together with a remittance payable to
29the board, of the amount of tax, if any, due under Article 2
30(commencing with Section 30121) or Article 3 (commencing with
31Section 30131) of Chapter 2 for that period.
32(c) To facilitate the administration of this part, the board may
33require the filing of the returns for longer than monthly periods.
34(d) Returns shall be authenticated in
a form or pursuant to
35methods as may be prescribed by the board.
No reimbursement is required by this act pursuant to
37Section 6 of Article XIII B of the California Constitution because
38the only costs that may be incurred by a local agency or school
39district will be incurred because this act creates a new crime or
40infraction, eliminates a crime or infraction, or changes the penalty
P12 1for a crime or infraction, within the meaning of Section 17556 of
2the Government Code, or changes the definition of a crime within
3the meaning of Section 6 of Article XIII B of the California
This act provides for a tax levy within the meaning of
6Article IV of the Constitution and shall go into immediate effect.