BILL ANALYSIS Ó
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Date of Hearing: September 8, 2015
ASSEMBLY COMMITTEE ON FINANCE
Shirley Weber, Chair
ABX2 11
(Nazarian) - As Introduced July 16, 2015
SUBJECT: Cigarette and tobacco product licensing: fees and
funding.
SUMMARY: Updates the Cigarette and Tobacco Products Licensing
Program under the Board of Equalization (BOE) by increasing
licensing, distributor, and wholesaler fees. Specifically, this
bill:
1)Increases, beginning January 1, 2016, the current one-time
retailer license fee of $100 per location to $265 per location
on an annual basis of a tobacco retailer license.
2)Increases, beginning January 1, 2016, the annual distributor
and wholesaler licensing fee from $1,000 to $1,200.
3)Requires BOE to report back to the Legislature no later than
January 1, 2019, regarding the adequacy of funding for the
Cigarette and Tobacco Products Licensing Act of 2003.
Requires the report to include data and recommendations about
whether the annual licensing fee funding levels are set at an
appropriate level to maintain an effective enforcement
program.
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EXISTING LAW:
1) Requires, under the Cigarette and Tobacco Licensing Act of
2003 (Licensing Act), a retailer to have in place and maintain a
license to engage in the sale of cigarettes or tobacco products.
Provides that a retailer license is valid for a 12-month period
and must be renewed annually.
2) Requires a retailer, in order to obtain a license, to file a
license application accompanied by a one-time license fee of
$100 for each retail location. Requires the retailer to renew
the license annually but only requires the $100 fee per retail
location with the initial application.
3) Requires, if a retailer's license has expired, that as a
condition of reinstatement, they pay an additional fee of $100.
FISCAL EFFECT:
Unknown administrative costs for the BOE to make required
computer system changes and notify retailers. The BOE indicates
that implementing the bill by January 1, 2016, will require the
BOE to redirect resources from existing responsibilities to make
the necessary changes included in this bill. According to the
BOE, a delay in implementation to January 1, 2017, would allow
the BOE to make the necessary changes within existing resources
and estimates costs to be about $18,000 for 2015-16.
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According to the LAO, the estimated revenue raised from the
change in fee structure is about $11 million annually from
increased licensing fees on tobacco retailers and on
distributors and wholesalers (Compliance Fund).
COMMENTS:
According to the author, the one-time tobacco licensing fee is
not adequate to cover costs associated with maintaining a viable
enforcement program, which is crucial to help maintain Master
Settlement Agreement (MSA) compliance. The author notes that
the intent of the bill is to shift the administrative costs from
the tobacco programs such as First 5 California, Proposition 10,
and Proposition 99 back to the retailers and wholesalers, while
maintaining the enforcement requirements under the MSA.
According to a 2015-16 LAO Budget Brief: Cigarette Tax and
Licensing Programs, the initial influx of revenue from the
licensing program was sufficient to pay the program's costs,
however in subsequent years fee revenue has been one-tenth of
the initial level and expenditures consistently exceed revenue.
Beginning in 2005-06, annual expenditures averaged $7 million
more than annual fee revenue. As a result, the Legislature, in
fiscal year 2006-07, allowed the BOE to charge the funds that
receive cigarette and tobacco excise tax revenue to cover the
administration of the licensing program. Consequently, the
funds pay about four-fifths of the licensing program's costs,
which have led to reduced programmatic resources.
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REGISTERED SUPPORT / OPPOSITION:
Support
American Cancer Society Cancer Action Network
American Heart Association/American Stroke Association
American Lung Association in California
California Academy of Family Physicians
California Dental Association
California Medical Association
California Pan-Ethnic Health Network
Children's Defense Fund - California
Chronic Care Coalition
First 5 Association of California
First 5 Los Angeles
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Planned Parenthood Affiliates of California
Service Employees International Union
Opposition
None on file.
Analysis Prepared by:Genevieve Morelos / FINANCE / 916-319-2099