BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | ABX2 11|
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THIRD READING
Bill No: ABX2 11
Author: Nazarian (D)
Amended: 3/3/16 in Assembly
Vote: 21
SENATE PUBLIC HEALTH AND DEVELOPMENTAL SERVICES COMMITTEE:
9-4, 3/7/16
AYES: Hernandez, Beall, Hall, Leno, McGuire, Mitchell,
Monning, Pan, Wolk
NOES: Morrell, Anderson, Moorlach, Nielsen
SENATE APPROPRIATIONS COMMITTEE: 5-2, 3/8/16
AYES: Lara, Beall, De León, Hill, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 48-26, 3/3/16 - See last page for vote
SUBJECT: Cigarette and tobacco product licensing: fees and
funding
SOURCE: Author
DIGEST: This bill revises the Cigarette and Tobacco Products
Licensing Act of 2003 to change the retailer license fee from a
$100 one-time fee to a $265 annual fee, and increases the
distributor and wholesaler license fee from $1,000 to $1,200.
ANALYSIS:
Existing law:
1)Imposes a one-time license fee of $100 per location on
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Page 2
cigarette and tobacco retailers. The fee is assessed at the
time a retailer submits an application for a license.
2)Imposes a fee of $1,000 per location with each license or
renewal application on cigarette and tobacco distributors and
wholesalers.
3)Requires a distributor, wholesaler, manufacturer, or importer
of cigarettes or tobacco products to register with and be
licensed by the Board of Equalization (BOE).
4)Requires the BOE to collect the retailer, and the distributor
and wholesaler license fees.
This bill:
1)Increases the license fee on cigarette and tobacco retailers
from $100 to $265, and requires the fee to be paid annually.
2)Increases the license fee on cigarette and tobacco
distributors and wholesalers from $1,000 to $1,200.
3)Requires the BOE to submit a report to the Legislature
regarding the adequacy of funding for the Cigarette and
Tobacco Products Licensing Act of 2003 (the Act). The report
shall include data and recommendations about whether the
annual licensing fee funding levels are set at an appropriate
level to maintain an effective enforcement program.
4)Applies to calendar years beginning on and after January 1,
2017.
Comments
1)Cigarette and Tobacco Products Licensing Act of 2003. The Act
established a statewide licensing program for retailers,
manufacturers, distributors, and importers of cigarettes and
tobacco products (AB 71 [Horton], Chapter 890, Statutes of
2003). The Act was enacted to counter cigarette tax evasion
through illegal sales of cigarettes and tobacco products in
California. According to BOE, the Act has been successful in
reducing illegal sales.
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2)Insufficient Funds. The current licensing fee structure does
not generate the necessary revenue to cover the administrative
costs associated with the licensing program. According to the
Legislative Analyst's Office (LAO), the licensing fee in the
Act generated $18 million in the program's first year.
However, in recent years, revenue from the fee has been
one-tenth of that initial level, with annual expenditures
averaging $7 million more than the annual fee revenue from
2005-06 to 2013-14. The LAO notes that in 2013-14, it cost
approximately $10 million to run the program, while revenue
has remained stagnant at $2 million. A subsequent report from
BOE stated that inadequate funding of this program can lead to
a lack of field enforcement, or a reduction in compliance
staff, potentially leading to further decreases in funding.
Further, in 2006, the Legislature approved a budget proposal
to begin charging the special funds that receive cigarette and
tobacco excise tax revenue for part of the costs of
administering the licensing program. While this has helped
increase the funding to administer the license program, this
change has reduced the resources available to programs
receiving cigarette and tobacco excise tax funds. The BOE
estimates the new fees will raise $12 million. The revenue
will ensure that there is more money available for the special
funds programs that receive cigarette and tobacco excise tax
revenue.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
1)Unknown administrative costs for the BOE to make required
computer system changes and notify retailers (Compliance
Fund). The BOE indicates that implementing this bill by
January 1, 2016, will require it to redirect resources away
from existing responsibilities to make the necessary system
changes. According to the BOE, a delay in implementation to
January 1, 2017, would allow the BOE to make the necessary
changes within existing resources without delaying other
changes.
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2)Ongoing annual revenue increases of $11.1 million per year
from increased licensing fees on tobacco retailers and on
distributors and wholesalers (Compliance Fund).
SUPPORT: (Verified 2/29/16)
American Cancer Society Cancer Action Network
American Heart Association/American Stroke Association
American Lung Association in California
Association of Northern California Oncologists
California Academy of Family Physicians
California Black Health Network
California Chronic Care Coalition
California Dental Association
California Medical Association
California Optometric Association
California Pan-Ethnic Health Network
California Primary Care Association
California Society of Addiction Medicine
Community Action Fund of Planned Parenthood Orange and San
Bernardino Counties
First 5 Association of California
March of Dimes, California Chapter
Medical Oncology Association of Southern California
Planned Parenthood Action Fund of the Pacific Southwest
Planned Parenthood Advocacy Project Los Angeles
Planned Parenthood Affiliates of California
Planned Parenthood Mar Monte
Planned Parenthood Northern California Action Fund
San Francisco Tobacco Free Coalition
Service Employees International Union
Solano County Board of Supervisors
State of California Tobacco Education and Research Oversight
Committee
OPPOSITION:(Verified 2/29/16)
None received
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ARGUMENTS IN SUPPORT: The supporters of this bill argue that
this bill will cover the cost of administering the BOE's
licensing program, which would eliminate the program's current
funding shortfall. Further, supporters argue that this will
result in more funding of Proposition 99 programs that help
reduce smoking, provide health care services, and support
tobacco-related research.
ASSEMBLY FLOOR: 48-26, 3/3/16
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,
Eggman, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez,
Gonzalez, Gordon, Gray, Roger Hernández, Jones-Sawyer, Levine,
Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark
Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Hadley, Harper, Irwin,
Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes,
Melendez, Obernolte, Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Frazier, Grove, Holden, Olsen, Waldron
Prepared by:Myriam Bouaziz / P.H. & D.S.
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