AB 16, as introduced, Bonta. Public health: cigarette and tobacco products: electronic cigarettes: taxes: California Health Care, Research, and Prevention Tobacco Tax Act of 2015.
The Cigarette and Tobacco Products Licensing Act of 2003 requires the State Board of Equalization to administer a statewide program to license manufacturers, importers, distributors, wholesalers, and retailers of cigarettes and tobacco products. Under existing law, a violation of this act is a misdemeanor.
This bill would expand the definition of tobacco products for purposes of that act to include electronic cigarettes, as defined, thereby subjecting manufacturers, importers, distributors, wholesalers, and retailers of electronic cigarettes to the same licensing requirements imposed pursuant to that act on manufacturers, importers, distributors, wholesalers, and retailers of tobacco products. By broadening the act to apply to manufacturers, importers, distributors, wholesalers, and retailers of electronic cigarettes, this bill would expand the scope of an existing crime, thereby imposing a state-mandated local program.
The Cigarette and Tobacco Products Tax Law, the violation of which is a crime, imposes a tax on distributors of cigarettes at the rate of $0.87 per package of 20 cigarettes and a tax on distributors of tobacco products, based on wholesale cost, at a rate determined annually that is equivalent to the combined rate of all taxes imposed on cigarettes, and at a rate equivalent to $0.50 per package of 20 cigarettes. Revenues from taxes imposed under this law are deposited in specified accounts. These taxes are inclusive of the 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).
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, which would be $2 per pack; 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 at the rate equal to the difference between the existing tax rate and the tax rate imposed by this bill 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 thereby increase the tax upon the distribution of tobacco products pursuant to Proposition 99, the revenues from which are required to be deposited in the Cigarette and Tobacco Products Surtax Fund.
This bill would additionally, 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 a tax on the distribution of electronic cigarettes, as defined, based on the wholesale cost, at a rate determined annually that is equivalent to the cigarette tax rate, which would be $2.87 per package of 20 cigarettes.
This bill would expand the definition of “tobacco products” for purposes of the Cigarette and Tobacco Products Tax Law to include electronic cigarettes, thereby subjecting distributors, wholesalers, and transporters of electronic cigarettes to, among other things, the same licensing, bonding, and registration requirements imposed on distributors, wholesalers, and transporters of tobacco products.
This bill would provide that the revenues collected from the taxes imposed on cigarettes and electronic cigarettes by this bill, less refunds, would not be considered General Fund revenues and would be deposited in the California Health Care, Research, and Prevention Tobacco Tax Act of 2015 Fund created by this bill. The bill would require moneys in the California Health Care, Research, and Prevention Tobacco Tax Act of 2015 Fund to be continuously appropriated without regard to fiscal year to the Controller, to be used to fund health care and prevention programs.
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.
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 40,000
5people every year. Each year thousands of Californians require
6medical and dental treatment as a result of tobacco use.
7(b) Health care treatment of all types of cancer, cardiovascular
8and lung disease, oral disease, and tobacco-related diseases and
9conditions continues to impose a significant financial burden upon
10California’s overstressed health care system. Tobacco use costs
11Californians more than $13.29 billion in health care expenses every
12year, of which $3.5 billion is paid for by taxpayers through existing
13health care programs and services that provide health care,
14treatment, and services for Californians. The cost of lost
15productivity due to tobacco use adds an additional estimated $10.35
P4 1billion to the annual economic consequences of smoking and
2tobacco use in California.
3(c) An increase in the tobacco tax is an appropriate way to
4decrease tobacco use and mitigate the costs of health care treatment
5and improve existing programs providing quality health care and
6access to health care services for families and children. It will save
7lives and save state and local governments money in the future.
8(d) Most electronic cigarettes contain nicotine, which is derived
9from tobacco and is a highly addictive drug. Electronic cigarettes
10are currently not subject to any tobacco taxation, making them
11cheaper and potentially more attractive, especially to young people.
12(e) There are more than 470 electronic cigarette brands for sale
13today offered in over 7,700 flavors including candy-flavors that
14appeal to youth, such as Captain Crunch, gummy bear, cotton
15candy, Atomic Fireball, and fruit loops. The fastest growing age
16range for electronic cigarettes is middle school and high school
17students and according to the Centers for Disease Control,
18electronic cigarette use among this group tripled from 2013 to
20(f) Increasing the cost of cigarettes and tobacco products is
21widely recognized as the most effective way to reduce smoking
22across California, especially by young people. The 2000 U.S.
23Surgeon General’s Report, Reducing Tobacco Use, found that
24raising tobacco-product prices decreases the prevalence of tobacco
25use, particularly among kids and young adults, and that tobacco
26tax increases produce “substantial long-term improvements in
27 health.” From its review of existing research, the report concluded
28that raising tobacco taxes is one of the most effective tobacco
29prevention and control strategies. Reducing smoking will save
30lives and saves state and local governments money in the future.
31(g) Because increasing the tobacco tax will reduce smoking and
32use of other tobacco products, it is important to protect existing
33tobacco tax-funded programs from a decline in tax revenues.
34(h) It is important that funding be dedicated to health care and
36(i) California currently taxes cigarettes at only $0.87 per pack,
37and ranks 35th in tobacco tax rates, reflecting one of the lowest
38tobacco tax rates in the United States. The national average is
39$1.60 per pack. Thirty-five states have cigarette tax rates of $1.00
40per pack or higher, and California is well below other western
P5 1states (Washington: $3.025, Oregon: $1.31, Nevada: $1.80, and
2Arizona: $2.00). California last raised its tobacco tax in 1998.
Section 22971.05 is added to the Business and
4Professions Code, to read:
For purposes of this division, beginning on and after
6the first day of the first calendar quarter commencing more than
790 days after the effective date of this section, “tobacco products”
8also includes electronic cigarettes, as that term is defined in
9subdivision (b) of Section 30130.51 of the Revenue and Taxation
Section 30014 of the Revenue and Taxation Code is
12amended to read:
(a) “Transporter” means any person transporting into
14or within this state any of the following:
15(1) Cigarettes not contained in packages to which are affixed
16California cigarette tax stamps or meter impressions.
17(2) Tobacco products upon which the tobacco products surtax
18imposed by Article 2 (commencing with Section 30121) and Article
193 (commencing with Section 30131) of Chapter 2 has not been
23(b) “Transporter” shall not include any of the following:
24(1) A licensed distributor.
25(2) A common carrier.
26(3) A person transporting cigarettes and tobacco products under
27federal internal revenue bond or customs control that are
28non-tax-paid under Chapter 52 of the Internal Revenue Act of 1954
Section 30104 of the Revenue and Taxation Code is
31amended to read:
The taxes imposed by this part shall not apply to the
33sale of cigarettes or tobacco products by a distributor to a common
34carrier engaged in interstate or foreign passenger service or to a
35person authorized to sell cigarettes or tobacco products on the
36facilities of the carrier. Whenever cigarettes or tobacco products
37are sold by distributors to common carriers engaged in interstate
38or foreign passenger service for use or sale on facilities of the
39carriers, or to persons authorized to sell cigarettes or tobacco
40products on those facilities, the tax imposed
begin delete by Sections 30101, shall not be levied with respect
P6 130123, and 30131.2end delete
2to the sales of the cigarettes or tobacco products by the distributors,
3but a tax is hereby levied upon the carriers or upon the persons
4authorized to sell cigarettes or tobacco products on the facilities
5of the carriers, as the case may be, for the privilege of making sales
6in California at the same rate as set forth
begin delete in Sections 30101, 30123, Those common carriers and
7and 30131.2.end delete
8authorized persons shall pay the tax imposed by this section and
9file reports with 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
begin delete by Sections is inapplicable shall,
1530101, 30123, and 30131.2end delete
16at the time of making the sale or accepting the order or, if the
17purchaser is not then obligated to pay the tax with respect to his
18or her distribution of the cigarettes or tobacco products, at the time
19the purchaser becomes so obligated, collect the tax from the
20purchaser, if the purchaser is other than a licensed distributor, and
21shall give to the purchaser a receipt therefor in the manner and
22form prescribed by the board.
23(b) Every person engaged in business in this state and making
24gifts of untaxed cigarettes or tobacco products as samples with
25respect to which the tax imposed
begin delete by Sections 30101, 30123, and is inapplicable shall, at the time of making
27the gift or, if the donee is not then obligated to pay the tax with
28respect to his or her distribution of the cigarettes or tobacco
29products, at the time the donee becomes so obligated, collect the
30tax from the donee, if the donee is other than a licensed distributor,
31and shall give the donee a receipt therefor in the manner and form
32prescribed by the board. This section shall not apply to those
33distributions of cigarettes or tobacco products
begin delete whichend delete are
34exempt from tax under Section 30105.5.
35(c) “Engaged in business in the state” means and includes any
36of the following:
37(1) Maintaining, occupying, or using, permanently or
38temporarily, directly or indirectly, or through a subsidiary, or agent,
39by whatever name called, an office, place of distribution, sales or
P7 1sample room or place, warehouse or storage place, or other place
3(2) Having any representative, agent, salesperson,
begin delete canvasserend delete
4 or solicitor operating in this state under the authority
5of the distributor or its subsidiary for the purpose of selling,
6delivering, or the taking of orders for cigarettes or tobacco
8(d) The taxes required to be collected by this section constitute
9debts owed by the distributor, or other person required to collect
10the taxes, to the state.
Article 2.5 (commencing with Section 30130.51) is
12added to Chapter 2 of Part 13 of Division 2 of the Revenue and
13Taxation Code, to read:
For the purposes of this article:
19(a) “Cigarette” has the same meaning as in Section 30003 as it
20read on January 1, 2015.
21(b) “Electronic cigarettes” means any device that is intended to
22be used to deliver aerosolized or vaporized nicotine to the person
23inhaling from the device, including, but not limited to, an
24e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah. Electronic
25cigarettes include any component, part, or accessory of that a
26device that is used during the operation of the device, whether sold
27separately or as a package with that device, if it is intended to be
28used to deliver aerosolized or vaporized nicotine to the person
29using the device. Electronic cigarettes also include any liquid or
30substance containing nicotine intended to be inhaled during the
31use of the device. Electronic cigarettes do not include any battery,
32battery charger, carrying case, or other accessory not used in the
33operation of the device if sold separately. E-cigarettes shall not
34include any product that has been approved by the United States
35Food and Drug Administration for sale as a tobacco cessation
36product or for other therapeutic purposes where that product is
37marketed and sold solely for such an approved purpose.
38(c) The references to “tobacco products” in this part, except in
39Article 2 (commencing with Section 30121) and Article 3
40(commencing with Section 30131) of Chapter 2 (commencing with
P8 1Section 30101), and Chapter 9 (commencing with Section 30461),
2shall include electronic cigarettes, unless the context otherwise
(a) In addition to any other taxes imposed upon the
5distribution of cigarettes, there shall be imposed an additional tax
6upon every distributor of cigarettes at the rate of one hundred mills
7($0.10) for each cigarette distributed on or after the first day of
8the first calendar quarter commencing more than 90 days after the
9effective date of this article.
10(b) (1) There shall be imposed upon every distributor a tax
11upon the distribution of electronic cigarettes, based on the
12wholesale cost of these products, at a tax rate, as determined
13annually by the State Board of Equalization, that is equivalent to
14the total rate of tax imposed on cigarettes by this part, on or after
15the first day of the first calendar quarter commencing more than
1690 days after the effective date of this article.
17(2) The board may adopt any regulations necessary to enforce
18and administer the tax imposed in paragraph (1), as provided for
19in subdivision (c) of Section 30130.51, including, but not limited
20to, regulations that address the following:
21(A) The imposition of tax on the distribution of any liquid or
22substance containing nicotine, any device intended to be used to
23deliver aerosolized or vaporized nicotine to the person inhaling
24from the device, and any component, part, or accessory of such a
25device that is intended to be used to deliver aerosolized or
26vaporized nicotine to the person inhaling from the device.
27(B) Describing who is a distributor of electronic cigarettes,
28which is consistent with the definition of the term “distributor” in
30(c) The wholesale cost used to calculate the amount of tax due
31under subdivision (b) does not include the wholesale cost of
32electronic cigarettes that were returned by a customer during the
33same reporting period in which the electronic cigarettes were
34distributed, when the distributor refunds the entire amount the
35customer paid for the tobacco products either in cash or credit. For
36purposes of this subdivision, refund or credit of the entire amount
37shall be deemed to be given when the purchase price less
38rehandling and restocking costs is refunded or credited to the
39customer. The amount withheld for rehandling and restocking
40costs may be a percentage of the sales price determined by the
P9 1average cost of rehandling and restocking returned merchandise
2during the previous accounting cycle.
(a) (1) Every dealer and wholesaler, for the
4privilege of holding or storing cigarettes for sale, use, or
5consumption, shall pay a floor stock tax for each cigarette in its
6possession or under its control in this state at 12:01 a.m. on the
7first day of the first calendar quarter commencing more than 90
8days after the effective date of this article at the rate of one hundred
9mills ($0.10) for each cigarette.
10(2) Every dealer and wholesaler shall file a return with the State
11Board of Equalization on or before the first day of the first calendar
12quarter commencing more than 180 days after the effective date
13of this act on a form prescribed by the State Board of Equalization,
14showing the number of cigarettes in its possession or under its
15control in this state at 12:01 a.m. on the first day of the first
16calendar quarter commencing more than 90 days after the effective
17date of this article. The amount of tax shall be computed and shown
18on the return.
19(b) (1) Every licensed cigarette distributor, for the privilege of
20distributing cigarettes and for holding or storing cigarettes for sale,
21use, or consumption, shall pay a cigarette indicia adjustment tax
22for each California cigarette tax stamp that is affixed to any
23package of cigarettes and for each unaffixed California cigarette
24tax stamp in its possession or under its control at 12:01 a.m. on
25the first day of the first calendar quarter commencing more than
2690 days after the effective date of this article at the following rates:
27(A) Two dollars and fifty cents ($2.50) for each stamp bearing
28the designation “25.”
29(B) Two dollars ($2.00) for each stamp bearing the designation
31(C) One dollar ($1.00) for each stamp bearing the designation
33(2) Every licensed cigarette distributor shall file a return with
34the board on or before the first day of the first calendar quarter
35commencing 180 days after the effective date of this act on a form
36prescribed by the board, showing the number of stamps described
37in subparagraphs (A), (B), and (C) of paragraph (1). The amount
38of tax shall be computed and shown on the return.
39(c) The taxes required to be paid by this section are due and
40payable on or before the first day of the first calendar quarter
P10 1commencing 180 days after the effective date of this act. Payments
2shall be made by remittances payable to the board and the payments
3shall accompany the return and forms required to be filed by this
5(d) Any amount required to be paid by this section that is not
6timely paid shall bear interest at the rate and by the method
7established pursuant to Section 30202 from the first day of the first
8calendar quarter commencing 180 days after the effective date of
9this article until paid, shall be subject to determination,
10redetermination, and any penalties provided with respect to
11determinations and redeterminations.
(a) The California Health Care, Research, and
13Prevention Tobacco Tax Act of 2015 Fund is hereby established
14in the State Treasury for the purposes set forth in this article.
15Notwithstanding Section 30461, all revenues, less refunds, derived
16from the taxes imposed by this article on cigarettes and electronic
17cigarettes shall be deposited in the California Health Care,
18Research, and Prevention Tobacco Tax Act of 2015 Fund.
19(b) Notwithstanding any other law, the California Health Care,
20Research, and Prevention Tobacco Tax Act of 2015 Fund is a trust
21fund established solely to carry out the purposes set forth in this
22article, and all revenues deposited into the California Health Care,
23Research, and Prevention Tobacco Tax Act of 2015 Fund, together
24with interest earned by the fund, are hereby continuously
25appropriated without regard to fiscal year to the Controller, to be
26used to fund health care and prevention programs.
27(c) 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 Title 2 of the Government Code, and
32shall not be considered General Fund revenue for purposes of
33Section 8 of Article XVI of the California Constitution, and its
35(d) Notwithstanding any other law, revenues deposited into the
36California Health Care, Research, and Prevention Tobacco Tax
37Act of 2015 Fund, and any interest earned by the fund, shall only
38be used for the specific purposes set forth in this article. Revenues
39deposited into the California Health Care, Research, and Prevention
40Tobacco Tax Act of 2015 Fund shall not be subject to
P11 1appropriation, reversion, or transfer by the Legislature, the
2Governor, the Director of Finance, or the Controller for any other
3purpose, nor shall the funds be loaned to the General Fund or any
4other fund of the state or any local government fund.
Section 30166 of the Revenue and Taxation Code is
6amended to read:
Stamps and meter register settings shall be sold at their
8denominated values less 0.85
begin delete percent to licensed Payment for stamps or meter
11register settings shall be made at the time of purchase, provided
12that a licensed distributor, subject to the conditions and provisions
13of this article, may be permitted to defer payments therefor.
Section 30181 of the Revenue and Taxation Code is
15amended to read:
begin deleteWhen end deleteany tax imposed upon cigarettes under
begin delete Article 1 (commencing with Section 30101), Article 2 is not paid through the
18(commencing with Section 30121), and Article 3 (commencing
19with Section 30131) of Chapter 2end delete
20use of stamps or meter impressions, the tax shall be due and
21payable monthly on or before the 25th day of the month following
22the calendar month in which a distribution of cigarettes occurs, or
23in the case of a sale of cigarettes on the facilities of a common
24carrier for which the tax is imposed pursuant to Section 30104,
25the tax shall be due and payable monthly on or before the 25th day
26of the month following the calendar month in which a sale of
27cigarettes on the facilities of the carrier occurs.
28(b) Each distributor of tobacco products shall file a return in the
29form, as prescribed by the board,
begin delete whichend delete may include, but not
30be limited to, electronic media respecting the distributions of
31tobacco products and their wholesale cost during the preceding
32month, and any other information as the board may require to carry
33out this part. The return shall be filed with the board on or before
34the 25th day of the calendar month following the close of the
35monthly period for which it relates, together with a remittance
36payable to the board, of the amount of tax, if any, due under Article
372 (commencing with Section 30121) or Article 3 (commencing
38with Section 30131) of Chapter 2 for that period.
39(c) To facilitate the administration of this part, the board may
40require the filing of the returns for longer than monthly periods.
P12 1(d) Returns shall be authenticated in a form or pursuant to
2methods as may be prescribed by the board.
3(e) This section shall become operative on January 1, 2007.end delete
No reimbursement is required by this act pursuant to
5Section 6 of Article XIII B of the California Constitution because
6the only costs that may be incurred by a local agency or school
7district will be incurred because this act creates a new crime or
8infraction, eliminates a crime or infraction, or changes the penalty
9for a crime or infraction, within the meaning of Section 17556 of
10the Government Code, or changes the definition of a crime within
11the meaning of Section 6 of Article XIII B of the California