BILL ANALYSIS Ó
AB 2149
Page 1
ASSEMBLY THIRD READING
AB
2149 (Bonilla)
As Amended May 4, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Revenue & |9-0 |Ridley-Thomas, | |
|Taxation | |Brough, Dababneh, | |
| | |Gipson, Mullin, | |
| | |O'Donnell, Patterson, | |
| | |Quirk, Wagner | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |14-4 |Gonzalez, Bloom, |Bigelow, Gallagher, |
| | |Bonilla, Bonta, |Jones, Wagner |
| | |Calderon, Daly, | |
| | |Eggman, Eduardo | |
| | |Garcia, Roger | |
| | |Hernández, Holden, | |
| | |Quirk, Santiago, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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AB 2149
Page 2
SUMMARY: Authorizes the State Board of Equalization (BOE) to
collect cash payments from medical marijuana-related businesses
for other state agencies, as specified. Specifically, this
bill:
1)Enacts the Medical Marijuana State Payment Collection Law
("Collection Law").
2)Authorizes the BOE to enter into an agreement with a "state
agency" to collect cash payments for any fee, fine, penalty,
or other charge payable to the "state agency" by a person that
is a medical marijuana-related business, as specified.
3)Requires the BOE to collect fees, fines, penalties, and other
charges if the BOE enters into an agreement with a "state
agency" to make those collections. Such an agreement shall
include the following:
a) A provision that the BOE be reimbursed for the
administrative costs of the collection from the fund for
which cash payments are collected, upon appropriation by
the Legislature;
b) A provision that the BOE transmit the collected moneys
to the Treasurer to be deposited in the State Treasury to
the credit of the fund for which collection was authorized;
c) A provision describing the administrative costs the BOE
will incur in carrying out the collection and
administration, which costs shall not exceed 10% of the
moneys collected;
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d) A savings clause that provides the BOE authority to
collect and to make refunds after the sunset date if a
sunset date exists; and,
e) A provision that sets forth the due date for payment of
the fee, fine, penalty, or other charge and return by the
feepayer [sic].
4)Provides that the term "state agency" includes, but is not
limited to, the following:
a) The Department of Consumer Affairs;
b) The Department of Food and Agriculture;
c) The Department of Public Health;
d) The Employment Development Department;
e) The Water Resources Control Board; and,
f) The Franchise Tax Board.
5)Directs the BOE to administer and collect the authorized
payments pursuant to the Fee Collection Procedures Law, except
as provided.
6)Provides that, for purposes of the Collection Law, the
references in the Fee Collection Procedures Law to "fee" shall
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include any fee, fine, penalty, or other charge required to be
paid by a person that is a medical marijuana-related business,
and all references to "feepayer" shall include a person
required to pay those fees.
7)Provides that no reimbursement is required pursuant to
California Constitution Article XIII B, Section 6, for
specified reasons.
EXISTING FEDERAL LAW prohibits the manufacture, possession,
sale, or distribution of marijuana. [21 United States Code
Section 841 et seq.]
EXISTING STATE LAW:
1)Imposes a sales tax on retailers for the privilege of selling
tangible personal property (TPP), absent a specific exemption.
The tax is based upon the retailer's gross receipts from TPP
sales in this state.
2)Imposes a complimentary use tax on the storage, use, or other
consumption of TPP purchased out-of-state and brought into
California. The use tax is imposed on the purchaser, and
unless the purchaser pays the use tax to an out-of-state
retailer registered to collect California's use tax, the
purchaser remains liable for the tax. The use tax is set at
the same rate as the state's sales tax and must generally be
remitted to the BOE.
3)Applies the sales and use tax to retail sales of marijuana,
including medical marijuana, to the same extent as any other
retail sale of TPP.
4)Allows, under the Compassionate Use Act of 1996 (Proposition
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215), for the use of marijuana for medical purposes.
5)Allows, under the Medical Marijuana Regulation and Safety Act,
for the licensure and regulation of commercial medical
marijuana activity by various state entities, as specified.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Costs of approximately $1.2 million for BOE to expand cash
collection infrastructure and operations across district
offices if BOE enters into an agreement with a state agency.
This bill allows BOE to be reimbursed for up to 10% of the
moneys collected. Since most cannabis-related fees have not
yet been established, it is unknown whether this cap is
sufficient to cover BOE costs.
2)Potential unknown, ongoing administrative cost savings to
state agencies that otherwise would collect fee payments
themselves. BOE, by being the primary point of cash
collection, can specialize and develop procedures that apply
universally to collecting cash for different agencies. In
contrast, each individual agency that imposes a fee on medical
marijuana-related businesses would incur substantial costs to
develop the infrastructure and security needed to collect cash
payments.
COMMENTS:
1)The author has provided the following statement in support of
this bill:
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AB 2149 helps medical marijuana related businesses to pay
their state fees and taxes by allowing the Board of
Equalization (BOE) to collect cash payments on behalf of
other state entities. Medical marijuana is estimated to
be a $2.7 billion dollar industry in California.
Unfortunately, because marijuana is still a Schedule 1
controlled substance under the federal Controlled
Substance Act, the same schedule as ecstasy and heroin,
it is very difficult for medical marijuana related
businesses to gain access to our traditional banking
system. These businesses are obligated to pay sales
taxes, payroll taxes, water discharge permits, and soon
to be developed licensing fees for medical marijuana
related entities, among others. Because of the
difficulty in obtaining bank accounts, marijuana related
businesses pay large sums of money in cash to meet tax
and fee obligations. This poses great difficulty to the
state entities which are responsible for collecting state
obligations from these entities. Not only must they
count the cash, but contend with greater security,
surveillance, and transportation issues. AB 2149
addresses this problem by authorizing the BOE to collect
fees and taxes from medical marijuana related businesses
on behalf of other state entities. The BOE has field
offices up and down the state and has already begun to
establish protocols for how to deal with large cash
payments. AB 2149 will allow the state to centralize its
cash collecting infrastructure, streamline the locations
which have an increased security need, and ensure that
California businesses can meet their state financial
obligations.
2)Revenue and Taxation Committee comments:
a) Caught in the middle: Due to the evident conflict
between federal and state drug laws noted above, many
medical marijuana-related businesses in California find it
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difficult to obtain banking services. The author notes
that this difficulty is faced by many different types of
businesses, including cultivators, transporters,
dispensaries, and manufacturers of marijuana edibles.
Moreover, the author's office notes:
Most banks refuse to accept medical marijuana
businesses as customers because they fear enforcement
action by the federal Department of Justice in regards
to the Racketeer Influence and Corrupt Organizations
Act (RICO Act). Violation of this act could risk the
forfeiture of a bank's assets or collateral used to
secure loans.
At the same time, however, marijuana-related businesses in
California must still find a way to remit sales taxes,
income taxes, applicable government fines, and
soon-to-be-determined licensing fees. This bill would
attempt to solve this problem, at least partially, by
authorizing the BOE to accept cash payments from
marijuana-related businesses on behalf of other state
entities that may not have the built-in infrastructure to
handle large quantities of cash.
b) Is there a statewide standard in place? The BOE has 22
field offices located up and down the state. The author's
office notes that, in Fiscal Year 2014-15, 15 of those
offices accepted cash payments of some type. The author's
office also notes that all of the BOE's districts, with the
exception of District 4, "allowed for hardship exemptions
where the fee to pay in cash can be waived." It is not
clear to Committee staff why tax agency policy would depend
on the location of the taxpayer in California. The
Legislature may wish to assess, in the context of this
bill, whether policies governing the payment of tax
liabilities in cash should be uniform throughout the state.
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Analysis Prepared by:
M. David Ruff / REV. & TAX. / (916) 319-2098
FN:
0003100