BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2149 (Bonilla) - State Board of Equalization: counties:
state agencies: collection of cash payments: medical
cannabis-related businesses
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|Version: August 2, 2016 |Policy Vote: GOV. & F. 5 - 1 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 8, 2016 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2149 would authorize the Board of Equalization (BOE)
and counties to collect cash payments from medical
cannabis-related businesses for state agencies.
Fiscal Impact: BOE would incur costs, minimally in the high
hundreds of thousands of dollars, to expand cash collection
infrastructure and operations across district offices to enter
into agreement with a state agency (special fund). This bill
would allow BOE to be reimbursed for up to 10 percent of the
funds. Most cannabis-related fees have not yet been established;
therefore, it is unclear whether this cap would cover BOE costs.
Additionally, the bill would result in unknown, ongoing
administrative cost savings (special fund) to state agencies
that otherwise would collect fee payments themselves absent the
AB 2149 (Bonilla) Page 1 of
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bill. BOE, by being the single cash collection entity, could
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.
Background: Prior to 1996, both federal and state law prohibited the
possession, possession with intent to sell, cultivation, sale,
transportation, importation, or furnishing of marijuana.
However, in 1996, California voters approved Proposition 215,
known as the Compassionate use Act of 1996 (CUA). Under CUA,
qualified patients with specified illnesses, and their primary
caregivers, cannot be prosecuted for possessing or cultivating
medical marijuana upon the written or oral recommendation or
approval of an attending physician. Thus, CUA allowed qualified
patients and primary caregivers to obtain and use medical
marijuana.
The Legislature clarified CUA in 2003 by enacting SB 420
(Vasconcellos, 2003). SB 420 exempted qualified patients and
caregivers from prosecution for using or from collectively or
cooperatively cultivating medical marijuana, and established a
medical marijuana card program for patients to use on a
voluntary basis. SB 420 provides a safe harbor for qualified
patients as to the amount of marijuana they may possess and the
number of plants they may maintain. It also protects patients
with valid identification cards from both arrest and criminal
liability for possession, transportation, delivery, or
cultivation of marijuana. Thus, California's estimated one
billion dollar medical marijuana industry exists amid a conflict
between federal and state law, and within state law itself. The
industry remained largely unregulated at the same level until
2015.
Medical Marijuana Regulation and Safety Act. In 2015, the
Legislature enacted the Medical Marijuana Regulation and Safety
Act (MMRSA), a package of legislation that comprehensively
regulates many aspects of medical marijuana including
cultivation, manufacturing, transportation, distribution, sale,
and product safety. The MMRSA comprises three bills-SB 643
(McGuire, 2015), AB 243 (Wood, 2015), and AB 266 (Bonta, 2015).
AB 2149 (Bonilla) Page 2 of
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Among other provisions, MMRSA establishes categories of licenses
for various medical marijuana activities, such as cultivation,
manufacturing, distribution, transportation, and sale. The MMRSA
requires each licensing authority to establish a scale of
application, licensing, and renewal fees, based upon MMRSA
enforcement costs. These fees have not yet been set.
State law imposes a sales and use tax on retailers for the
privilege of selling tangible personal property, absent a
specific exemption. The tax is based upon the retailer's gross
receipts from sales in California. Generally, medicine is exempt
from the sales and use tax, but medical marijuana does not
qualify for the exemption. To be exempt, medication must be (1)
prescribed by an authorized person and dispensed on a
prescription filled by a pharmacist, (2) furnished by a licensed
physician to his or her own patient, or (3) furnished by a
health facility for treatment pursuant to a licensed physician's
order, or sold to a licensed physician. Consequently, the sale
of medical marijuana is subject to both the state and local
sales and use tax.
Proposed Law:
This bill would authorize BOE and counties to collect cash
payments from medical cannabis-related businesses for state
agencies. Specifically, the bill would do the following:
Enact the Medical Cannabis State Payment Collection Law
("Collection Law").
Authorize BOE and counties to enter into an agreement
with specified state agencies 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.
Specify that counties shall collect fees, fines,
penalties, and other charges only if both the board of
supervisors of the county, and the county tax collector or
county treasurer-tax collector approves of entering into an
AB 2149 (Bonilla) Page 3 of
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agreement with a state agency to make those collections.
Provide that a state agency that enters into an
agreement with BOE or a county may impose a cash collection
fee in an amount reasonably necessary to recover the
collection costs not to exceed 10 percent of any amounts
collected. The amount of the cash collection fee shall be
determined by the state agency and BOE or county, and a
cash collection fee shall not be imposed if the fine,
penalty, or other charge already includes amounts
reasonably necessary to recover the collection costs of
cash payments.
State that any cash collection fees imposed shall be
deposited into the funds or accounts which the fine,
penalty, or other charge to be collected is deposited.
Prohibit a cash collection fee to be imposed for the
collection of a tax.
Require an agreement with a state agency to collect cash
payments for any fee, fine, penalty, or other charge
payable to the state agency to include the following:
A provision that BOE or the county be reimbursed for the
administrative costs of the collection from the fund for
which cash payments are collected.
A provision that BOE or the county transmit the
collected moneys to the Treasurer to be deposited in the
State Treasury to the credit of the funds or accounts which
the fees, fines, penalties, taxes, or other charges are
otherwise required by law to be deposited.
A provision that describes the administrative costs BOE
or the county will incur in carrying out the collection,
limited to no more than 10 percent of the funds collected.
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Related
Legislation:
AB 821 (Gipson) would authorize BOE, until January 1,
2018, to allow medical marijuana dispensaries to remit tax
liability due in a method other than an electronic
transfer. The bill is currently pending on the Senate
Floor.
Staff
Comments: Medical marijuana-related businesses in California
generally have difficulty obtaining banking services due to
federal drug policy. Nevertheless, these businesses must remit
sales taxes, income taxes, applicable government fines, and
soon-to-be-determined licensing fees.
In 2014, all of BOE's 22 field offices stopped accepting cash
from taxpayers attempting to pay their sales or use tax
liabilities. This "No Cash Policy" allows BOE to reduce costs
and ensure safety to its employees. However, BOE allows an
exception when taxpayers can document that they are unable to
obtain a bank account or that paying in cash is necessary to
avoid significant hardship. The exception is most frequently
applied to medical marijuana dispensaries. Consequently, BOE
field offices receive hundreds of thousands of dollars in sales
and use tax payments from medical marijuana-related businesses.
Accepting such large cash payments creates a safety concern for
the both the public and BOE's own staff. Allowing the BOE to
contract with state agencies to collect cash payments from
medical marijuana-related businesses would magnify these risks.
Additionally, this bill would further BOE's administrative
challenges related to accepting cash payments. BOE's field
offices already are generally unequipped to handle large sums of
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cash for sales and use tax payments. Collecting medical
marijuana cash payments for other state agencies, as proposed by
this bill, would require additional modifications and upgrades
to BOE district office security systems and cash storage, as
well as the BOE's computer system and cash payment procedures.
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