BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SBX2 10|
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THIRD READING
Bill No: SBX2 10
Author: Beall (D), et al.
Introduced:7/16/15
Vote: 21
SENATE PUBLIC HEALTH AND DEVELOP. SVCS. COMM.: 9-3, 8/19/15
AYES: Hernandez, Beall, Hall, Leno, McGuire, Mitchell,
Monning, Pan, Wolk
NOES: Morrell, Moorlach, Nielsen
NO VOTE RECORDED: Anderson
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/24/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
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
cigarette and tobacco retailers. The fee is assessed at the
time a retailer submits an application for a license.
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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 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,
2016.
Comments
1)Author's statement. According to the author, in 2003
California enacted the Act which established a statewide
licensing program administered by the BOE. The Act was
established to reduce untaxed distributions and the illegal
sale of cigarettes and tobacco products.
The current licensing fee does not generate enough revenue to
cover the administrative costs associated with the program.
According to the Legislative Analyst's Office, in 2013-14 it
cost approximately $10 million to run the program while
revenue remained stagnant at $2 million. The BOE has also
stated that inadequate funding of this program can lead to a
lack of field enforcement or a reduction in compliance staff,
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potentially leading to further decreases in funding.
Further, in 2006, the Legislature approved a budget proposal
to begin charging special funds that receive cigarette and
tobacco excise tax revenue for part of the costs of
administering the licensing program. These funds support
programs such as childhood development; tobacco education and
prevention, tobacco-related disease research, health care for
low-income persons, environmental protection, and recreation
programs; and breast cancer related research and screening for
uninsured women. While this has helped increase the funding to
administer the license program, this change has reduced the
resources for programmatic purposes.
2)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.
Related Legislation
SBX2 5 (Leno)/ABX2 6 (Cooper) recast and broaden the definition
of "tobacco product" in existing law to include electronic
cigarettes as specified; extend current restrictions and
prohibitions against the use of tobacco products to electronic
cigarettes; extend current licensing requirements for
manufacturers, importers, distributors, wholesalers, and
retailers of tobacco products to electronic cigarettes; and
require electronic cigarette cartridges to be child-resistant.
SBX2 5 was heard on August 24, 2015, in the Senate
Appropriations Committee, and passed on a vote of 5-2. ABX2 6
will be heard on August 25, 2015, in the Assembly Public Health
and Developmental Services Committee.
SBX2 6 (Monning)/ABX2 7 (Stone) prohibit smoking in
owner-operated businesses and remove specified exemptions in
existing law that allow tobacco smoking in certain workplaces.
SBX2 6 is currently on Third Reading on the Senate Floor. ABX2 7
will be heard on August 25, 2015, in the Assembly Public Health
and Developmental Services Committee.
SBX2 10
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SBX2 7 (Hernandez)/ABX2 8 (Wood) increase the minimum legal age
to purchase or consume tobacco from 18 to 21. SBX2 7 was heard
on August 24, 2015, in the Senate Appropriations Committee, and
passed on a vote of 5-2. ABX2 8 will be heard on August 25,
2015, in the Assembly Public Health and Developmental Services
Committee.
SBX2 8 (Liu)/ABX2 9 (Thurmond and Nazarian) extend current
tobacco use prevention funding eligibility and requirements to
charter schools; broaden the definition of products containing
tobacco and nicotine, as specified, and prohibit their use in
specified areas of schools and school districts, regardless of
funding; and require specified signs to be prominently displayed
at all entrances to school property. SBX2 8 was heard on August
24, 2015, in the Senate Appropriations Committee, and passed on
a vote of 5-2. ABX2 9 will be heard on August 25, 2015, in the
Assembly Public Health and Developmental Services Committee.
SBX2 9 (McGuire)/ABX2 10 (Bloom) allow counties to impose a tax
on the privilege of distributing cigarettes and tobacco
products. SBX2 9 is currently on Third Reading on the Senate
Floor. ABX2 10 will be heard on August 25, 2015, in the Assembly
Public Health and Developmental Services Committee.
SBX2 10 (Beall)/ABX2 11 (Nazarian) revise the Act to change the
retailer license fee from a $100 one-time fee to a $265 annual
fee, and increase the distributor and wholesaler license fee
from $1,000 to $1,200. ABX2 11 will be heard on August 25, 2015
in the Assembly Public Health and Developmental Services
Committee.
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
SBX2 10
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changes within existing resources without delaying other
changes.
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: (Verified8/25/15)
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
Bernadino 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
Service Employees International Union
Solano County Board of Supervisors
OPPOSITION: (Verified8/25/15)
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.
Prepared by:Myriam Bouaziz /PHDS /
8/26/15 14:13:14
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