BILL ANALYSIS Ó
SENATE COMMITTEE ON PUBLIC HEALTH AND DEVELOPMENTAL SERVICES
Senator Ed Hernandez, O.D., Chair
BILL NO: SBX2 10
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|AUTHOR: |Beall |
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|VERSION: |July 16, 2015 |
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|HEARING DATE: |August 19, | | |
| |2015 | | |
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|CONSULTANT: |Myriam Bouaziz |
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SUBJECT : Cigarette and tobacco product licensing: fees and
funding
SUMMARY : 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.
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.
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.
SBX2 10 (Beall) Page 2 of ?
4)Applies to calendar years beginning on, and after January 1,
2016.
FISCAL
EFFECT : This bill has not been analyzed by a fiscal committee.
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 (LAO), 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, 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.
3)Insufficient Funds. The current licensing fee structure does
SBX2 10 (Beall) Page 3 of ?
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 for 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.
4) Related legislation. SBX2 5 (Leno)/AB X2 6 (Cooper) recast
and broaden the definition of "tobacco product" in current 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. SB X2 5 will be heard on August 19, 2015 in
this committee and AB X2 6 is pending in the Assembly.
SBX2 6 (Monning)/AB X2 7 (Stone) prohibit smoking in
owner-operated businesses and remove specified exemptions in
existing law that allow tobacco smoking in certain workplaces.
SB X2 6 will be heard on August 19, 2015 in this committee and
AB X2 7 is pending in the Assembly.
SBX2 7 (Hernandez)/AB X2 8 (Wood) increase the minimum legal
age to purchase or consume tobacco from 18 to 21. SB X2 7 will
SBX2 10 (Beall) Page 4 of ?
be heard on August 19, 2015 in this committee and AB X2 8 is
pending in the Assembly.
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. SB X2 8 will be
heard on August 19, 2015 in this committee and AB X2 9 is
pending in the Assembly.
SBX2 9 (McGuire)/ABX2 10 (Bloom) allow counties to impose a
tax on the privilege of distributing cigarettes and tobacco
products. SB X2 9 will be heard on August 19, 2015 in this
committee and AB X2 10 is pending in the Assembly.
ABX2 11 (Nazarian) revise 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 increase the
distributor and wholesaler license fee from $1,000 to $1,200.
AB X2 11 is pending in the Assembly.
5)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.
6)Policy Comment. The BOE contends that the effective date of
January 1, 2016 will not allow sufficient time to implement
the retailer renewal fee program. The BOE would like a delayed
implementation date. As a reference point, the initial Act's
implementation date was June 30, 2004, a six month delay.
SUPPORT AND OPPOSITION :
Support: American Cancer Society Cancer Action Network
American Heart Association/American Stroke Association
American Lung Association in California
Association of Northern California Oncologists
California Black Health Network
California Chronic Care Coalition
SBX2 10 (Beall) Page 5 of ?
California Dental Association
California Medical Association
California Pan-Ethnic Health Network
California Society of Addiction Medicine
First 5 Association of California
Medical Oncology Association of Southern California
Planned Parenthood Affiliates of California
Service Employees International Union
Oppose: None received.
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