BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 140 (Leno) - Electronic cigarettes
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|Version: April 13, 2015 |Policy Vote: HEALTH 6 - 1 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: April 27, 2015 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 140 would expand the definition of "tobacco
product" in certain sections of current law to include
electronic cigarettes. In doing so, the bill would extend many
existing restrictions or prohibitions on the use of tobacco
products to electronic cigarettes. The bill would require
electronic cigarette manufacturers, wholesalers, and retailers
to be licensed.
Fiscal
Impact:
One-time costs of about $180,000 to revise regulations and
educational materials relating to the prohibition on the sale
of tobacco products to minors by the Department of Public
Health (General Fund or tobacco tax funds).
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Ongoing costs in the tens of thousands to low hundreds of
thousands per year for additional survey activities at retail
stores selling electronic cigarettes (General Fund or tobacco
tax funds).
Current federal law requires the state to determine the rate
at which minors can illegally purchase tobacco products. The
Department of Public Health conducts random inspections at
about 750 retail locations annually to determine a statewide
average rate at which retailers are not in compliance with
state and federal law. The total annual cost to conduct the
current survey is $400,000.
There are many retail locations that sell both traditional
tobacco products as well as electronic cigarettes. There are
also a significant number of retail locations that only sell
electronic cigarettes and related products. Because this bill
would expand the universe of retail locations subject to the
inspection requirement, the Department will need to conduct
additional visits to newly regulated retail locations which
only sell electronic cigarettes. There are about 1,000
retailers in the state that sell electronic cigarettes but not
tobacco products. The Department is likely to incur additional
costs to survey a sample of those retail locations to
accurately determine the rate at which minors can purchase
electronic cigarettes. Because retailers that sell both
tobacco products and electronic cigarettes are not likely (in
the long-term) to sell those products to minors at different
rates, the Department will likely be able to combine survey
efforts at retailers that sell both types of products.
Ongoing costs in the hundreds of thousands per year for
enforcement actions relating to illegal sales of electronic
cigarettes to minors (General Fund or tobacco tax funds).
Under current law, the Department of Public Health enforces
the law prohibiting the sale of tobacco products to minors by
conducting compliance inspections using youth decoy purchasers
and following up on complaints from the public. The total
annual cost for the Department's enforcement program is $1.6
million per year. By adding additional retailers to the
current prohibition on sales to minors, the bill will increase
the Department's enforcement efforts, particularly for
retailers who do not already sell traditional tobacco
SB 140 (Leno) Page 2 of
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products. The amount of that increased enforcement activity
will depend both on the number of additional retailers covered
by the law and the compliance rate of those retailers (or if
retailers of traditional tobacco products are found to be
selling electronic cigarettes to minors at higher rates than
traditional tobacco products). The total enforcement cost is
unknown at this time, but is likely to be in the hundreds of
thousands per year, based on existing enforcement costs.
Because the state has fully allocated the existing federal
funding for this program, any additional costs will be borne
by the General Fund, tobacco tax funds, or other fund sources.
Ongoing licensing costs of about $300,000 for the Board of
Equalization to license retailers who sell electronic
cigarettes but are not currently licensed because they do not
sell tobacco products (Compliance Fund and General Fund).
Under current law, the Board licenses wholesalers and
retailers of tobacco products, to facilitate the collection of
tobacco taxes. This bill will require the Board to also
license electronic cigarette retailers. Currently, the Board
expends about $280 per licensee to operate the licensing
program. Licensees pay a one-time licensing fee of $100. The
remaining program costs are offset with tobacco tax revenues.
According to the Stanford Prevention Center, there are about
1,000 retailers in the state that specialize in electronic
cigarettes and do not sell other tobacco products. The Board
would incur additional licensing costs to license those
retailers, which would be partially offset by the initial
licensing fee. It is not clear whether the Board could use
tobacco tax revenue to supplement the licensing fee or whether
General Fund monies would be needed to pay for the shortfall.
No anticipated change in tobacco tax revenue (General Fund and
special fund). The bill does not change the definition of
"tobacco product" in the Revenue and Taxation Code to include
electronic cigarettes. Thus, the bill does not extend the
state's existing tax on those products to electronic
cigarettes.
Background: Under current law (the Stop Tobacco Access to Kids Enforcement
or STAKE Act) the Department of Public Health is responsible for
enforcing the prohibition on furnishing tobacco products to
minors. Federal law requires states to demonstrate that they are
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complying with federal law in this area, by demonstrating that
the rate at which minors can purchase tobacco products does not
exceed 20%. The Department fulfills this requirement by
conducting an annual survey of about 750 retail stores, using
minors to attempt a purchase. Using information from the survey,
as well as public complaints and other sources, the Department
conducts enforcement actions against retailers in violation of
the law. In addition to assessing fines for non-compliance, the
Department is authorized to notify the Board of Equalization of
repeated violations by a retailer; the Board is then authorized
to suspend the retailer's license.
While current law prohibits the furnishing of electronic
cigarettes to minors, this prohibition is not subject to STAKE
Act enforcement.
Current law requires the Board of Equalization to license
tobacco wholesalers and retailers. The purpose of this licensing
requirement is to facilitate the collection of state tobacco
taxes and prevent tax evasion.
Current state law prohibits smoking of tobacco products in
various places, such as school campuses, public buildings,
places of employment, retail food facilities, and other places.
Those requirements are enforced at the local level.
Proposed Law:
SB 140 would expand the definition "tobacco product" in
certain sections of current law to include electronic
cigarettes. The bill would specify that "tobacco cessation
products" licensed by the Food and Drug Administration are not
considered tobacco products. The bill would not expand the
definition of tobacco products under the Revenue and Taxation
Code. Thus the bill would not extend the existing tobacco tax to
electronic cigarettes.
Specific provisions of the bill would:
Make the sale electronic cigarettes to minors subject to STAKE
Act enforcement;
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Prohibit the use of electronic cigarettes in specific places,
such as schools, places of employment, public buildings,
apartments, and other places;
Make electronic cigarette wholesalers and retailers subject to
licensure by the Board of Equalization.
Related
Legislation:
SB 24 (Hill) would classify electronic cigarettes separately
from tobacco products, and would extend STAKE Act requirements
and smoking location prohibitions to electronic cigarettes.
That bill will be heard in this committee.
SB 151 (Hernandez) would raise the legal age to purchase
tobacco products from age 18 to age 21. That bill will be
heard in this committee.
AB 216 (Garcia) would raise the fine for selling an electronic
cigarette to a minor. That bill is pending in the Assembly.
AB 768 (Thurmond) would prohibit the use of electronic
cigarettes in any baseball stadium. That bill is pending in
the Assembly.
Staff
Comments: The only costs that may be incurred by a local agency
relate to crimes and infractions. Under the California
Constitution, such costs are not reimbursable by the state.
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