BILL NUMBER: SB 987	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator McGuire

                        FEBRUARY 10, 2016

   An act to add Part 17 (commencing with Section 37001) to Division
2 of the Revenue and Taxation Code, relating to medical marijuana.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 987, as introduced, McGuire. Taxation: medical marijuana:
Marijuana Value Tax Act.
   Existing law, the Compassionate Use Act of 1996, an initiative
measure enacted by the approval of Proposition 215 at the November 5,
1996, statewide general election, allows the use of marijuana for
medical purposes. The Medical Marijuana Regulation and Safety Act,
operative beginning on January 1, 2016, provides for the licensure
and regulation of commercial medical marijuana activity, as
specified. The Fee Collection Procedures Law, the violation of which
is a crime, provides procedures for the collection of certain fees
and surcharges.
   This bill, on and after January 1, 2018, would impose an excise
tax on the consumption or other use in this state of medical
marijuana purchased from any retailer for the consumption or other
use in this state at the rate of 15% of the sales price of the
medical marijuana. This bill would provide that a purchaser is liable
for that tax and would require every retailer engaged in business in
this state and making sales of medical marijuana to a purchaser for
the consumption or other use in this state to separately state and
collect the tax from a purchaser, as specified. This bill would also
make specific violations of this bill a crime, thereby imposing a
state-mandated local program.
   This bill would require the State Board of Equalization to
administer and collect the tax in accordance with the Fee Collection
Procedures Law. By expanding the application of the Fee Collection
Procedures Law, the violation of which is a crime, this bill would
impose a state-mandated local program. The bill would require a
retailer to register for a permit with the board, to prepare and file
with the board returns, and to remit the tax quarterly. The bill
would require that all revenues, less refunds, be remitted to the
State Board of Equalization and deposited in the Marijuana Value Tax
Fund, which the bill would establish.
   This bill would require moneys in the Marijuana Value Tax Fund to
be allocated by the Controller in specified percentages to the
General Fund and, upon appropriation by the Legislature, to the
Bureau of Medical Marijuana Regulation for the administration of a
grant program to distribute grants to local agencies that oversee the
regulation of cultivating, processing, manufacturing, distributing,
and selling of medical marijuana; the Department of Parks and
Recreation for base operations of state parks; to county and city
human service departments for drug and alcohol treatment programs; to
the California Natural Resources Agency for restoration and
remediation of public and private lands and watersheds damaged by
medical marijuana cultivation and for allocation as grants for those
purposes.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   This bill would include a change in state statute that would
result in a taxpayer paying a higher tax within the meaning of
Section 3 of Article XIII A of the California Constitution, and thus
would require for passage the approval of 2/3 of the membership of
each house of the Legislature.
   Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares that edible cannabis
products, as defined in Section 19300.5 of the Business and
Professions Code and as applicable to Section 2 of this act, are not
considered a food product for purposes of Section 34 of Article XIII
of the California Constitution.
  SEC. 2.  Part 17 (commencing with Section 37001) is added to
Division 2 of the Revenue and Taxation Code, to read:

      PART 17.  Marijuana Value Tax Act


   37001.  This part is known, and may be cited, as the "Marijuana
Value Tax Act."
   37002.  For purposes of this part, the following definitions shall
apply:
   (a) "Medical marijuana" means medical cannabis as defined in
Section 19300.5 of the Business and Professions Code.
   (b) "Person" means person as defined in Section 55002.
   (c) "Purchaser" means a person that purchases medical marijuana
for consumption or other use in this state.
   (d) "Retail sale" or "sale at retail" means a sale for any purpose
other than resale in the regular course of business in the form of
medical marijuana.
   (e) (1) "Retailer" includes every person that makes any retail
sale or sales of medical marijuana. "Retailer" also includes a person
holding a dispensary license issued pursuant to the Medical
Marijuana Regulation and Safety Act (Chapter 3.5 (commencing with
Section 19300) of Division 8 of the Business and Professions Code).
   (2) Every person making more than two retail sales of medical
marijuana during any 12-month period shall be considered a retailer
within the provisions of this part.
   (f) "Retailer engaged in business in this state" means any
retailer that has substantial nexus with this state for purposes of
the commerce clause of the United States Constitution and any
retailer upon whom federal law permits this state to impose a tax
collection duty.
   (g) "Sale" or "purchase" means and includes any transfer of title
or possession, exchange, or barter, conditional or otherwise, in any
manner or by any means whatsoever, of medical marijuana for a
consideration. "Transfer of possession" includes only transactions
found by the board to be in lieu of a transfer of title, exchange, or
barter.
   (h) "Sales price" means the total amount for which medical
marijuana is sold, valued in money, whether paid in money or
otherwise, without any deduction on account of the cost of any
expenses.
   (i) "Use" includes the exercise of any right or power over medical
marijuana incident to the ownership of that medical marijuana,
except that it does not include the sale of that medical marijuana in
the regular course of business.
   37003.  On and after January 1, 2018, there is hereby imposed an
excise tax on the consumption or other use in this state of medical
marijuana purchased from any retailer for the consumption or other
use in this state at the rate of 15 percent of the sales price of the
medical marijuana.
   37004.  (a) Every purchaser consuming or otherwise using in this
state medical marijuana that the purchaser purchased from a retailer
for consumption or other use in this state is liable for the tax
imposed by Section 37003. That purchaser's liability is not
extinguished until the tax has been paid to this state except that a
receipt from a retailer engaged in business in this state given to a
purchaser pursuant to paragraph (2) of subdivision (b) is sufficient
to relieve the purchaser from further liability for the tax to which
the receipt refers.
   (b) (1) Every retailer engaged in business in this state and
making sales of medical marijuana to a purchaser shall, at the time
of making such a sale, collect the tax as a charge separate from, and
not included in, any other fee, charge, or other amount paid by the
purchaser.
   (2) Every retailer engaged in business in this state shall collect
the tax from the purchaser and give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
   (c) The board shall administer and collect the tax imposed by this
part pursuant to the Fee Collection Procedures Law (Part 30
(commencing with Section 55001)), except that Article 1.1 (commencing
with Section 55050) of Chapter 3 of that part shall not apply. For
purposes of this part, the references in the Fee Collection
Procedures Law to "fee" shall include the tax imposed by this part,
and references to "feepayer" shall include a person required to pay
the tax imposed by this part.
   (d) (1) The tax required to be collected by the retailer engaged
in business in this state, any tax collected from a purchaser that
has not been remitted to the board, and any amount unreturned to a
purchaser which is not tax but was collected from the purchaser under
the representation by the retailer that it was tax constitutes debts
owed by the retailer to this state.
   (2) A retailer is relieved from liability to collect tax that
became due and payable, insofar as the measure of the tax is
represented by accounts that have been found to be worthless and
charged off by the retailer in accordance with generally accepted
accounting principles. A retailer that has previously paid the amount
of the tax may, under rules and regulations prescribed by the board,
take as a deduction on its return the amount found worthless and
charged off by the retailer. If these accounts are thereafter in
whole or in part collected by the retailer, the amount collected
shall be included in the first return filed after the collection and
the amount of the tax shall be paid with the return.
   (3) The board may by regulation promulgate such other rules with
respect to uncollected or worthless accounts as it shall deem
necessary to the fair and efficient administration of this part.
   (e) It is unlawful for any retailer to advertise or hold out or
state to the public or to any purchaser, directly or indirectly, that
the tax or any part thereof will be assumed or absorbed by the
retailer or that it will not be added to the selling price of the
medical marijuana sold or that if added it or any part thereof will
be refunded. Any person violating this subdivision is guilty of a
misdemeanor.
   (f) The tax required to be collected by the retailer engaged in
business in this state from the purchaser shall be displayed
separately from the list price, the price advertised in the premises,
the marked price, or other price on the sales check or other proof
of sales. Any person violating this subdivision is guilty of a
misdemeanor.
   (g) (1) The board may prescribe, adopt, and enforce regulations
relating to the administration and enforcement of this part.
   (2) The board may prescribe, adopt, and enforce any emergency
regulations as necessary to implement this part. Any emergency
regulation prescribed, adopted, or enforced pursuant to this section
shall be adopted in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code, and, for purposes of that chapter, including Section 11349.6 of
the Government Code, the adoption of the regulation is an emergency
and shall be considered by the Office of Administrative Law as
necessary for the immediate preservation of the public peace, health
and safety, and general welfare.
   (h) (1) The tax imposed by this part is due and payable to the
board quarterly on or before the last day of the month next
succeeding each quarterly period.
   (2) On or before the last day of the month following each
quarterly period, a return for the preceding quarterly period shall
be filed using electronic media with the board. Returns shall be
authenticated in a form or pursuant to methods as may be prescribed
by the board.
   37005.  (a) A retailer required to collect the tax imposed under
this part shall register for a permit with the board. Every
application for registration shall be made in a form prescribed by
the board and shall set forth the name under which the applicant
transacts or intends to transact business, the location of the
retailer's place or places of business, and any other information
that the board may require. An application for registration shall be
authenticated in a form or pursuant to methods as may be prescribed
by the board.
   (b) The board shall grant and issue to each applicant that
complies with subdivision (a) a separate permit for each place of
business within the state.
   (c) A permit issued pursuant to this section is not assignable and
is valid only for the person in whose name it is issued and for the
transaction of business at the place designated therein. It shall at
all times be conspicuously displayed at the place for which it is
issued.
   37005.3.  Whenever any retailer fails to comply with any provision
of this part or any rules or regulations of the board prescribed and
adopted under this part, the board upon hearing, after giving the
retailer at least 10 days' notice in writing specifying the time and
place of the hearing and requiring the retailer to show cause why the
permit should not be revoked, may revoke or suspend the permit held
by the retailer. The board shall give to the retailer written notice
of the suspension or revocation of any of the retailer's permits. The
notices herein required may be served personally or by mail in the
manner prescribed for service of notice of a deficiency
determination. The board shall not issue a new permit after the
revocation of a permit unless it is satisfied that the former holder
of the permit will comply with the provisions of this part and the
regulations of the board prescribed and adopted under this part.
   37005.5.  (a) The board may refuse to issue a permit to any person
submitting an application for a permit as required in Section 37005
if the person desiring to engage in or conduct business as a retailer
within this state has an outstanding final liability with the board
for any amount due under this part.
   (b) The board may also refuse to issue a permit if the person
desiring to engage in or conduct business as a retailer within this
state is not a natural person or individual and any person
controlling the person desiring to engage in or conduct business as a
seller within this state has an outstanding final liability with the
board as provided in subdivision (a). For the purposes of this
section, "controlling" has the same meaning as defined in Section
22971 of the Business and Professions Code.
   (c) For purposes of this section, a liability will not be deemed
to be outstanding if the person has entered into an installment
payment agreement pursuant to Section 55209 for any liability and is
in full compliance with the terms of the installment payment
agreement.
   (d) If the person submitting an application for a permit pursuant
to Section 37005 has entered into an installment payment agreement as
provided in subdivision (c) and fails to comply with the terms of
the installment payment agreement, the board may seek revocation of
the person's permit pursuant to this section.
   (e) (1) Whenever any person desiring to engage in or conduct
business as a retailer within this state is denied a permit pursuant
to this section, the board shall give to the person written notice of
the denial. The notice of the denial may be served personally, by
mail, or by other means deemed appropriate by the board. If served by
mail, the notice shall be placed in a sealed envelope, with postage
paid, addressed to the person at the address as it appears in the
records of the board. The giving of notice shall be deemed complete
at the time of deposit of the notice at the United States Postal
Service, or a mailbox, subpost office, substation or mail chute, or
other facility regularly maintained or provided by the United States
Postal Service, without extension of time for any reason. In lieu of
mailing, a notice may be served personally by delivering to the
person to be served and service shall be deemed complete at the time
of the delivery. Delivery of notice by other means deemed appropriate
by the board may include, but is not limited to, electronic
transmission. Personal service or delivery by other means deemed
appropriate by the board to a corporation may be made by delivery of
a notice to any person listed on the application as an officer.
   (2) Any person that is denied a permit pursuant to this section
may request reconsideration of the board's denial of the permit. This
request shall be submitted in writing within 30 days of the date of
the notice of denial. Timely submission of a written request for
reconsideration shall afford the person a hearing in a manner that is
consistent with a hearing provided for by Section 37005.3. If a
request for reconsideration is not filed within the 30-day period,
the denial becomes final at the end of the 30-day period.
   (f) The board shall consider offers in compromise when determining
whether to issue a permit.
   37006.  (a) The Marijuana Value Tax Fund is hereby established in
the State Treasury. All revenues, less refunds, collected pursuant to
this part shall be made in remittances to the board and shall be
deposited in the Marijuana Value Tax Fund.
   (b) Moneys in the Marijuana Value Tax Fund shall be allocated by
the Controller as follows:
   (1) Thirty percent to the General Fund.
   (2) Thirty percent to the Bureau of Medical Marijuana Regulation
for the administration of a grant program to distribute grants to
local agencies that oversee the regulation of cultivating,
processing, manufacturing, distributing, and selling of medical
marijuana upon appropriation by the Legislature. All local agencies
shall be eligible for the grants, including, but not limited to, law
enforcement and zoning enforcement. The grants shall be made
available beginning on or before July 1, 2018. No more than 5 percent
of any funds allocated may be used for administrative costs of the
grant program by the bureau or for any administrative costs of the
local agency awarded the grant.
   (3) Twenty percent to the Department of Parks and Recreation for
base operations of state parks, upon appropriation by the
Legislature.
   (4) Ten percent to county and city human service departments for
drug and alcohol treatment programs, distributed based on population,
upon appropriation by the Legislature. Any funds appropriated shall
be used for drug and alcohol treatment and recovery and case
management services.
   (5) Ten percent to the California Natural Resources Agency for
restoration and remediation of public and private lands and
watersheds damaged by medical marijuana cultivation, including lands
affected by medical marijuana cultivation before the operative date
of this section, upon appropriation by the Legislature. Fifty percent
of any funds appropriated shall be made available as a grant to
state and local government agencies and organizations that are exempt
from federal income tax as an organization described in Section 501
(c)(3) of the Internal Revenue Code for the purpose of restoration
and remediation of affected lands. The grants shall be made available
beginning on or before July 1, 2018. No more than 5 percent of any
funds awarded as grants may be used for the administration of the
grant program.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.