Amended in Senate May 31, 2016

Amended in Senate March 15, 2016

Senate Bill No. 987

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 begin delete marijuana. end delete begin insert marijuana, and making an appropriation therefor. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 987, as amended, McGuire. begin delete Taxation: medical end delete begin insert Medical end insert marijuana: Marijuana begin delete Value Tax end delete begin insert User Fee end insert 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 begin insert bill would enact the Marijuana User Fee Act. The end insert bill, on and after January 1, 2018, unless a specified initiative is passed by the voters at the November 8, 2016, statewide general election, would impose begin delete an excise tax end delete begin insert a fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert quarterly. The bill would require that all revenues, less refunds, be remitted to the State Board of Equalization and deposited in the Marijuana begin delete Value Tax end delete begin insert User Fee end insert Fund, which the bill would establish.

This bill would require moneys in the Marijuana begin delete Value Tax end delete begin insert User Fee end insert 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, begin delete including districts, end delete begin insert as defined, end insert that oversee or are affected by the regulation of cultivating, processing, manufacturing, distributing, and selling of medical marijuana, or that undertake enforcement activities pertaining to the cultivation of marijuana; the Department of Parks and Recreation for the stewardship, operation, maintenance, and preservation of state park units; and to begin delete counties for allocation to city human services departments end delete begin insert counties, as defined, end insert for drug and alcohol treatment programs. begin delete By requiring counties to allocate funds to city human services departments, this bill would impose a state-mandated local program. end delete begin insert The bill, commencing in 2018, and at least every other year thereafter, would require the Legislative Analyst to review and evaluate the fee, and provide a report on the fee to specified committees of the Legislature. The bill would also require funds to be advanced to the Marijuana User Fee Fund as a General Fund or special fund loan, would authorize the Director of Finance to provide an initial operating loan from the General Fund, and would appropriate to the board funds so advanced or loaned to the board for the implementation and administration of the act. end insert

begin delete

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.

end delete begin delete

This bill would provide that with regard to certain mandates no reimbursement is required by this act for a specified reason.

end delete begin delete

With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

end delete begin delete

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.

end delete begin insert

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.

end insert begin insert

This bill would provide that no reimbursement is required by this act for a specified reason.

end insert

Vote: ²⁄₃. Appropriation:  begin delete no end delete begin insert yes end insert . 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 begin delete Value Tax end delete begin insert User Fee end insert Act

 

37001.  

This part is known, and may be cited, as the “Marijuana
begin delete Value Tax end delete begin insert User Fee end insert Act.”

37002.  

For purposes of this part, the following definitions shall
apply:

begin insert

(a) “Local agency” includes any city, county, special district,
authority, or other political subdivision of the state.

end insert begin delete

(a)

end delete

begin insert (b) end insert  “Medical marijuana” means medical cannabis as defined in
Section 19300.5 of the Business and Professions Code.

begin delete

(b)

end delete

begin insert (c) end insert  “Person” means person as defined in Section 55002.

begin delete

(c)

end delete

begin insert (d) end insert  “Primary caregiver” means a person who is exempt from
the licensure requirements of the Medical Marijuana Regulation
and Safety Act (Chapter 3.5 (commencing with Section 19300) of
Division 8 of the Business and Professions Code) pursuant to
subdivision (b) of Section 19319 of the Business and Professions
Code.

begin delete

(d)

end delete

begin insert (e) end insert  “Purchaser” means a person that purchases medical
marijuana for consumption or other use in this state.

begin delete

(e)

end delete

begin insert (f) end insert  “Qualified patient” means a person who is entitled to the
protections of the Compassionate Use Act of 1996 (Section 11362.5
of the Health and Safety Code).

begin delete

(f)

end delete

begin insert (g) end insert  “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.

begin delete

(g)

end delete

begin insert (h) end insert  (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.

begin delete

(h)

end delete

begin insert (i) end insert  “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 begin delete tax end delete begin insert fee end insert
collection duty.

begin delete

(i)

end delete

begin insert (j) end insert  (1) “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.

(2) Notwithstanding paragraph (1), “sale” or “purchase” does
not include the transfer of title or possession, exchange, or barter
of medical marijuana for a consideration between a qualified patient
and his or her primary caregiver.

begin delete

(j)

end delete

begin insert (k) end insert  “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.

begin delete

(k)

end delete

begin insert (l) end insert  “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
begin delete an excise tax end delete begin insert a fee end insert 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
begin delete tax end delete begin insert fee end insert imposed by Section 37003. That purchaser’s liability is not
extinguished until the begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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. begin delete 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. end delete

(d) (1) The begin delete tax end delete begin insert fee end insert required to be collected by the retailer
engaged in business in this state, any begin delete tax end delete begin insert fee end insert collected from a
purchaser that has not been remitted to the board, and any amount
unreturned to a purchaser which is not begin delete tax end delete begin insert the fee, end insert but was collected
from the purchaser under the representation by the retailer that it
was begin delete tax end delete begin insert the fee, end insert constitutes debts owed by the retailer to this state.

(2) A retailer is relieved from liability to collect begin delete tax end delete begin insert the fee end insert that
became due and payable, insofar as the measure of the begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete
begin insert fee end insert 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)  begin insert (1) end insert begin insert   end insert The begin delete tax end delete begin insert fee end insert required to be collected by the retailer
engaged in business in this state from the purchaser shall be
displayed separately from the begin delete list price, the price advertised in the
premises, the marked price, or other end delete price begin insert of the medical marijuana end insert
on the sales check or other proof of sales. Any person violating
this begin delete subdivision end delete begin insert paragraph end insert is guilty of a misdemeanor.

begin insert

(2) Except as otherwise required by paragraph (1), the fee
required to be collected by the retailer engaged in business in this
state from the purchaser shall be included in any list price, marked
price, or any other advertised or quoted price of medical marijuana
provided or displayed by the retailer engaged in business in this
state.

end insert

(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 begin delete tax end delete begin insert fee end insert 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 begin delete tax end delete begin insert fee end insert 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 begin delete Value Tax end delete begin insert User Fee end insert 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 begin delete Value Tax end delete begin insert User Fee end insert
Fund.

(b)  begin delete Moneys end delete begin insert Except as otherwise provided in Section 37006.3,
moneys end insert in the Marijuana begin delete Value Tax end delete begin insert User Fee end insert Fund shall be
allocated by the Controller annually 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 begin delete agencies, including districts, end delete begin insert agencies end insert that oversee
or are affected by the regulation of cultivating, processing,
manufacturing, distributing, and selling of medical marijuana, begin delete or end delete
that undertake enforcement activities pertaining to the cultivation
of marijuana in violation of state law or local ordinance, begin insert or that
are involved in a fire suppression, emergency medical, or other
”all-risk end insert begin insert ” response to a marijuana cultivation, processing,
manufacturing, or distribution incident, end insert upon appropriation by the
Legislature. begin delete All local agencies, including districts, shall be eligible
for the grants, including, but not limited to, law enforcement and
zoning enforcement. end delete 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 the stewardship, operation, maintenance, and preservation of
state park units, including units operated on behalf of the state by
local or regional agencies or by nonprofit organizations, upon
appropriation by the Legislature. The department shall allocate to
those local or regional agencies or nonprofit organizations a
percentage of the funds received pursuant to this paragraph that is
roughly proportional to the ratio of the number of units operated
by the agencies or organizations to the number of units operated
by the department.

(4)  begin insert (A) end insert begin insert   end insert Twenty percent to counties for drug and alcohol
treatment programs, distributed based on the ratio of each county’s
population to the total population of all counties, as set forth in
the most recent E-1 Cities, Counties, and the State Population
Estimates published by the Department of Finance, upon
appropriation by the Legislature. begin delete Each county shall allocate funds
received pursuant to this subdivision to the human services
departments of cities within the county. end delete Any funds appropriated
shall be used for drug and alcohol treatment and recovery and case
management services.

begin insert

(B) For purposes of this paragraph, “county” means a county
mental health department, two or more county mental health
departments acting jointly, or a city-operated program receiving
funds pursuant to Section 5701.5 of the Welfare and Institutions
Code.

end insert

begin insert

begin insert 37006.3. end insert   

(a) Funds for the implementation and administration
of this part shall be advanced to the Marijuana User Fee Fund as
a General Fund or special fund loan, and shall be repaid by the
initial revenues, less refunds, collected pursuant to this part.

(b) Funds advanced or loaned to the Marijuana User Fee Fund
pursuant to this section are hereby appropriated to the board for
the implementation and administration of this part.

(c) The Director of Finance may provide an initial operating
loan from the General Fund to the Marijuana User Fee Fund that
does not exceed five million dollars ($5,000,000).

end insert

37006.5.  

Commencing 2018, and at least every other year
thereafter, the Legislative Analyst shall review and evaluate the
begin delete tax end delete begin insert fee end insert imposed by this part, and shall provide to the Senate
Committees on Governance and Finance, Appropriations, and
Budget and Fiscal Review, and to the Assembly Committees on
Revenue and Taxation, Appropriations, and Budget, a report that
makes recommendations regarding the begin delete tax end delete rate of, allocations of
revenue from, and any other adjustments to, the begin delete tax end delete begin insert fee end insert imposed
by this part. The report shall include, but not be limited to, all of
the following:

(a) Annual revenues.

(b) Annual costs of implementing this part.

(c) Annual amounts allocated to all of the following:

(1) The General Fund.

(2) The Bureau of Medical Marijuana Regulation.

(3) The Department of Parks and Recreation.

(4) Counties, for drug and alcohol programs.

(d)  begin delete Tax end delete begin insert Fee end insert compliance rates.

(e) Board recommendations to improve effective and efficient
administration and enforcement of this part.

37007.  

Nothing in this part shall be interpreted to preclude a
city, county, or city and county from enacting or continuing to
enforce a local ordinance that imposes any begin delete taxes end delete begin insert fees, taxes, end insert or
other charges on the consumption or other use of medical
marijuana, as may be otherwise authorized by law.

37008.  

This part shall only become operative if Secretary of
State Initiative Number 1762, also known as the Control, Regulate
and Tax Adult Use of Marijuana Act, is not approved by the voters
at the November 8, 2016, statewide general election and does not
take effect.

begin delete

SEC. 3.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution for certain
costs that may be incurred by a local agency or school district
because, in that regard, 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.

However, if the Commission on State Mandates determines that
this act contains other costs mandated by the state, reimbursement
to local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.

end delete

begin insert

begin insert SEC. 3. end insert   

end insert begin insert

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.

end insert