BILL NUMBER: SB 987 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 31, 2016
AMENDED IN SENATE MARCH 15, 2016
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. marijuana, and making an appropriation
therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 987, as amended, McGuire. Taxation: medical
Medical marijuana: Marijuana Value Tax
User Fee 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 would enact the Marijuana User Fee Act. The
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 an excise tax a fee
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 fee 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
fee 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 fee 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 fee 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 User Fee Fund, which the bill would
establish.
This bill would require moneys in the Marijuana Value Tax
User Fee 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, including districts, as defined,
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 counties for allocation to city human
services departments counties, as defined, for
drug and alcohol treatment programs. By requiring counties
to allocate funds to city human services departments, this bill would
impose a state-mandated local program. 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.
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 with regard to certain mandates no
reimbursement is required by this act for a specified reason.
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.
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.
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.
Vote: 2/3. Appropriation: no yes .
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 User Fee
Act
37001. This part is known, and may be cited, as the "Marijuana
Value Tax User Fee Act."
37002. For purposes of this part, the following definitions shall
apply:
(a) "Local agency" includes any city, county, special district,
authority, or other political subdivision of the state.
(a)
(b) "Medical marijuana" means medical cannabis as
defined in Section 19300.5 of the Business and Professions Code.
(b)
(c) "Person" means person as defined in Section 55002.
(c)
(d) "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.
(d)
(e) "Purchaser" means a person that purchases medical
marijuana for consumption or other use in this state.
(e)
(f) "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).
(f)
(g) "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.
(g)
(h) (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.
(h)
(i) "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 fee collection duty.
(i)
(j) (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.
(j)
(k) "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.
(k)
(l) "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 a fee 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 fee imposed by Section 37003. That
purchaser's liability is not extinguished until the tax
fee 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
fee 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 fee
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 fee 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
fee 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 fee required to be
collected by the retailer engaged in business in this state, any
tax fee collected from a purchaser that
has not been remitted to the board, and any amount unreturned to a
purchaser which is not tax the fee, but
was collected from the purchaser under the representation by the
retailer that it was tax the fee,
constitutes debts owed by the retailer to this state.
(2) A retailer is relieved from liability to collect tax
the fee that became due and payable, insofar as
the measure of the tax fee 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 fee 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
fee 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 fee 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) (1) The tax fee
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 of the medical marijuana
on the sales check or other proof of sales. Any person
violating this subdivision paragraph is
guilty of a misdemeanor.
(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.
(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 fee 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
fee 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 User
Fee 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 User Fee Fund.
(b) Moneys Except as otherwise
provided in Section 37006.3, moneys in the Marijuana
Value Tax User Fee 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 agencies, including districts, agencies
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 in violation of
state law or local ordinance, or that are involved in a fire
suppression, emergency medical, or other "all-risk "
response to a marijuana cultivation, processing, manufacturing, or
distribution incident, upon appropriation by the Legislature.
All local agencies, including districts, 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
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) (A) 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. Each county shall allocate
funds received pursuant to this subdivision to the human services
departments of cities within the county. Any funds
appropriated shall be used for drug and alcohol treatment and
recovery and case management services.
(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.
37006.3. (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).
37006.5. Commencing 2018, and at least every other year
thereafter, the Legislative Analyst shall review and evaluate the
tax fee 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 tax
rate of, allocations of revenue from, and any other
adjustments to, the tax fee 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) Tax Fee 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 taxes
fees, taxes, 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.
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.
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.