BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: SB 1400 Hearing Date: April 11,
2016
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|Author: |Wieckowski |
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|Version: |February 19, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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Subject: Retail tobacco licenses
SUMMARY: Revises the definition of "retail location" under the
Cigarette and Tobacco Products Licensing Act to mirror the
definition of "tobacco store" under the Stop Tobacco Access to
Kids Enforcement Act.
Existing law:
1) Defines a "tobacco store", under the Stop Tobacco Access to
Kids Enforcement Act, as a retail business that meets the
following requirements: (Business and Professions Code (BPC)
§ 22962(4)(A))
a) Primarily sells tobacco products.
b) Generates more than 60 percent of its gross revenues
annually from the sale of tobacco products and tobacco
paraphernalia.
c) Does not permit any person under 18 years of age to be
present or enter the premises at any time, unless
accompanied by the person's parent or legal guardian, as
defined in Family Code § 6903.
d) Does not sell alcoholic beverages or food for
consumption on the premises.
SB 1400 (Wieckowski) Page 2
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2) Establishes the Cigarette and Tobacco Products Licensing Act,
which outlines the licensing requirements on all retailers,
wholesalers, and distributors of cigarettes and tobacco
products, and all manufacturers and importers of cigarettes.
(BPC § 22970 et seq.)
3) Requires the State Board of Equalization (BOE), under the
Cigarette and Tobacco Products Licensing Act, to administer a
statewide program to license cigarette and tobacco products
manufacturers, importers, distributors, wholesalers, and
retailers. (BPC § 22970.2)
4) Defines "retail location" as both any building from which
cigarettes or tobacco products are sold at retail and a
vending machine. (BPC § 22971(q))
5) Requires a retailer, for purposes of collecting a tobacco
tax, to obtain a separate license for each retail location
that sells cigarettes and tobacco products and pay a one-time
fee of $100. (BPC § 22973(7)(d))
6) Prohibits selling tobacco products without a valid license
and makes violations punishable as a misdemeanor. (BPC §
22980.2; 22981)
This bill: Recasts the definition of "retail location" as a
tobacco store that is a retail business that, among other
things, generates more than 60% of its gross revenues annually
from the sale of tobacco products and tobacco paraphernalia.
FISCAL
EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. The Author is the sponsor of the bill. According
to the Author, "Current law requires a retailer to obtain a
license from the BOE to sell cigarette and tobacco products
in California. A 'retailer' is currently defined as a person
who engages in this state in the sale of cigarettes or
tobacco products directly to the public from a retail
SB 1400 (Wieckowski) Page 3
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location. The act defines a 'retail location' as both any
building from which cigarettes or tobacco products are sold
at retail and a vending machine. SB 1400 narrows the
definition of 'retailers' permitted to sell tobacco products
to only tobacco stores, thus significantly restricting where
tobacco products can be purchased."
2. Background. While California boasts the second-lowest
smoking rate in the nation, tobacco-related diseases still
claim the lives of 40,000 Californians every year. The state
has worked successfully to discourage people from smoking;
however, tobacco products are easily available in a gas
station or grocery store. Unlike tobacco shops, there are no
age restrictions on entering a gas station or grocery store.
Consequently, tobacco products sold in these stores are
visible and easily available to minors to purchase. Tobacco
advertising is also commonplace at many retail locations.
A 2004 Stanford University study found that cigarettes are
marketed more heavily in stores where adolescents shop -
particularly the cigarette brands most popular with
adolescent smokers. The report underscores that, "Compared
to other stores in the same community, stores popular among
adolescents displayed more than three times as many cigarette
marketing materials outside, and contained almost three times
more marketing materials and twice as much shelf space for
Marlboro, Camel, and Newport. These three brands account for
more than 80% of the cigarettes bought by US adolescents."
3. License for Retailers. Through AB 71 (Jerome Horton, Chapter
890, Statutes of 2003), the State of California enacted the
Cigarette and Tobacco Products Licensing Act, which
established a statewide licensing program under the Business
and Professions Code (BPC § 22970 et seq.). The Act imposed
licensing requirements on all retailers, wholesalers, and
distributors of cigarettes and tobacco products, and all
manufacturers and importers of cigarettes. These licensing
requirements are in addition to the permits and licenses that
may be required depending on the individual's business
operations. The Act, intended to decrease tax evasion on the
sales of cigarettes and tobacco products in California, also
included provisions for new recordkeeping requirements,
inspection and seizure of any untaxed cigarettes or tobacco
products, and imposed civil and criminal penalties for
SB 1400 (Wieckowski) Page 4
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violations.
Every retailer who sells or will sell cigarettes or tobacco
products in California is required to obtain a retailer's
license from the BOE. An individual must obtain a license
for each retail location they own or operate. For example,
if a person operates several different stores, which each
sell cigarettes or tobacco products, they must obtain a
separate license for each store location. However, a person
may submit a single application for multiple licenses, and
include $100 for each location's license (BPC § 22972 (a)).
The license is valid for one year and must be renewed
annually. There is no additional charge to renew a license.
There are severe penalties of up to $5,000, or up to one year
imprisonment in the county jail, or both the fine and
imprisonment if an individual is caught selling cigarettes or
tobacco products without a license (BPC § 22972(a);
22980.1(h); 22981).
4. Tobacco Products Banned from Pharmacies. In 2008, San
Francisco became the first city in the United States to ban
the sale of tobacco products from retail pharmacies. The
Author reports that San Francisco has "since expanded the law
to apply to all stores containing pharmacies, such as Costco.
One hundred six cities have since joined San Francisco in
passing tobacco-free pharmacy laws."
Additionally, CVS has announced that it will ban tobacco
products from all of its stores.
5. This Measure Would Significantly Limit the Number of Retail
Locations Permitted to Sell Tobacco Products. By revising
the definition of "retail location", under the Cigarette and
Tobacco Products Licensing Act, only a specific amount of
stores will be able to sell cigarettes and tobacco products.
Consequently, this change in definition will dramatically
curtail who can apply and qualify for a BOE license. For
example, if this bill is enacted into law, supermarket
chains, small business grocery stores, and local convenient
stores would be prohibited to sell cigarette and tobacco
products, given the clear reason that they do not produce 60%
of their annual revenue from the sale of tobacco products and
tobacco paraphernalia.
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In the BOE's analysis for SB 1400 (Wieckowski), the analyst
writes, "BOE data indicates that 33,381 retailers had
licenses that allowed them to sell cigarette and tobacco
products in February 2016. The North American Industry
Classification
System (NAICS) shows that the largest numbers of licensees
were grocery stores, gas stations, convenience stores, liquor
stores, and tobacco stores. Of the total licenses, 2,276 were
tobacco stores. These tobacco stores are unlikely to be
affected by this bill, but all the others will likely no
longer meet the requirements to be licensed?The proposed
definition change reduces the number of businesses that may
hold a retailer license from 33,000 to 10,000, as of January
1, 2017."
Coupled with SB 1470 (Wieckowski) of 2016, supermarket chains
and small business grocery stores would be prohibited from
additionally selling tobacco paraphernalia.
6. Related and Prior Legislation. SB 1470 (Wieckowski) of 2016
revises a definitional requirement of "tobacco store" to
indicate that a retail business primarily sells tobacco
products and tobacco paraphernalia. ( Status: This bill is
currently set to be heard in this committee on April 11,
2016.)
SBX2 - 5 (Leno) of 2015 recasts and broadens the definition
of "tobacco product" in current law to include electronic
cigarettes, as specified; extends current restrictions and
prohibitions against the use of tobacco products to
electronic cigarettes; extends current licensing requirements
for manufacturers, importers, distributors, wholesalers, and
retailers of tobacco products to electronic cigarettes; and
requires electronic cigarette cartridges to be
child-resistant. ( Status: This bill is currently in
engrossing and enrolling, pending the Governor's signature.)
SB X2 - 7 (Hernandez) of 2015 increases the minimum legal age
to purchase or consume tobacco from 18 to 21 and makes
additional conforming changes to restrictions and enforcement
mechanisms in current law. ( Status: This bill is currently
in engrossing and enrolling, pending the Governor's
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signature.)
SB X2 - 10 (Beall) of 2015 revised 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
increased the distributor and wholesaler license fee from
$1,000 to $1,200. ( Status: This bill was held at the
Assembly desk.)
SB 24 (Hill) of 2015 would have classified electronic
cigarettes separately from tobacco products, added electronic
cigarettes to the Stop Tobacco Access to Kids Enforcement Act
and smoking location prohibitions, and mandated childproof
packaging for e-liquid used in electronic cigarettes.
( Status: This bill was ultimately amended to deal with the
California Public Employees' Pension Reform Act of 2013.)
ABX2 - 6 (Cooper) of 2015 defined the term smoking for
purposes of the Stop Tobacco Access to Kids Enforcement Act,
expanded the definition of a tobacco product to include
electronic cigarettes (e-cigarettes), and extended current
restrictions and prohibitions against the use of tobacco
products to electronic cigarettes. The bill further extended
current licensing requirements for manufacturers, importers,
distributors, wholesalers, and retailers of tobacco products
to electronic cigarettes. ( Status: This bill was never
heard on the Assembly Floor.)
AB 1500 (Dickinson) of 2014 would have prohibited a delivery
seller, as defined, from selling or delivering an electronic
cigarette to a person under 18 years of age. ( Status: AB
1500 failed passage in the Assembly Appropriations
Committee.)
SB 568 (Steinberg, Chapter 336, Statues of 2013) prohibits an
operator of an Internet Web site, online service, online
application, or mobile application, as specified, from
marketing or advertising electronic cigarettes to a minor.
SB 648 (Corbett) of 2013 would have restricted electronic
cigarettes from being sold in vending machines. ( Status:
SB 648 failed passage in the Assembly Appropriations
Committee.)
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SB 882 (Corbett, Chapter 312, Statutes of 2010) made it
unlawful, to the extent not preempted by federal law, for a
person to sell or otherwise furnish an electronic cigarette
to a person less than 18 years of age.
SJR 8 (Corbett) of 2009 would have requested that the FDA
prohibit sale of electronic cigarettes until they are deemed
safe. ( Status: SJR8 failed passage in the Assembly.)
7. Arguments in Support. The American Lung Association in
California asserts that, "By limiting the sale of tobacco
products to tobacco only stores, this bill limits the ability
of the tobacco industry to market tobacco to our kids.
Studies have shown that frequent exposure to tobacco retail
displays has been associated with increased smoking
initiation among youth and can create a negative impact on
tobacco quit attempts."
First 5 Association of California highlights that, "By
restricting the sales of tobacco products to only tobacco
stores, this bill would both drastically reduce tobacco
exposure to minors and streamline tax collection and
enforcement for the BOE."
8. Policy Issue: Does this measure somewhat accomplish what it
is attempting to prevent? AB 71 (Jerome Horton, Chapter 890,
Statutes of 2003) redefined "retail location" to restrict a
mobile vendor from engaging in the sale of cigarettes and
tobacco products. Specifically, the definition was narrowed
to allow only a location that is a "building" to be licensed.
The BOE reports that, "The amendment was intended to prevent
cigarette and tobacco products access to minors and to make
tax enforcement, including retail inspections, feasible, and
more effective."
In its current form, SB 1400 appears to allow a mobile vendor
to qualify for a license to engage in the sale of cigarettes
and tobacco products. Thus, catering trucks, lunch wagons,
and other mobile facilities may be licensed if they meet the
"tobacco store" requirements. The BOE further underscored
that, "This appears to undermine the bill's intent to prevent
access to minors and complicates retail license enforcement."
To protect minors from exposure to cigarette and tobacco
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products, the Author may wish to clarify how mobile venders
would be excluded from BOE's license.
SUPPORT AND OPPOSITION:
Support:
American Lung Association in California
First 5 Association of California
The American Academy of Pediatrics, California (AAP-CA)
The County Health Executives Association of California (CHEAC)
Regional Asthma Management and Prevention (RAMP)
Opposition:
None on file as of April 5, 2016.
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