BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1400 (Wieckowski) - Retail tobacco licenses
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|Version: February 19, 2016 |Policy Vote: B., P. & E.D. 6 - |
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|Urgency: No |Mandate: No |
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|Hearing Date: April 25, 2016 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1400 would revise the definition of a "retail
location" under the Cigarette and Tobacco Products Licensing Act
to limit the sale of cigarettes and tobacco products to "tobacco
stores" as currently defined in law.
Fiscal
Impact:
No fiscal impact is anticipated by the Department of Public
Health with respect to its enforcement of the Stop Tobacco
Access to Kids Enforcement Act.
One time increase in tobacco retailer licensing fees of about
$700,000 in the first year, offset in future years by an
ongoing reduction of $470,000 per year in licensing fee
revenues (Compliance Fund). The definitional change in the
bill will result in a substantial reduction in the number of
retail businesses that can legally sell cigarettes and tobacco
products in the state. According to the Board of Equalization,
this change is expected to prohibit about 30,000 retailers
SB 1400 (Wieckowski) Page 1 of
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(including grocery stores and gas stations) from selling
tobacco products. This would leave about 2,200 existing
retailers that are likely to meet the new definition of a
"retail location". In addition, the Board estimates that an
additional 7,000 new retail locations would open to meet
existing demand for tobacco products. The Board anticipates an
initial influx of licensing application fee revenue from those
new retail locations, offset in future years from reductions
in license applications from retail locations no longer
authorized to sell tobacco products.
Reduced total excise tax and sales tax revenues on tobacco
products of $84 million per year (various funds). The Board of
Equalization projects reduced tobacco excise tax revenues of
about $56 million per year (about 10% of which would come from
the General Fund and the remainder from special funds that
support a variety of public health programs). The Board
estimates reduced sales tax revenues of about $29 million per
year (about 50% coming from the General Fund and the remainder
coming from local government sales tax revenues). The Board
estimates that most consumers will shift their purchases of
tobacco products from retailers such as gas stations or
grocery stores to tobacco stores. However, the Board also
projects an overall reduction in tobacco consumption from this
change, due to the reduced convenience having to purchase
tobacco products only at tobacco stores.
Unknown, but significant health care cost savings to public
payers (various funds). According to the Centers for Disease
Control and Prevention, estimates of annual direct health care
costs related to smoking are between $130 billion and $180
billion per year, nationally. This bill is likely to reduce
health care costs, by reducing tobacco use rates. If the
long-term reduction in the expenditure of health care costs
relating to smoking is proportional to the reduction in the
use rate, total direct health care costs in the state would be
reduced by as much as $1 billion per year in the long-run. A
significant portion of those savings would likely accrue to
public payers such as the Medi-Cal program and CalPERS.
Background: 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
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taxes and prevent tax evasion. Tobacco products are subject to
both a specific excise tax on tobacco products as well as the
general Sales and Use Tax.
Proposed Law:
SB 1400 would revise the definition of a "retail location"
under the Cigarette and Tobacco Products Licensing Act to limit
the sale of cigarettes and tobacco products to "tobacco stores"
as currently defined in law.
Specifically, the bill would define "retail location" under the
Cigarette and Tobacco Products Licensing Act to mirror the
definition of a "tobacco store" under the Stop Tobacco Access to
Kids Enforcement Act. This would limit the sale of tobacco
products to locations that primarily sell tobacco products and
generate more than 60% of gross revenues from tobacco products
and paraphernalia.
Related
Legislation: SB X2 7 (Hernandez) would increase the minimum
legal age for smoking from 18 to 21. That bill is awaiting
action by the Governor.
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