BILL ANALYSIS Ó
SB 1400
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Date of Hearing: June 28, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
SB 1400(Wieckowski) - As Amended June 21, 2016
SENATE VOTE: 21-16
NOTE: This bill is double-referred, and if passed by this
Committee, it will be referred to the Assembly Committee on
Governmental Organization.
SUBJECT: Tobacco
SUMMARY: Revises, beginning on January 1, 2019, 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.
EXISTING LAW:
1)Establishes the Cigarette and Tobacco Products Licensing Act
of 2003, and requires the Board of Equalization to administer
a statewide program to license manufacturers, importers,
distributors, wholesalers, and retailers of cigarettes and
tobacco products. (Business and Professions Code (BPC) Section
22970, et seq.)
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2)Defines "tobacco products" as all forms of cigars, smoking
tobacco, chewing tobacco, snuff, and any other articles or
products made of, or containing at least 50 percent tobacco,
but does not include cigarettes, among other items. (BPC
Section 22971(s))
3)Defines "retail location" as both any building from which
cigarettes or tobacco products are sold at retail and a
vending machine. (BPC Section 22971(q))
4)Requires a retailer to obtain a separate license for each
retail location that sells cigarettes and tobacco products and
pay a one-time fee of $100. (BPC Sections 22972, 22973(7)(d))
5)Defines a "tobacco store", under the Stop Tobacco Access to
Kids Enforcement Act, as a retail business that meets the
following requirements: (BPC Section 22962(a)(4))
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 Section 6903.
d) Does not sell alcoholic beverages or food for
consumption on the premises.
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6)Requires all persons engaging in the retail sale of tobacco
products to check the identification of tobacco purchasers, if
the purchaser reasonably appears to be under the age of 21.
(BPC Section 22956)
THIS BILL:
7)Revises and recasts the definition of a "retail location"
under the California Cigarette and Tobacco Products Licensing
Act of 2003, to match the definition of a "tobacco store" as
specified under the Stop Tobacco Access to Kids Enforcement
Act, beginning January 1, 2019.
8)Makes other conforming changes.
FISCAL EFFECT: According to the Senate Appropriations Committee
analysis, 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. This bill will likely
result in:
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. 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 (Board), this change is expected to prohibit
about 30,000 retailers (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
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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. The Board
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. 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
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COMMENTS:
Purpose. This bill revises the definition of a retail tobacco
location, which will limit the types of retail locations that
will be authorized to sell tobacco products. This bill is
sponsored by the author. According to the author, "[This bill]
will do more to prevent exposure and access to tobacco products
to children by reducing its pervasive presence in retail
locations in California. Despite having steep penalties for
selling tobacco to minors, 90% of smokers still say they began
smoking before the legal age. This is in part because tobacco
companies have not stopped in their efforts to market to
children."
Background. Cigarette and Tobacco Products Licensing Act. As a
result of AB 71 (Horton), Chapter 890, Statutes of 2003, the
Cigarette and Tobacco Products Licensing Act (Act) was enacted.
The Act imposed licensing requirements on all retailers,
wholesalers, and distributors of cigarettes and tobacco products
and all manufacturers and importers of cigarettes. Licensing
requirements are in addition to the permits and licenses that
may be required depending on other business operations. The Act
intended to decrease tax evasion on the sales of cigarettes and
tobacco products in California, and also included provisions for
new recordkeeping requirements, inspection and seizure of any
untaxed cigarettes or tobacco products, and imposed civil and
criminal penalties for violations.
The BOE is the regulatory entity charged with the licensure and
enforcement of the Act. As noted, retail sellers of cigarettes
and tobacco products in California must have a Cigarette and
Tobacco Products Retailer's License. There is a one-time fee of
$100 for each location from which cigarettes or tobacco products
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are sold at retail; a license is valid for one year and must be
renewed annually. There is no additional charge to renew a
license. However, if a license expires, a fee of $100 is
required for reinstatement. Retailers are strictly prohibited
from selling cigarette and other tobacco products without a
valid Cigarette and Tobacco Products Retail License.
In an analysis of this bill, the BOE notes that it anticipates
that the definitional change will reduce the number of retail
locations from approximately 33,000 (current licensees) to less
than 3,000. The BOE notes that the largest numbers of licensees
were grocery stores, gas stations, convenience stores, liquor
stores, and tobacco stores. Of those total licensees, only
2,276 were solely tobacco only stores. However, the BOE
analysis does anticipate an increase of new tobacco retail
facilities (estimates approximately 10,000) as a result of this
bill, well below the current 33,000 current retail
establishments that can sell tobacco specified products.
This bill includes a two-year delayed implementation. According
to the author, the delayed implementation will help provide
businesses with time to change their business model (become a
retail tobacco store) to meet the revised requirements
prescribed by this bill in order to sell tobacco products.
The Stop Tobacco Access to Kids Enforcement Act (STAKE). The
Stake Act was established in the 1990s as an effort to address
the issue of tobacco sales to minors in California to conform to
a federal mandate, among other reasons. The STAKE is enforced
through the California Department of Public Health (CDPH).
According to the CDPH, "the mission of the program is to reduce
the illegal sales of tobacco products to individuals under 21
years of age through effective enforcement of the STAKE." The
BPC Section 29952(c) requires the CDPH to conduct random
inspections at retail sites in order to investigate the sales of
tobacco to underage minors. In addition, the STAKE requires
that specified tobacco retailers include an age-of-sale warning
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at each point of sale that selling tobacco to persons under the
age of 21 years is illegal and subject to penalties. Until June
of 2016, the sale of tobacco products was prohibited for persons
under the age of 18, current law now prohibits the sale of
tobacco products to individuals under 21 unless they are active
duty military personnel in the U.S. Armed Forces. The STAKE was
implemented as a mechanism to ensure that minors were not
effectively able to obtain tobacco products from retail stores,
and if they were, those stores be subjected for penalties. The
revised definition of a retail tobacco store as proposed in this
bill is similar to the definition of a tobacco store identified
in the STAKE, which was established to address illegal sales to
minors and not for issuance of retail sale licenses.
The CDPH conducts an annual "Statewide Youth Tobacco Purchase
Survey" to monitor retailer compliance with the Act. The CDPH's
California Tobacco Facts and Figures 2015 report states,
"Although California prohibits selling tobacco to youth ages 18
and under, statewide data show that more than 5% of retailers
still sell tobacco to minors." The report breaks down the
percentage of retailers selling tobacco to youth by store type.
It was found that while some retail stores were found to have
higher incidents of selling tobacco to minors, including
convenience stores with gasoline, restaurants, donut shops,
meat, and produce markets, the incident rates were at least
eight percent less compared to that of tobacco stores. The most
compliant retailers included supermarkets and drug
stores/pharmacies.
Tobacco Consumption and Tobacco Sales to Minors. The CDC states
that if smoking continues at the current rate among youth in
this country, 5.6 million of today's Americans younger than 18
will die early from a smoking-related illness. Some of the
statistics related to tobacco use provided by the CDC indicate
that while there has been no significant change in overall
tobacco use among high school students since 2011, there was a
decrease in cigarette use among high school students from
2011-2015. According to the Executive Summary from the Surgeon
General's 2012 report, Preventing Tobacco Use Among Youth and
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Adults, "nearly all tobacco use begins in childhood and
adolescence. In all, 88% of adult cigarette smokers who smoke
daily, report that they started smoking by the age of 18, (NSDUH
2010, Chapter 3). This is a time in life of great vulnerability
to social influences, and the pervasive presence of tobacco
product marketing-including everything from sleek ads in
magazines to youth-generated posts on social networking sites,
to images of smoking in the movies-conveys messages that make
tobacco use attractive to youth and young adults."
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, and Boston became the
second. Additionally, CVS announced in 2014 that it planned to
ban tobacco products from all of its stores.
Current Related Legislation. SB 1470 (Wieckowski) of 2016,
revises the definition of "tobacco store" to indicate that a
retail business primarily sells tobacco products and tobacco
paraphernalia. STATUS: This bill is currently pending in the
Assembly Committee on Business and Professions.
SBX2 - 5 (Leno) Chapter 7, Statutes of 2016, recasts and
broadens the definition of "tobacco product" 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.
SB X2 - 7 (Hernandez) Chapter 8, Statutes of 2016 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.
Prior Related Legislation. SB X2 - 10 (Beall) of 2015, would
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have 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. NOTE: 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. NOTE:
This bill was amended to pertain to 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. NOTE: This bill was held 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. NOTE: This bill
failed passage in the Assembly Committee on Appropriations.
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. NOTE: SB 648
failed passage in the Assembly Committee on Appropriations.
SB 882 (Corbett), Chapter 312, Statutes of 2010, made it
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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.
ARGUMENTS IN SUPPORT:
The California College and University Police Chiefs Association
writes in support, "This important bill will modernize the way
tobacco products are sold in California. Tobacco products are
everywhere-easily available in a quick trip to a gas station or
grocery store or virtually every retail establishment around a
college or university campus."
Common Sense Kids Action writes in support, "[This bill] will
help reduce the chance that children will be impacted by the
negative lifetime health risks associated with these products.
By restricting the sales of tobacco products to tobacco stores,
this bill will both drastically reduce exposure of minors to
tobacco and streamline tax collection and enforcement for the
Board of Equalization."
The Santa Clara County Board of Supervisors writes in support,
"[This bill] narrows the definition of retailers permitted to
sell tobacco products to only tobacco stores. This would
significantly restrict where tobacco products can be purchased
and help reduce tobacco exposure to minors."
The County Health Executives Association of California writes in
support, "Limiting the sale of tobacco products to only at
tobacco stores would decrease youth exposure to tobacco products
as they do not allow minors to enter the premises without a
parent or legal guardian."
The American Cancer Society Cancer Action Network writes in
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support, "By limiting the sale of tobacco products to tobacco
only stores, this bill limits the number of tobacco retailers
and thus 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."
ARGUMENTS IN OPPOSITION:
The California Association Representing Independent Fuel, Lubes
and Convenience Store Interests writes in opposition, "Sale of
tobacco products provides essential revenues for the operation
and profitability of convenience stores, allowing continued
operation of those vital community service locations.
Prohibiting sales of tobacco products will create serious, if
not fatal, consequences for such businesses."
The California Chamber of Commerce writes in opposition,
"Passage of this bill will result in a loss of jobs and tax
revenues."
The National Federation of Independent Business Owners writes in
opposition, "the sale of legal tobacco products generates 40% of
the gross grocery sale revenue for the typical small convenience
stores and gas stations.?[This bill] will only serve to further
decimate small business in a state where they are struggling to
survive and create job."
The California Retailers Association , "While tobacco is a legal
product in California, our members would like to continue to
responsibly sell offer it for sale to age appropriate
consumers."
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Trepco West writes in opposition, "[This bill would create an
unfair swing in the tobacco and cigarette business that will
hurt thousands of businesses across the state, including Trepco
West, and forcing more people out of jobs."
C-Store Realty and G&M Oil Company, Inc. , writes in opposition,
"There is no good reason to support the sales prohibition in
[this bill], convenience stores have a well-deserved and
positive compliance record; serving only those eligible to buy
legal tobacco products."
The California Distributors Association writes in opposition,
"[This bill] will have a heavy impact on the viability of
convenience stores and small grocery stores."
A coalition of organizations writes in opposition, "this bill
places undue burden on our licensed retailers that have for many
years sold tobacco products in a successful and responsible
manner to legal age consumers."
REGISTERED SUPPORT:
American Cancer Society Cancer Action Network
California College and University Police Chiefs Association
Common Sense Kids Action
County Health Executives Association of California
Santa Clara County Board of Supervisors
REGISTERED OPPOSITION:
American Petroleum and Convenience Store Association*
California Asian Chamber of Commerce*
California Association Representing Independent Fuel, Lubes and
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Convenience Store Interests
California Black Chamber of Commerce*
California Chamber of Commerce*
California Distributors Association*
California Independent Oil Marketers Association*
California Licensed Beverage Association*
California Retailers Association*
C-Store Realty
National Federation of Independent Business Owners*
Regional Black Chamber of Commerce*
Retailers and Store Owners United to Rebuild California's
Economy*
Trepco West
Valley Industry Commerce Association*
Numerous individuals
Analysis Prepared by:Elissa Silva / B. & P. / (916)
319-3301