BILL ANALYSIS
AB 2733
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Date of Hearing: April 12, 2010
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Joe Coto, Chair
AB 2733 (Ruskin) - As Introduced: February 19, 2010
SUBJECT : Cigarettes and tobacco products
SUMMARY : Prohibits the transfer of title or possession of
cigarettes or tobacco products without consideration, exchange,
or barter if the cigarettes or tobacco products had been
purchased for resale under a license issued pursuant to the
California Cigarette and Tobacco Products Licensing Act (Act)
and the transfer occurs without a license or after receipt of a
notice of suspension or revocation of the license.
Specifically, this bill :
1)Prohibits certain displays of cigarettes or tobacco products.
2)Imposes prescribed notices to be posted when a license has
been posted when a license has been suspended or revoked by
the State Board of Equalization (BOE), and would make
violation of these posting requirements subject to a civil
penalty of $1,000 for each offense.
EXISTING LAW :
1)Establishes the California Cigarette and Tobacco Products
Licensing Act and provides for the licensure by the State
Board of Equalization of manufacturers, distributors,
wholesalers, importers, and retailers of cigarette or tobacco
products that are engaged in business in California.
a) Prohibits retailers, manufacturers, distributors, and
wholesalers from distributing or selling those cigarettes
and tobacco products unless they are licensed.
b) Authorizes the State Board of Equalization to suspend or
revoke the license of any manufacturer, distributor,
wholesaler, importer, or retailer of tobacco products that
is in violation of the law.
FISCAL EFFECT : Unknown
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COMMENTS : This bill would prohibit a license holder from
gifting or displaying for sale cigarettes or tobacco products
during a period of suspension or after revocation of a license.
Purpose of this bill . According to the Board of Equalization,
the sponsor, this bill is intended to provide the necessary
clarification to licensees that gifting cigarettes or tobacco
products or the displaying of such products in retail stock in a
retail sales area is prohibited during periods of license
suspension or revocation, thus avoiding further violations of
the Act. These types of violations of the Act are punishable,
in part, by the seizure and forfeiture of all cigarettes and
tobacco products, which can have a substantial financial effect
on the licensee.
Background . According to a BOE Board analysis on this issue,
when a license has been suspended or revoked for violations of
the Act, the licensee is served with a notice of suspension or
revocation. This type of notice states that the suspended or
revoked licensee must cease the sale of cigarettes or tobacco
products on the effective date of the suspension or revocation.
To ensure this compliance, the BOE Board's Investigations
Division follows up on suspended and revoked licenses by
inspecting locations where the license has been suspended or
revoked to verify cigarettes or tobacco products are no longer
being sold.
Board of Equalization inspections . According to BOE staff, they
have inspected approximately 60,000 retail locations from July
1, 2004 through March 31, 2010. During that period the BOE
suspended 981 locations and this represents all citations
triggering a suspension that are finalized. Of those 981
suspended locations, 66 were cited for making sales during a
period of suspension.
BOE staff points to past inspections where there have been
instances where cigarettes or tobacco products are found to in
retail stock and clearly visible to consumers. In these
circumstances, BOE investigators will make a purchase of these
cigarettes or tobacco products as evidence of a sale during
suspension or revocation, which is a violation of the Act and
subjects all of the suspended licensee's cigarettes and tobacco
products to seizure and forfeiture. The analysis continues to
say when the suspended license holder appeals the violation they
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typically argue that no sale occurred because it was a mistake
by their employee. In order to prevent a dispute over an issue
of fact that is in the control of the licensee, this proposal
would provide a presumption that cigarettes or tobacco products
are displayed for sale If they remain clearly visible to a
retail consumer in retail stock otherwise held for sale on the
premises during a period of suspension or revocation.
BOE staff says they have received inquiries from licensees about
furnishing cigarettes or tobacco products to persons without
consideration or combined with another product or service during
a period of suspension. For example, staff was asked if a
suspended license could furnish cigars at no additional cost at
a wine tasting party, which attendees paid $10 per person to
attend. This type of transfer constitutes a sale and is a
violation of the Act. But, it is not clear to licensees that
such a transfer is a violation that would cause the products to
be subject to seizure and forfeiture. BOE investigators have
also witnessed suspended or revoked licensees furnishing free
sticks or cigarettes to consumers as an incentive to continue
patronizing their retail locations. In addition to violating
California Penal Code 308.2, which provides that no person may
sell one or more cigarettes other than in a sealed and properly
labeled package, the licensee should not be engaging in the sale
or any other transfer of cigarettes or tobacco products while
the license is suspended or revoked.
In support . As the sponsor, the Board of Equalization says,
"This bill is intended to prevent inadvertent sales or gifting
of cigarettes or tobacco products during periods of license
suspension or revocation by requiring all cigarettes and tobacco
products to be removed from being clearly and easily visible as
retail stock which would indicate that such products are being
displayed for sale."
Related legislation . AB 2496 (Nava, 2010 Legislative Session)
amends the California Cigarette and Tobacco Products Licensing
Act of 2003 in governing the financial and other obligations of
non-participating tobacco manufacturers as part of its diligence
obligation. In the Assembly Governmental Organization Committee
and is scheduled to be heard on April 12, 2010.
Prior legislation . SB 1927 (Hayden, Chapter 1009, Statutes of
1994) enacts the Stop Tobacco Access to Kids Enforcement (STAKE)
Act to address the increase in tobacco sales to minors in
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California and fulfill the federal mandate that prohibited the
sale of cigarettes and tobacco products to minors.
AB 71 (Jerome Horton, Chapter 890, Statutes of 2003) enacts the
Cigarette and Tobacco Products Licensing Act of 2003 and imposes
licensing requirements on tobacco manufacturers, wholesalers,
retailers, and importers. Requires manufacturers to pay a
one-time fee. Imposes civil and criminal penalties on
individuals and businesses that violate tobacco-related,
anti-contraband laws, and laws prohibiting tobacco-related sales
to minors.
AB 2344 (Beall, 2008 Legislative Session) would have required
tobacco retailers to pay an annual licensing fee of $185 to
offset the State Board of Equalization's funding shortfall for
the administration and enforcement of the California Cigarette
and Tobacco Products Act. Vetoed by the Governor.
SB 400 (Kuehl, 2005 Legislative Session) would seek to make
changes to the penalties imposed on a retailer convicted of
furnishing cigarettes or tobacco products to a minor under 18
years of age. Held on the Senate Appropriations Committee
Suspense File.
SB 433 (Ortiz, 2004 Legislative Session) would change the
conditions under which the State Board of Equalization levies
penalties against tobacco retailers for sales to minors and
requires local agencies to report convictions for illegal sales
to the State Board of Equalization. Held on the Senate
Appropriations Committee Suspense File.
SB 1843 (Budget and Fiscal Review Committee, 2002 Legislative
Session) would have enacted the Cigarette and Tobacco Products
Licensing Act of 2002. Also, would have established licensing
requirements for cigarettes and tobacco products retailers,
wholesalers and importers, creates an enhanced cigarette tax
compliance and enforcement program; revises the cigarette
"distributor discount" for applying tax stamps; appropriates
funds to implement the program in 2002-2003; establishes a
long-term funding mechanism for the program. Held in the
Assembly.
AB 2205 (Koretz, Chapter 687, Statutes of 2002) creates an
additional $100 penalty on each knowingly possessed carton of
untaxed cigarettes where the proceeds would be used to fund a
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local competitive grant program to reduce availability of
tobacco products on the black market. The program had a sunset
clause that took place on January 1, 2006.
SB 1766 (Ortiz, Chapter 686, Statutes of 2002) requires that all
sales of cigarettes in the State be vendor-assisted,
face-to-face sales unless the seller receives valid
identification, that the purchaser is over 18, the product is
shipped to the address provided on the identification, the sales
is at least for two cartons, and the seller either provides the
State Board of Equalization with all taxes due on the sale or
includes with the shipment a notice that the purchaser is
responsible for state taxes.
AB 1830 (Frommer, Chapter 685, Statutes of 2002) prohibits the
sales of tobacco products to minors through the United States
Postal Service or through any other public or private postal or
package delivery service, and imposes specified age-verification
requirements on tobacco product sellers or distributors.
Double-referral . This bill is double-referred to the Assembly
Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Breathe California
Board of Equalization (sponsor)
Opposition
None on file
Analysis Prepared by : Rod Brewer / G. O. / (916) 319-2531