BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 603|
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THIRD READING
Bill No: SB 603
Author: Padilla (D), et al
Amended: 6/1/09
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-3, 04/22/09
AYES: Wolk, Alquist, Florez, Padilla, Wiggins
NOES: Walters, Ashburn, Runner
SENATE APPROPRIATIONS COMMITTEE : 7-5, 5/28/09
AYES: Kehoe, Corbett, DeSaulnier, Hancock, Leno, Oropeza,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
NO VOTE RECORDED: Wolk
SUBJECT : Retail tobacco sales: licenses
SOURCE : Author
DIGEST : This bill restricts new tobacco retail licenses
for a retail location in an area overconcentration area and
for a retail location located within 600 feet of a public
elementary or secondary school except as specified. This
bill sets a renewal license fee at $100. Lastly it
requires the Department of Alcohol and Beverages and the
Department of Public Health upon request of the Board of
Equalization to provide them with specified information
covering tobacco and control laws.
ANALYSIS : Existing federal law provides that the federal
CONTINUED
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government may reduce each state's alcohol and substance
abuse block grant funding unless the youth purchase survey
conducted by each state, using underage decoys to purchase
cigarettes, is below 20 percent.
Existing State Law
Existing state law requires the Board of Equalization (BOE)
to administer the Cigarette and Tobacco Products Licensing
Act of 2003, a statewide cigarette and tobacco products
license program for the sale of cigarettes and tobacco
products. Existing law requires BOE to license
manufacturers, distributors, wholesalers, importers and
retailers of cigarette or tobacco products who are engaged
in business in California. Existing law also requires a
retailer to have and maintain a license to sell cigarettes
or tobacco products.
A retailer that owns or controls more than one retail
location where cigarette and tobacco products are sold is
required to obtain a separate license for each retail
location. Each retailer is required to submit a one-time
license fee of one hundred dollars with each application
and may submit a single application for those licenses with
a license fee of one hundred dollars per location. A
"retail location" is defined to mean any building from
which cigarettes or tobacco products are sold at retail or
a vending machine.
Existing law requires that all persons engaging in the
retail sale of cigarettes and tobacco products shall check
the identification of tobacco purchasers, to establish the
age of the purchaser, if the purchaser reasonably appears
to be under 18 years of age. Existing law also prohibits
any person, firm or corporation from selling, giving, or in
any way furnishing cigarettes or tobacco products to any
person who is under the age of 18 years.
Existing law provides BOE the authority to take enforcement
action if a retailer is convicted of either a Penal Code
violation of selling cigarettes or tobacco products to any
person who is under the age of 18 years or if a retailer is
convicted of violating the provisions of the STAKE Act.
Existing law limits this authority of BOE to take
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enforcement action during periods when the statewide
underage sales rate in California, as measured in an annual
survey conducted by the Department of Public Health (DPH),
is 13 percent or more.
Existing law provides for a range of penalties, from
issuing a warning letter on the first violation to revoking
the license on the eighth violation within a 24-month
period that can be levied against a licensee during the
period when BOE has the authority to act on licenses for
violations of underage sales laws. Specifically, the
existing penalty structure is as follows:
1. Upon the first conviction of a violation, the retailer
receives a warning letter from BOE that delineates the
circumstances under which a retailer's license may by
suspended or revoked and the amount of time the license
may be suspended or revoked. The retailer and its
employees are required to receive training on tobacco
control laws from the Department of Health Services upon
a first conviction.
2. Upon the second conviction of a violation within 12
months the retailer is subject to a fine of five hundred
dollars.
3. Upon the third conviction of a violation within 12
months the retailer is subject to a fine of one thousand
dollars.
4. Upon the fourth to the seventh conviction of a violation
within 12 months BOE is required to suspend the
retailer's license to sell cigarette and tobacco
products for 90 days.
5. Upon the eighth conviction of a violation within 24
months BOE is required to revoke the retailer's license
to sell cigarette and tobacco products.
Existing Local Law:
Existing local ordinances in some jurisdictions require
tobacco retailers to obtain a license for the retail sales
of cigarettes and tobacco products in those jurisdictions.
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Existing local ordinances in some jurisdictions require
cigarette and tobacco product retailers to comply with
specific provisions of the jurisdiction's land use and
zoning ordinances, including provisions that regulate the
location of these retailers.
This bill restricts new tobacco retail license for a retail
location in an area of overconcentration (an area where the
ratio of retail licenses to population in a census tract is
greater than the ratio of retail licenses to population in
the county overall) and for a retail location that is
located within 600 feet of a public elementary or secondary
school. The bill provides an exception to this restriction
if issuing a tobacco license of a local governing body
determines within nine days of notification of a completed
application that public convenience or necessity will be
served by the issuance. If the local governing body or its
designated subordinate officer or body, does not make a
determination within the 90-day period, the license is to
be deemed denied.
The bill also allows a retailer, subject to approval by the
BOE, in an area of overconcentraiton to transfer an
existing license to another person for continual use at the
same location upon the sale or transfer of the business
holding the license, only to a person to otherwise meets
the requirements for the issuance of a new license, and
only after first providing 30 days notice to the BOE
together with an application for transfer, all transfer
documents, and evidence the transferee would meet the
requirements for the issuance of a new license. It
provides for a transfer fee of $100 and sets a renewal fee
at $100.
Lastly, the bill requires the Alcoholic Beverage Control
Board, upon request, provide the BOE any licensure
information, including, but not limited to, application,
license issuance, license transfers, license denials, or
any other information necessary to administer the
California Cigarette and Tobacco Products Licensing Act of
2003. It also requires the DPH, upon request, to provide
the BOE any information, including, but not limited to,
statewide information on the annual Youth Tobacco Purchase
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Survey, Stop Tobacco Access to Kids Enforcement Act,
compliance checks, California retailers and youth tobacco
control laws, or any other information necessary to
administer the California Cigarette and Tobacco Products
Licensing Act of 2003.
Comments
According to the author's office, retail tobacco licenses
are not subject to an annual renewal fee like many other
state issued licenses. Liquor licenses, for example, must
be renewed annually at a cost ranging from $71.00 to
$1,332.00, depending on the type of liquor license. The
funds generated through license renewal fees are typically
used to fund enforcement and compliance of laws affecting
the licensed industries. Absent an annual fee from tobacco
retailers, the BOE, the licensing authority for tobacco
retailers, struggles to administer and enforce their
licensing program. In 1994, the Legislature approved a
moratorium on the issuance of beer and wine licenses and
capped the number of licenses issued at one per every 2500
people within a county. This limit was intended to curb
alcohol consumption, among other things. Meanwhile, there
is no cap on the number of tobacco licenses that can be
issued within a county. Considering the often deadly
effects of tobacco use, it makes sense to have alcohol and
tobacco laws more closely aligned. This bill is needed to
reduce the availability of tobacco products in our
communities to prevent youth from tobacco use.
Related legislation
SB 602 (Padilla), of 2009 adds provisions to the Licensing
Act to prohibit the issuance of a new license to a retailer
in an "area of over concentration," and makes reporting
requirement changes related to sales to minors.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Floor Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2009-10 2010-11
2011-12 Fund
Tobacco license renewals
License revenue gain
($955)($3,820)($3,820) Special*
BOE programming $100 $100 General
BOE administration $90 $180 $180
Special*/
General
Tobacco license restriction
BOE: determination ofUnknown administrative costs,
Special*/
the license applicant likely in range of $300 annually
eligibility
License transfer fees Unknown,
likely minor fee Special*
revenue gains
* Cigarette and Tobacco Products Compliance Fund, General
Fund, other tobacco tax special funds
SUPPORT : (Verified 5/29/09) (previous version)
American Cancer Society
American Heart Association
American Lung Association
Magna Systems Incorporated
California Dental Association
OPPOSITION : (Verified 5/29/09) (previous version)
California Grocer's Association
California Distributor's Association
California Independent Grocers Association
ARGUMENTS IN SUPPORT : Supporters states that with over
38,000 tobacco retailers in the state, there are no
shortage of tobacco in our communities and cite studies
that confirm the connection between communities dense with
tobacco retail establishments and higher smoking rates.
Furthermore, they argue that unlike existing law governing
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liquor licenses, tobacco retailers are not required to pay
license renewal fees for the privilege of selling tobacco
in the state. Similarly, there is no limit on the number
of tobacco retail establishments like there is for liquor
licenses. This lack of a limit makes tobacco more
available.
ARGUMENTS IN OPPOSITION : The California Grocers
Association opposes this bill and argues that the state's
tobacco licensing law has been a success in reducing
cigarette tax evasion and reducing sales to minors. They
argue that the overconcentration provisions will reduce the
number of licensees in any downtown area. They are also
concerned that this bill will lead to increased tax
avoidance, and that there is no research to document the
effectiveness of overconcentration. The California
Distributors Association expresses concerns that the bill
will harm retail establishments and reduce the number of
small business in this state. As amended this bill does
not affect existing retailers; they have been grandfathered
in.
DLW:do 6/1/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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