BILL ANALYSIS
SB 603
Page 1
Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Joe Coto, Chair
SB 603 (Padilla) - As Proposed to be Amended: July 8, 2009
SENATE VOTE : 21-16
SUBJECT : Retail tobacco sales: licenses: violations
SUMMARY : This bill would establish a $100 annual fee on each
license issued by the State Board of Equalization (BOE) for the
retail sale of cigarette and tobacco products. Also, this bill
establishes a statewide standard relative to the traditional
retailers definition and proximity limitations. Specifically,
this bill :
1) Creates a five strikes penalty schedule over a 24-month
period for the BOE if they find a retailer who is selling,
furnishing, or supplying cigarettes and tobacco products to
minors under the age of 18.
a. First conviction of a violation of the Stop
Tobacco Access to Kids Enforcement (STAKE) Act or
Penal Code Section 308 would result in a warning
letter from BOE, training on tobacco control laws from
the Department of Public Health, and receive a fine of
$750.
b. Second conviction of a violation of the STAKE
Act or Penal Code Section 308 would receive a fine of
$1,500.
c. Third conviction of a violation of the STAKE
Act or Penal Code Section 308 would receive a $2,000
fine and a 30-day suspension from the BOE.
d. Fourth conviction of a violation of the STAKE
Act or Penal Code 308 is a 90-day suspension.
e. Fifth conviction of a violation of the STAKE
Act or Penal Code 308 would result in BOE revoking the
retailer's license to sell cigarettes and tobacco
products.
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2) Requires retailers to appeal, in writing, any suspension
or revocation imposed by the BOE, for violating existing
law. However the BOE is not required to accept or consider
an appeal if the appeal contests the basis of a conviction
of a violation of existing law.
3) Establishes an annual $100 licensing fee for retailers
who sell cigarettes and tobacco products.
4) Specifies that a new license may not be issued to a
retailer for a retail location that is located within 600
feet of a public or private elementary or secondary school.
An exception exists for the following situations:
a. Retailers who sell alcoholic beverages.
b. Existing retailers who sell cigarettes and
tobacco products.
5) Connects the approval process for a retailer alcohol
license with a retailer tobacco license.
6) Prohibits local governments from adopting an ordinance
or rule that would extend the 600-feet limitation for a
retail license and determine the types of locations that
are eligible to be licensed to sell cigarettes and tobacco
products contrary to what is considered a traditional
retail location, as defined under this bill.
7) Expands the definition of "traditional retail locations"
for purposes of this section.
8) Requires the Department of Alcoholic Beverage Control
and the State Department of Public Health (DPH), upon
request of BOE, to provide specified information covering
tobacco and control laws and notify BOE of retailers'
violations of underage sales laws.
EXISTING LAW :
1) Requires states to enact and enforce laws that prohibit
the sale of cigarettes and tobacco products to minors under
the age of 18.
2) Makes it a misdemeanor, subject to civil action and
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fines, any individual who knowingly or under circumstances
furnishes, gives, or sells cigarettes or tobacco products
to minors under the age of 18.
3) Provides that any individual desiring to engage in the
sale of cigarettes or tobacco products as a distributor
shall file with the BOE an application for a distributor's
license. A distributor must apply and obtain a license for
each place of business where he or she will engage in the
business of distributing cigarettes or tobacco products.
4) Provides that any individual desiring to engage in the
sale of cigarettes or tobacco products as a wholesaler
shall file with the BOE an application for a wholesaler's
license. A wholesaler must apply and obtain a license for
each place of business where he or she will engage in the
business of selling cigarettes or tobacco products as a
wholesaler.
5) Establishes, under the California Cigarette and Tobacco
Products Licensing Act of 2003 (Act), a statewide
licensing program for tobacco manufacturers, importers,
wholesalers, distributors and retailers administered by the
BOE for monitoring and collection of excise taxes, and it
imposes additional criminal and civil penalties on
violators of tobacco-related tax laws Also, this law
requires-
a. A retailer to obtain a license from the BOE to
engage in the sale of cigarette and tobacco products
in this state.
b. A retailer to obtain a separate license for
each retail location.
c. Retail licensees to pay a one-time license fee
of $100, no renewal fee, and a reinstatement fee of
$100 if the license is renewed after the lapse.
d. Authorizes the BOE to suspend or revoke the
license of any retailer of tobacco products that is in
violation of the Act.
e. Requires all moneys collected pursuant to the
Act be deposited into the Cigarette and Tobacco
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Products Compliance Fund, which is available for
appropriation by the Legislature solely for the
purpose of implementing, enforcing, and administering
the Act.
6) Requires, under the Stop Tobacco Access to Kids
Enforcement (STAKE) Act-
a. Retailers from selling cigarettes and tobacco
products to minors under the age of 18 and requires
that retailers check identification of individuals
trying to buy cigarettes and tobacco products who
appear under the age of 18.
b. Increases civil penalties and expands the
number of agencies that are permitted to carry out
investigations of illegal tobacco sales to minors from
the State Department of Public Health (DPH) to include
the Attorney General and other state and local
agencies.
c. Makes certain violations of the STAKE Act a
criminal offense.
d. Requires DPH to take primary responsibility
for enforcement of the STAKE Act and requires DPH to
conduct random, onsite inspections of retail sites.
e. Requires DPH to enlist the assistance of
persons who are 15 or 16 years of age for this purpose
and requires the DPH to adopt and publish guidelines
for the use of minors in inspections.
f. Requires the peace officer accompanying the
minor to re-enter the retail site following the
completion of a sale and inform the seller of the
random inspection. Existing law requires DPH,
following an attempted sale, to notify the retailer of
the inspection.
g. Permits DPH to enter into an agreement with a
local law enforcement agency for delegation of
enforcement of the STAKE Act.
h. Requires any enforcement by DPH, in cases
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where DPH has delegated enforcement to a local law
enforcement agency, to be coordinated with the local
law enforcement agency and prohibits duplication of
enforcement activities that result in a duplication of
civil penalties or assessments.
i. Requires DPH to reimburse local law
enforcement agencies for enforcement costs pursuant to
delegation contracts from the Sale of Tobacco to
Minors Control Account, which was created under the
STAKE Act and receives moneys collected as civil
penalties under the Act.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of the bill . 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. This bill is
needed to reduce the availability of tobacco products in our
communities to prevent youth from tobacco use.
Proposed author's amendments to this bill seek to make the
retail provisions of cigarettes and tobacco sales and
responsibilities similar to the policies created for retail
licensees under the Alcoholic Beverage Control (ABC) Act.
PROPOSED AMENDMENTS . The above "Summary" section for this bill
indicates what the author will offer as author's amendments
today in committee. The proposed author's amendments will
reflect the change in penalty schedule to five strikes,
establishing a $100 annual fee for retailers who are eligible to
sell cigarettes and tobacco products, and establishing a
statewide "rules of engagement" standard for traditional
retailers of cigarettes and tobacco products. Should this bill
pass, the committee will adopt the proposed author's amendments.
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Background . According to the United States Department of
Health and Human Services (DHS), approximately 80 percent of
adult smokers began smoking before the age of 18. Youth smoking
is associated with greater likelihood of adult smoking, heavier
use of cigarettes, and more difficulty in quitting.
According to the DHS, with the passage of Proposition 99 in 1988
and the enactment of subsequent legislation throughout the
1990s, California has mounted the largest and most comprehensive
anti-smoking campaign in the United States. DHS states that
California's campaign sets the standard for the rest of the
nation and the world, setting a goal of changing public
perception of tobacco use and emphasizing local interventions,
regional coalitions, media, research, and evaluation. The
campaign has focused on four key areas: countering pro-tobacco
influences; protecting youth and adults from secondhand smoke;
reducing the availability of tobacco products to youth; and,
providing support for quitting tobacco use. In the 11 years
following the passage of Proposition 99, adult smoking
prevalence dropped by more than 30 percent and per-capita
cigarette consumption in California fell by more than 50
percent.
Synar Amendment and the STAKE Act . In 1992, Congress passed the
Synar Amendment, which requires states to pass and enforce laws
that prohibit the sale of tobacco to minors. It also requires
that federal alcohol and substance abuse block grant funding be
applied to enforcing state law in a manner that can reasonably
be expected to reduce the illegal sales rate of tobacco products
to minors. Up to 40 percent of the block grant funding can be
withheld from states for not complying with the Synar Amendment.
SB 1927 (Hayden, Chapter 1009, Statutes of 1994), enacted the
STAKE Act to address the increase in tobacco sales to minors in
California and fulfill the federal mandate. Authority for
enforcement and responsibility for implementation of the Act was
delegated to the then-State Department of Health Services' Food
and Drug Branch, which is required to:
1) Implement the program to reduce the illegal sale of
tobacco products to minors and to conduct sting operations
using 15 and 16 year old minors;
2) Operate a toll-free number for the public to report
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illegal tobacco sales to minors;
3) Assure that tobacco retailers post signs, which include
the toll-free number, to report violations;
4) Assure that clerks check the identification of
youthful-appearing persons prior to a sale;
5) Assess civil penalties ranging from $200 to $6,000
against store owners for violations; and,
6) Comply with the Synar Amendment and prepare an annual
report for the federal government, state Legislature, and
the Governor regarding enforcement activities and their
effectiveness.
Implementation of the STAKE Act . Onsite inspections of
retailers under the STAKE Act have been occurring since late
1995. Between that time and 2004, almost 15,000 inspections
were conducted statewide. Over 4,000 inspections (29 percent)
identified the illegal sales of tobacco to minors. This figure
does not represent the entire underage sales rate, because the
inspections do not constitute a random sample since they include
stores where illegal sales were suspected. There were close to
4,000 cases in which fines were paid and over $1 million
collected. Between 1995 and 2004, the toll-free public
complaint line generated over 32,850 calls.
The most recent statewide data compiled by the DHS through the
Youth Tobacco Purchase Survey suggests that the illegal sales
rate to minors (14 percent in 2004) had not changed
significantly from the 2003 rate.
City of Los Angeles survey . Several years ago, the City of Los
Angeles conducted a compliance study of over 750 retailers by
the City of Los Angeles found that nearly 40 percent of
businesses surveyed illegally sold tobacco to children. Of
these retailers, almost half were within 1,000 feet or walking
distance of schools. The study showed that every type of
retailer sold tobacco to minors, from large grocery chains to
"mom and pop" markets, liquor stores and gas stations.
Retailers with the highest illegal sales rate in 2003 were
discount stores (75 percent), followed by doughnut/dairy shops
(59.6 percent), mini-markets (46.7 percent), gas stations (38.7
percent), liquor stores (30.8 percent), pharmacy/drug stores
(29.2 percent), supermarkets (27.8 percent) and gas/convenience
stores (13.5 percent).
Local Ordinances . In California, there are 66 workplace-related
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smoke-free ordinances in our cities and counties. Of that
number 56 of these ordinances include an annual fee for
retailers to pay to their local government entity for local
tobacco licensing. This bill, as to be amended, will require
"traditional retailers," as defined, to pay an annual fee, which
would not eliminate these ordinances.
In July 2008, San Francisco adopted an ordinance prohibiting
cigarettes and tobacco product sales in pharmacies, including
stores like Rite-Aid and Wallgreens. To this committee's
knowledge, no other cities in the United States have a similar
ordinance. Although this bill creates a statewide standard, the
San Francisco ordinance and other similar local ordinances would
not be pre-empted. In short, the proposed amendments for this
bill would prevent future local governing bodies from adopting
similar ordinances targeting specific traditional retailers in
the future.
Policy Concerns . In the past local pre-emption has been
considered a major cause of concern for the organizations like
the American Cancer Society, American Lung Association, and the
American Heart Association. In the past, the concerns from
these health advocates focused on having a weak and non-enforced
state standard that would prevent local governments from
adopting more stringent standards.
With the proposed amendments for this bill, the author seeks to
strengthen the penalties and licensing provisions under this
bill and make cigarette and tobacco product retailers more
accountable to the public. More important, the author appears
to be moving the cigarette and tobacco products policy on a
similar track as the Alcoholic Beverage Control (ABC) Act.
In Opposition . In Opposition, American Cancer Society also has
concerns over the pre-emption provisions. American Cancer
Society claim that addition of the pre-emption provisions in
this bill undercuts efforts to promote effective tobacco control
policies across the state.
American Cancer Society is mainly concerned with the "600 feet
buffer zone" provision. They cite that it would grandfather in
all existing licenses, allow "traditional retailers" with
certain alcohol licenses to be exempt from the "600 feet buffer
zone" provisions, and pre-empts local jurisdictions from
expanding the prohibition of licenses within 600 feet. In
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short, American Cancer Society does not believe these changes
"will significantly impact a decrease in youth access and will
once again tie the hands of local jurisdictions to pursue
something stronger."
Related legislation . SB 624 (Padilla, Chapter 653, Statutes of
2007) increases the civil penalties under the Stop Tobacco
Access to Kids Enforcement (STAKE) Act and expands the role of
agencies that are permitted to carry out investigations of
illegal tobacco sales to minors under the STAKE Act from the
Department of Public Health to include the Attorney General and
other state and local agencies.
SB 600 (Padilla and Steinberg, 2009 Legislative Session) imposes
a $1.50 tax on cigarettes and, indirectly, an equivalent tax on
tobacco products. Provides that 85 percent of the funds
resulting from the tax will be deposited into the General Fund
and 15 percent deposited into the Tobacco Tax and Health
Protection Fund, which is created by the bill, for tobacco
control, tobacco disease research, and lung cancer research. In
Senate Revenue and Taxation-scheduled to be heard July 8, 2009.
SB 601 (Padilla, 2009 Legislative Session) would prohibit the
State Board of Equalization from issuing a new cigarette and
tobacco products license for a retail location within 600 feet
of a public or private elementary and secondary school, unless
public convenience or necessity would be served by the issuance,
as specified. Restricts the issuance of a new retail license to
"traditional retail locations." Held in Senate Appropriations.
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
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.
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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
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
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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.
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association
California Dental Association
Opposition
American Cancer Society
California Chamber of Commerce
California Taxpayers Association
Analysis Prepared by : Rod Brewer / G. O. / (916) 319-2531