BILL ANALYSIS
SB 1131
Page 1
SENATE THIRD READING
SB 1131 (Calderon)
As Amended August 20, 2010
Majority vote
SENATE VOTE : Vote not relevant
ARTS & ENTERTAINMENT
(vote not relevant)
SUMMARY : Creates a statewide program to license sellers and
transporters of cannabis and cannabis products, administered by
the State Board of Equalization (board). Specifically, this
bill :
1)Requires the board to administer a statewide program to
license sellers and transporters of cannabis and cannabis
products. Permits the board to prescribe, adopt, and enforce
rules and regulations relating to the administration of this
bill.
2)Defines the following terms:
a) "Board" means the State Board of Equalization;
b) "Cannabis" means all of the plant Cannabis sativa L.,
whether growing or not; the seeds thereof; the resin
extracted from any part of the plant; and every compound,
manufacture, salt, derivative, mixture, or preparation of
the plant, or its seeds or resin. It does not include the
mature stalks of the plant, fiber produced from the stalks,
oil, or cake made from the seeds of the plant, any other
compound, manufacture, salt, derivative, mixture, or
preparation of the mature stalks (except the resin
extracted there from), fiber, oil, or cake, or the
sterilized seed of the plant which is incapable of
germination;
c) "Cannabis product" means any article made of, and
containing, at least 50% cannabis;
d) "Display for sale" means the placement of cannabis or
cannabis products in retail stock for the purpose of
selling or gifting the cannabis or cannabis products. For
purposes of this definition, the clear and easily visible
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display of cannabis or cannabis products shall create a
rebuttable presumption that either was displayed for sale;
e) "Gifting" means any transfer of title or possession
without consideration, exchange, or barter, in any manner
or by any means, of cannabis or cannabis products that have
been purchased for resale under a license, as specified;
f) "Grower" means every person that plants, cultivates,
harvests, dries, or processes any cannabis or cannabis
products;
g) "Importer" means any purchaser for resale in California
of cannabis or cannabis products manufactured outside of
California for the purpose of making the first sale within
California;
h) "License" means a license issued by the board pursuant
to this bill;
i) "Licensee" means any person holding a license issued by
the board;
j) "Notice" or "notification" means, unless as otherwise
provided, the written notice or notification provided to a
licensee by the board by either actual delivery or by
first-class mail at the address on the license;
aa) "Person" means a person as defined in the Revenue and
Taxation Code, as specified;
bb) "Retailer" means a retailer as specified in the Revenue
and Taxation Code that engages in the retail sale of
cannabis or cannabis products from a retail location, and a
retailer making sales of cannabis or cannabis products;
cc) "Retail location" means any building from which cannabis
or cannabis products are sold;
dd) "Retail sale" means a retail sale as defined in the
Revenue and Tax Code;
ee) "Sale" or "sold" means a sale as defined in the Revenue
and Tax Code;
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ff) "Seller" means a grower, importer, wholesaler, and
retailer of cannabis or cannabis products in California,
but does not mean a transporter of cannabis or cannabis
products;
gg) "Transporter" means any common carrier and holder of
interstate cannabis transporter's permits, transporting
within California and into California from outside
California for delivery or use within California and for
transport or use outside of California; and,
hh) "Wholesaler" means every person, other than a grower or
importer, that engages in making sales for resale of
cannabis or cannabis products;
3)Specifies that only persons subject to the laws of the United
States (US), the California Constitution, and the US
Constitution are subject to this bill.
4)States that nothing in this bill preempts or supersedes any
local cannabis or cannabis products law. Permits local
licensing laws to provide for the suspension or revocation of
the local license for any violation of a state cannabis
licensing law.
5)Describes notice requirements.
6)States that all information and records provided to the board
pursuant to this bill are confidential, not a public record
under the California Public Records Act, and shall not be
disclosed or open to public inspection.
7)States that all information and records submitted to the board
by or on behalf of a grower, importer, wholesaler, retailer,
or transporter which contain the name, address, or any other
identifying information concerning the grower, importer,
wholesaler, retailer, or transporter are confidential.
8)Requires every grower, importer, wholesaler, retailer, or
transporter of cannabis and cannabis products to annually
obtain and maintain a license to engage in the sale of
cannabis or cannabis products, and this license is
non-transferable or assignable.
9)Requires a licensee who ceases to do business as specified in
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the license, or who never commences business, or whose license
is suspended or revoked, to immediately surrender the license
to the board.
10)Requires the board to develop an application for a license or
license renewal by a grower, importer, wholesaler, retailer,
or transporter, which includes the following:
a) The name, address, and telephone number of the
applicant. For applicants whose corporate offices are at a
separate location, the business name, address, and
telephone number of the corporate office. All citations
will be forwarded to all addresses on the license;
b) If any other licenses or permits have been issued by the
board or the Department of Alcoholic Beverage Control to
the applicant, the license or permit numbers for each
license or permit in effect;
c) A statement by the applicant affirming that the
applicant has not been convicted of a felony and has not
violated and will not violate or cause or permit to be
violated any of the provisions of this bill or any rule of
the board applicable to the applicant or pertaining to the
growing, importing, sale, or distribution of cannabis or
cannabis products. If the applicant is unable to affirm
this statement, the application shall contain an
explanation section.
d) A statement by the applicant that the contents of the
application are complete, true, and correct. An applicant
who knowingly provides false information is guilty of a
misdemeanor punishable by imprisonment of up to one year in
the county jail, a fine of no more than $1,000 or both
imprisonment and jail;
e) Signature of the applicant; and,
f) Any other information the board may require.
11)Requires the board to provide for the submission and
acceptance of applications electronically.
12)Provides for an unspecified application and renewal fee for a
grower, importer, wholesaler, retailer, or transporter
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license.
13)Requires the board to issue a license to a grower, importer,
wholesaler, retailer, or transporter upon receipt of a
completed application and fee unless:
a) The grower, importer, wholesaler, retailer, or
transporter is not an individual, in which case any person
controlling the grower or importer has previously been
issued a license that is suspended or revoked by the board
for violation of any of the provisions of this bill;
b) The application is for a license or renewal of a license
for grower, importer, wholesaler, retailer, or transporter
whose license is revoked or for which revocation is
pending, unless either of the following is true:
i) It has been more than five years since a grower,
importer, wholesaler, retailer, or transporter's previous
license was revoked; or,
ii) The person applying for the license provides the
board with documentation demonstrating that he or she has
acquired or is acquiring the business in an arm's length
transaction, as specified.
c) If the grower, importer, wholesaler, retailer, or
transporter is not an individual, any person controlling
the grower or importer has been convicted of a felony; or,
d) The retailer does not possess all required permits or
licenses required under the Revenue and Taxation Code, as
specified.
14)Permits any grower, importer, wholesaler, retailer, or
transporter denied a license to petition for a redetermination
of the board's denial of the license, as specified.
15)Permits the board to investigate the truthfulness and
completeness of all applications.
16)Requires common carriers transporting cannabis or cannabis
products within California and into California from outside
California for delivery or use within California and for
transport for delivery or use outside of California, to obtain
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from the licensee a receipt for the cannabis so transported
and delivered. This receipt shall be carried with the load at
all times and contain all of the following:
a) Name of shipper;
b) Point of origin;
c) Name of licensee to whom delivery is made;
d) Place of delivery;
e) Name of carrier making delivery;
f) A complete description of the shipment;
g) The number of the waybill covering the shipments; and,
h) In the case of rail shipments, the car number, and in
case of water shipments, the name of the vessel and the
number of the steamship bill of lading.
17)States that a copy of the freight bill or other shipping
document containing all of this information shall be deemed to
be in compliance with the requirements. A copy of the receipt
shall be delivered to the licensee to whom delivery is made.
With respect to pool shipments in which more than one
licensees participate, the common carrier shall furnish a copy
of the receipt to each participating licensee.
18)Requires all deliveries of cannabis and cannabis products,
shipment of which originated outside California, made to
California importers, to be reported to the board by common
carriers and holders of interstate cannabis transporters'
permits, as specified.
19)Requires every sale, transfer, or delivery of cannabis or
cannabis products from one licensee to another to be recorded
on a sales invoice, as specified, whether or not consideration
is involved. Invoices covering the sale or purchase of
cannabis or cannabis products shall be filed in a manner as to
be readily accessible for examination by employees of the
board and shall not be commingled with invoices covering
commodities other than cannabis and cannabis products.
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20)Requires invoices covering sales of cannabis or cannabis
products between licensees to show, in addition to other
requirements as specified, the total weight covered by the
invoice.
21)Requires invoices covering the sale of cannabis or cannabis
products for export to be stamped or marked "sold for export."
22)Requires growers, importers, wholesalers, retailers, and
transporters subject to this bill's licensing requirements to
retain all records and invoices for a period of one year from
the date of the purchase or sale at the licensee's location.
Thereafter, the invoices and records shall be made available
for inspection by the board or a law enforcement agency for a
period of four years.
23)Permits peace officers and board employees granted limited
peace officer status, as specified, to enter any place, as
specified, for inspection, as specified.
24)Prohibits the sale and transfer of cannabis and cannabis
products between unlicensed growers, importers, wholesalers,
transporters, and retailers, subject to penalty, as specified.
25)Permits the board or law enforcement agency to seize and
destroy all cannabis or cannabis products at the location of
the grower, importer, wholesaler, retailer, or any other
location deemed necessary if a sale is transacted without a
valid license.
26)Defines escalating penalties for failure to adhere to this
bill's provisions, including license revocation, misdemeanor
charges, and fines.
27)Requires a retailer whose license has been suspended or
revoked to conspicuously post a notice thereof at the public
entrance to the retail location and each cash register, as
specified.
28)States that any violation of this bill by any person, except
as otherwise provided, is a misdemeanor. Each offense shall
be punished by a fine not to exceed $5,000, or imprisonment
not exceeding one year in a county jail, or both the fine and
imprisonment. Requires the court to order any fines assessed
be deposited in the Cannabis and Cannabis Products Compliance
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Fund, created in the General Fund.
29)Requires wholesalers to prepay retail sales taxes on his or
her gross receipts, as specified.
30)Permits the board to require a wholesaler to provide it with
a list of purchasers to who cannabis and cannabis products
were sold for the purposes of determining sales tax.
31)Defines individuals who may be refunded prepayment sales tax
amounts.
32)Permits the board to require any wholesaler to provide a
security to ensure compliance with this bill, as specified,
and permits the board to sell the security at public auction
if it becomes necessary to do so in order to recover any tax
or penalty due.
33)Establishes an appeals process.
FISCAL EFFECT : Unknown
COMMENTS : The Medical Marijuana Program (MMP) was established
to provide a voluntary medical marijuana identification card
issuance and registry program for qualified patients and their
caregivers. The web-based registry system allows law
enforcement and the public to verify the validity of qualified
patient or caregiver's card as authorization to possess, grow,
transport and/or use medical marijuana in California.
In 2003, Senate Bill 420 (Chapter 875, Statutes of 2003) was
passed as an extension and clarification of Proposition 215, the
Compassionate Use Act of 1996. MMP, within the California
Department of Public Health (CDPH), is administered through a
patient's county of residence. Upon obtaining a recommendation
from their physician for use of medicinal marijuana, patients
and their primary caregivers may apply for and be issued, a
Medical Marijuana Identification Card (MMIC).
In California there is no state regulation or standard for the
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cultivation and distribution of medical marijuana. California
leaves the establishment of guidelines to local jurisdictions,
which can vary widely. All administrative costs for MMP, at
both the state and county level are fee supported. The state's
portion of the fee is required to be sufficient to cover the
expenses incurred by CDPH, including start up and other costs.
Likewise, each county program may add their costs to the total
fee to support expenses incurred by the county program. The
state portion of the MMIC application fee is currently set at
$66 per card for non Medi-Cal patients and $33 per card for
Medi-Cal patients. The counties then add their administration
fee to the state cost. Both the state and counties have
authority to cover their expenses through application fees,
therefore, established fees vary by county.
According to the board, the sale of medical marijuana has always
been considered taxable. However, prior to October 2005, the
board did not issue seller's permits to sellers of property that
may be considered illegal. In October 2005, after meeting with
taxpayers, businesses, and advocacy groups, the board directed
staff to issue seller's permits regardless of the fact that the
property being sold may be illegal, or because the applicant for
the permit did not indicate what products it sold.
In February 2007, the board issued a special notice confirming
its policy of taxing medical marijuana transactions, as well as
its requirement that businesses engaging in such transactions
hold a Seller's Permit. According to the notice, having a
Seller's Permit does not allow individuals to make unlawful
sales, but instead merely provides a way to remit any sales and
use taxes due. The board further clarified its policy in a June
2007 special notice that addressed several frequently asked
questions concerning taxation of medical marijuana transactions.
According to the author's office, this bill "creates a licensing
structure similar to the Tobacco Licensing Act of 2003 (Act)
which imposed licensing requirements on all retailers,
wholesalers, and distributors of cigarettes and tobacco products
and all manufacturers and importers of cigarettes. The Act,
intended to decrease tax evasion on the sales of cigarettes and
tobacco products in California, also included provisions for new
recordkeeping requirements, inspection and seizure of any
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untaxed cigarettes or tobacco products, and imposed civil and
criminal penalties for violations."
Analysis Prepared by : Sarah Weaver / B.,P. & C.P. / (916)
319-3301
FN: 0006586