BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1301 HEARING: 6/29/11
AUTHOR: Hill FISCAL: Yes
VERSION: 6/22/11 TAX LEVY: No
CONSULTANT: Lui
RETAIL TOBACCO SALES: STAKE ACT
Changes retail license programs at the Board of
Equalization.
Background and Existing Law
I. Synar Amendment
In 1992, Congress passed the Synar Amendment, which aimed
to decrease minors' access to tobacco. The Synar Amendment
requires states to adopt and enforce laws prohibiting any
manufacturer, retailer, or distributor from selling or
distributing tobacco products to minors. If the state's
Youth Purchase Survey-a state compliance check using
underage decoys to purchase cigarettes at random site
inspections-is above 20 percent, the federal government may
reduce each state's alcohol and substance abuse block grant
funding. This federal block grant amounts to nearly $100
million annually for California.
II. STAKE Act
In 2004, the Stop Tobacco Access to Kids Enforcement
(STAKE) Act was adopted to meet the requirements of the
Synar Amendment. The STAKE Act created a new statewide
enforcement program to take regulatory action against
businesses that sold tobacco to minors. The California
Department of Public Health (CDPH) enforces certain
provisions of the STAKE Act, such as conducting compliance
checks, using teenage decoys, serving legal notices,
administering penalty appeal hearings, and assessing and
collecting penalties. If any person, firm or corporation
sells or furnishes minors with any tobacco paraphernalia,
tobacco, cigarette, or cigarette papers, an enforcing
agency may assess the following civil penalties:
For the first violation, a $400 to $600 fine.
For the second violation within 5 years, a $900 to
$1,000 fine.
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For the third violation within 5 years, a $1,200 to
$1,800 fine.
For the fourth violation within 5 years, a $3,000
to $4,000 fine.
For a fifth or subsequent violation within 5 years,
a $5,000 to $6,000 fine.
If a retailer or person who sells or deals tobacco fails to
conspicuously post a notice that serving minors is illegal,
the enforcing agency may assess a $200 fine for the first
offense, $500 fine for the second. The CDPH Food and Drug
Branch also conducts compliance checks and manages a
toll-free number to report illegal tobacco sales to minors.
III. Cigarette and Tobacco Products Licensing Act
In efforts to stem the tide of untaxed distributions and
illegal sales of cigarettes and tobacco products, the
Cigarette and Tobacco Products Licensing Act requires the
Board of Equalization (BOE) to license manufacturers,
distributors, wholesalers, importers and retailers of
cigarette or tobacco products who are engaged in business
in California (AB 71, Horton, 2003). A retailer must have
and maintain a license to sell cigarettes or tobacco
products. Any retailer that owns or controls more than one
retail location, where cigarette and tobacco products are
sold, must obtain a separate license for each retail
location. Each retailer is required to submit a one-time
license fee of one hundred dollars ($100) with each
application, and may submit a single application for those
licenses with a license fee of one hundred dollars ($100)
per location. A "retail location" is defined as any
building from which cigarettes or tobacco products are sold
at retail or a vending machine.
All persons and firms engaged in the retail sale of
cigarettes and tobacco products must check the
identification of tobacco purchasers. The 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.
The penalty structure for conviction of violations of the
Licensing Act are as follows:
First conviction of a violation, BOE sends the
retailer a warning letter that delineates the
circumstances under which BOE may suspend or revoke
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the license, and the amount of time BOE can suspend or
revoke the license. The retailer and its employees
must receive training on tobacco control laws from the
Department of Health Services upon a first conviction.
Second conviction of a violation within 12 months,
the retailer is subject to a fine of five hundred
dollars ($500).
Third conviction of a violation within 12 months,
the retailer is subject to a fine of one thousand
dollars ($1,000).
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.
Eighth conviction of a violation within 2 years,
BOE must revoke the retailer's license to sell
cigarette and tobacco products.
IV. California Penal Code
BOE can take action if a retailer is convicted of either
selling cigarettes or tobacco products to any person who is
under the age of 18 years or violating the provisions of
the STAKE Act. Any person who provides tobacco to a minor
may be convicted of a misdemeanor, or to a civil action
brought by a city attorney, a county counsel, or a district
attorney. BOE may issue a $200 fine for the first offense,
a $500 fine for the second offense, and a $1,000 fine for
the third offense.
Existing law also requires every person, firm, or
corporation which sells, deals in tobacco or any tobacco
product to post a conspicuous notice at the point of
purchase, that selling tobacco products to anyone under 18
years of age is illegal. Any person convicted of failing
to post conspicuously a notice is punished by:
For the first offense, a $50 fine.
For the second offense, a $100 fine.
For the third offense, a $250 fine.
For the fourth and each subsequent offense, a $500
fine or imprisonment in a county jail for no more than
30 days.
However, BOE can only use this enforcement action when the
Youth Purchase Survey is 13% or more. If the Youth
Purchase Survey is under 13 percent, this authority remains
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inoperative. In 2006-2007, the National Survey on Drug Use
and Health found that 6.9% of youth aged 12 to 17 years
smoked a cigarette in the past month.
Proposed Law
I. Trigger language. Assembly Bill 1301 removes the 13%
trigger language under the STAKE Act, which makes BOE's
authority operative or inoperative based on the results
from the Youth Purchase Survey.
II. Language clarification. Unlike current language that
authorizes BOE to act for a conviction of a violation, the
bill authorizes BOE to enforce penalties for either STAKE
Act or Penal Code violations.
III. Penalty structure. AB 1301 repeals the existing
eight-strike conviction penalty schedule. The bill
proposes a five-strike penalty schedule for retailers who
sell to minors in local governments without an adopted
tobacco retail licensing ordinance. If any retailer
violates the STAKE Act or the Penal Code, they are subject
to the following:
First violation. The BOE sends a warning letter
that delineates the circumstances under which a
retailer's license may by suspended or revoked. The
retailer and its employees must receive training on
tobacco control laws from the Department of Health
Services.
Second violation. The retailer must pay a $500
fine, or must show proof that he or she has purchased
and installed an identification verification scanner
since the date of the violation.
Third violation. BOE suspends the retailer's
license to sell cigarette and tobacco products is
suspended for 45 days.
Fourth violation. BOE suspends the retailer's
license for 180 days.
Fifth violation. BOE revokes the retailers license
to sell cigarette and tobacco products.
AB 1301 provides that retailers can only appeal to the BOE
if the BOE decides to suspend or revoke the retailer's
license, within 30 days of the notice of suspension or
revocation of license. The bill states that BOE can start
determining penalty violations after January 2012.
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IV. Time period. Under AB 1301, the time frame for when
STAKE Act or Penal Code violations remain on a retailer's
record is changed from two years to three years.
V. Immunity. Before youth can participate in random,
onsite sting inspections at retail sites, the local
District Attorney must approve minors' participation. AB
1301 provides that minors, who participate in sting
enforcement activities, cannot be prosecuted for purchase,
receipt, or possession of any tobacco, tobacco-related
paraphernalia, or products prepared from tobacco.
VI. Findings and declarations. AB 1301 makes legislative
findings and declarations that support the bill's purpose.
State Revenue Impact
None available. The Board of Equalization estimates
substantial administrative costs.
Comments
1. Purpose of the bill . AB 1301 seeks to improve the way
California deals with repeat offenders who sell tobacco
products to minors. Despite existing laws that prohibit
the sale of tobacco products to minors and media efforts
aimed at deglamorizing tobacco use, minors are still sold
tobacco products by a variety of retailers, and products
are marketed increasingly to younger audiences. According
to the U.S. Center for Disease Control and Prevention
(CDC), nearly 90% of adults who are regular smokers started
at or before age 19. The CDC also reported in 2007 that
21% of high school students were tobacco users; in
California, youth smoking rates among 9-12 graders is
14.6%. The CDC also reports that around 3,600 young people
between the ages of 12 and 17 initiate cigarette smoking.
Not only does early tobacco use pose significant health
problems for young people, but early tobacco engagement
increases the likelihood of lifelong tobacco addiction.
The CDC attributes the alarming trend of tobacco use among
youth, in part, to access and availability. The California
Tobacco Control Program rank that the suspension or
revocation of licenses as a top strategy to reduce youth
access to tobacco. Because the Board of Equalization (BOE)
is prevented from issuing penalties due to technical
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language, few retailer licenses, if any, have ever been
revoked. According to the author, AB 1301 is a necessary
step to strengthen California's tobacco laws and prevent
youth tobacco access.
2. Here, there, anywhere ? Under AB 1301, BOE would
enforce its new penalty regime only in local jurisdictions
that have not adopted a tobacco retail license ordinance.
The bill provides no direction for where BOE would apply
its powers. The American Lung Association cites 86
"noteworthy" local licensing programs, but there is no data
on which cities or counties have no local licensing
programs. Without knowing where its powers are required,
BOE must sift through hundreds of local statutes to
determine proper oversight. BOE must design, implement,
and regularly track a database system for existing and
future local ordinances. Despite imposing additional
workload, AB 1301 provides no secured funding for the
additional hours incurred to research ordinances, maintain
and update a database, or the necessary staff training to
analyze local rules. Furthermore, BOE's Licensing Act
funding stream is already drying up; budgeted resources for
the Licensing Act stem from the Cigarette and Tobacco
Products Compliance Fund, which is funded by proceeds from
the Licensing Act fees, but because AB 71 provided a sunset
date, the Cigarette and Tobacco Tax Program Funds, which
include funds from the General Fund, Proposition 10,
Proposition 99, and the Breast Cancer Fun, go to help BOE
finance its every day enforcement responsibilities.
Without additional funding, BOE would require more state
funds to finance the additional tasks proposed by AB 1301.
The bill's silence on implementation and its lack of
secured funding undermines stability and diverts state
general funds during distressed fiscal times. The
Committee may wish to consider an amendment that uniformly
applies BOE's 5-strike penalty schedule to all cities and
counties, rather than treat local governments, with or
without retail ordinances, differently.
3. Thank you for smoking . Many local cities and counties
in California have adopted local tobacco retailer licensing
laws which require a retailer to pay an annual licensing
fee and be subject to suspension or revocation of that
license if they are found selling tobacco to minors.
Therefore, California retailers engaged in the sale of
cigarettes or tobacco products and located in a city or
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county that has adopted local tobacco retailer licensing
laws have two licenses (state and city/county). This also
means that some retailers may have local licensing
requirements and restrictions unrelated to payment of
excise taxes. For example, a local tobacco retail license
program requires both a state and county license because
the BOE's tobacco license is meant to curb tobacco tax
fraud and the counterfeiting of tobacco products, while
local licensing ordinances encourage responsible tobacco
retailing and prohibit the sale or distribution of tobacco
products to minors. State law does not preempt local
jurisdictions from adopting local tobacco licenses. To
legally sell tobacco products in the unincorporated areas
of the County retailers need a valid state tobacco license
and a County tobacco license. Some advocates are concerned
that retailers may be double-penalized under local and
state licensing laws, so they've proposed limiting BOE's
new penalty structure to areas that don't have any retail
laws. However, the possibility for "double-penalization"
already exists. The Committee may wish to weigh if the
retailer's concern about double penalization and regulation
is a justifiable for a product that studies have shown to
be detrimental to health.
4. Inconsistencies . The bill's haphazard application of
BOE's new penalty schedule could result in neighboring
counties operating under different Licensing Act penalties.
Would retailers be more likely to move to areas with less
stringent local measures than harsher state penalties? Will
youth be aware of accessing more lenient retailers in
particular jurisdictions? AB 1301 fails to differentiate
between strict and ineffectual local tobacco retail
licensing ordinances. The bill creates serious
inconsistencies across and within county lines. The mere
existence of a local tobacco retail licensing ordinances
does not equate to it being effective at reducing underage
tobacco use. For example:
Some ordinances in Los Angeles County, such as
Azusa and West Covina, are missing suspension or
enforcement/fee elements needed for a strong
ordinance.
Maywood only has a $46 fee and $11 renewal, and
none of the money goes to enforcement of the licensing
ordinance.
Several cities in Riverside County (Indian Wells,
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Palm Desert, Rancho Mirage) have fees of $25 or less,
which are not sufficient to fund enforcement.
Some ordinances in San Mateo County, such as Menlo
Park and Redwood City, do not set aside specific
funding for enforcement.
AB 1301 could create a circumstance where a lenient, less
effective ordinance governs the locality rather than the
more stringent state law; or conversely, a city or county
could be subject to more serious penalties than the state's
proposed 5-strike penalty. Would it be counter-productive
to allow local ordinances that have less successful tobacco
strategies operate while a more stringent state policy
exists? The Committee may wish to consider an amendment
that would require the more stringent policy to preempt the
other and a method for determining which is more stringent.
5. Who's the boss ? The mission of BOE is to serve the
public through fair, effective, and efficient tax
administration. Certain provisions in this bill mark a
drastic departure from traditional "tax collection"
functions, although BOE do issue and enforce tobacco
licenses. Historically, local tobacco licensing ordinances
were focused on preventing underage tobacco sales, while
state Licensing Act provisions centered on tax collection
and protection against counterfeit tobacco products.
Because AB 1301 requires BOE to serve as a local and state
enforcement agency, portions of the bill may tread into
related public-health purposes. The Committee may wish to
ask if requiring a tax administration agency to enforce
public health-oriented measures is appropriate.
6. Can you tell me ? AB 1301 recognizes that the 13%
trigger language threshold prevents BOE to take action
against retailers that sell tobacco to minors, but it
doesn't address another component why BOE can't enforce
penalties. Nothing in existing statute, or in AB 1301,
requires the enforcing agency to notify BOE of a violation.
Instead, the locals are left with mere legislative intent
language. AB 1301 does not attempt to bridge local and
state communications, recognizing that it may be costly for
a state mandate. Is a piecemeal endeavor effective or
productive? Without receiving notification of a local
retailer's violation, BOE cannot penalize retailers nor can
it keep track of repeat offenders. Would it not be
productive to have a comprehensive and coordinated approach
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between locals and the state, rather than have one area be
subject to local and state licensing laws and another area
subject to state laws? At this point, AB 1301 does not
address either possible duplication of efforts or
communication concerns. The Committee may wish to consider
an amendment that would seek more substance to coordinate
local and state efforts.
7. Size matters . Small scale retailers may be at a
disadvantage under the proposed 5-strike penalty structure.
Because larger retailers and grocers conduct thousands
more transactions than small businesses, they have greater
financial ability to pay for fines associated with "honest
mistakes." Under AB 1301's proposed second penalty, the
retailer must either pay a $500 fine or show proof of
purchase of an identification verification scanner. For
small retailers, would $500 create retailers to curtail
businesses? In this regard, AB 1301 would be successful in
curbing underage tobacco access because retailers may
close.
8. 5 strikes, you're out ? There is evidence to suggest
that the best way to change behavior, such as eliminating
tobacco sales to minors, is to increase the penalty regime
associated with the behavior. Though the bill changes the
penalty structure from 8 strikes to 5 strikes in certain
jurisdictions, the Department of Alcohol and Beverage
Control (ABC) only allows for three violations before
license revocation. Higher penalties for the first and
second offenses should stop the behavior (selling
cigarettes to minors) from occurring in the first place.
The Committee may wish to consider if a more aggressive
penalty structure would be an effective strategy.
9. A conviction, by any other name . The Licensing Act
requires BOE to take action against a retailer convicted of
violating specified laws relating to sales of cigarettes or
tobacco products to minors, depending on results from the
Youth Purchase Survey. Because existing law was written so
that action can only be taken against a retailer who is
convicted of a violation of either the STAKE Act or the
Penal Code, the law could never be enforced. STAKE Act
violations are subject to civil penalties assessed by the
California Department of Public Health and do not result in
a conviction. AB 1301 appropriately removes the 13% trigger
language and addresses the problematic language-violation
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vs. conviction-to make the enforcement arm workable.
10. Legislative efforts . AB 1301 is not the first bill
seeking to reform tobacco retail licensing penalties.
SB 331 (Padilla, 2011) removes the 13% Youth
Purchase Survey trigger, creates a 3-strike penalty
structure, and extends the time frame for when youth
tobacco sales remain on a retailer's record, from the
current two years to five years. It is a two-year
bill.
SB 601 (Padilla, 2009) would have added provisions
to the Licensing Act, prohibiting the issuance of a
retail license for a location within 1,000 feet of a
school, and limited retail licenses to "traditional
retail locations," like grocery stores, convenience
stores, pharmacies, liquor stores, or tobacco or cigar
stores. SB 601 (Padilla, 2009) was held in the Senate
Appropriations Committee suspense file.
Before being amended, SB 602 (Padilla) would have
added provisions to the Licensing Act to prohibit the
issuance of a new license to a retailer in an "area of
overconcentration," and made reporting requirement
changes related to sales to minors. When SB 602
(Padilla, 2009) was chaptered, it transformed into a
bill about food safety.
SB 603 (Padilla, 2009) would have imposed an annual
retailer fee, limited the total number of retailer
licenses issued in a county, and provided for the
transfer of a license under specified conditions. SB
603 was referred to the Assembly Governmental
Organization Committee, but was never heard.
SB 433 (Ortiz, 2004) and SB 400 (Kuehl, 2005) would
have altered the penalty schedule and would have
required law enforcement to notify BOE of violations.
Both bills died in the Senate Appropriations Committee
suspense file because costs to locals could not be
reimbursed.
Assembly Actions
Assembly Governmental Organization:14-2
Assembly Appropriations: 12-5
Assembly Floor: 61-15
AB 1301 -- 6/22/11 -- Page 11
Support and Opposition (6/23/11)
Support : Asian American Recovery Services, Inc.; BREATHE
California; California Law Enforcement Association of
Records Supervisors; California Probation Parole and
Correctional Association; California State Sheriffs'
Association; San Mateo Office of the Sheriff; San Mateo
County Tobacco Education Coalition; Youth Leadership
Initiative.
Opposition : Unknown.