BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1301 HEARING: 1/11/12
AUTHOR: Hill FISCAL: Yes
VERSION: 1/4/12 TAX LEVY: No
CONSULTANT: Lui
CIGARETTES AND TOBACCO PRODUCTS
Changes STAKE Act penalty structure.
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 1994, the Legislature enacted Stop Tobacco Access to
Kids Enforcement (STAKE) Act (Hayden, SB 1927, 1994) 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 (DPH) implements 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. Many
cities and counties have also adopted local tobacco retail
licensing ordinances to further reduce the sales of tobacco
products to minors.
If any person, firm or corporation sells or furnishes
minors with any tobacco paraphernalia, tobacco, cigarette,
or cigarette papers, an enforcing agency - defined as the
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DPH, another state agency, the Attorney General, a local
law enforcement agency, city attorney, district attorney,
or county counsel -- 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.
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
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 with a license fee of one
hundred dollars ($100) per location. Retailers must
annually renew their tobacco license. 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
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products to any person who is under the age of 18 years.
The application requirements for the Licensing Act are as
follows:
Applicant's name, address, and telephone number.
Affirmation that the applicant has not been
convicted of a felony; the applicant must also affirm
that he or she will to violate any rule pertaining to
the manufacture, sale, or distribution of cigarettes
or tobacco products.
The license or permit number of any license or
permits issued by the Department of Alcoholic Beverage
Control.
The applicant must sign a statement affirming the accuracy
and truthfulness of the application contents. If the
applicant falsifies any information, the applicant is
guilty of a misdemeanor punishable by imprisonment of up to
one year in county jail, and/or a fine of not more than
$1,000.
The penalty structure is:
First conviction of a violation, BOE sends the
retailer a warning letter that delineates the
circumstances under which BOE may suspend or revoke
the license, and the time period BOE has to 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
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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 subject 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.
Firms or corporations controlling businesses or business
operations in multiple locations shall be deemed a separate
entity for the second and subsequent violations.
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
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. STAKE Act penalty structure. Assembly Bill 1301
proposes a five-strike penalty schedule for retailers that
sell to minors:
First violation. A $400 to $600 fine.
Second violation. A $900 to $1,000 fine within a
five-year period.
Third violation. A $1,200 to $1,800 fine within a
five-year period.
Fourth violation A $3,000 to $4,000 fine within a
AB 1301 - 1/4/12 -- Page 5
five-year period.
Fifth violation. A $5,000 to $6,000 fine within a
five-year period.
II. Additional penalties for a license suspension or
revocation . For the third, fourth, and fifth penalties,
the Department of Public Health (DPH) shall assess an
additional $200 civil penalty within 30 days of an
uncontested violation or final administrative adjudication.
DPH shall direct the Board of Equalization to suspend or
revoke a license with the following schedule:
A 45-day license suspension for a third violation
within a five-year period.
A 90-day license suspension for a fourth violation
within a five-year period.
A license revocation for a fifth violation within a
five-year period.
The revenue from the assessed $200 penalties will be
deposited into the Cigarette and Tobacco Products
Compliance Fund, which can be appropriated by the
Legislature, to fund the Board of Equalization (BOE)'s
administrative adjudications and license suspension or
revocation activities.
III. Cigarette and Tobacco Products Licensing Act. AB
1301 repeals several Licensing Act components:
The existing eight-strike conviction penalty
schedule and replaces it with a five-strike penalty
system under the STAKE Act; and
The 13% youth purchase survey trigger before BOE
can take action on a retailer.
AB 1301 limits licensees' appeals process. BOE must
provide a licensee with at least 10 days' written notice of
a pending suspension or revocation, and an opportunity to
appeal the suspension or revocation and the proposed
additional $200 civil penalty. However, appeals can only
be to correct a mistake or clerical error. The bill
requires that BOE shall not accept or consider a license
suspension or revocation if the appeal is founded upon the
grounds of whether the retailer, or employee/agent of the
retailer, violated the STAKE Act. BOE is allowed to modify
its action to correct a mistake or clerical error.
IV. Information sharing. DPH shall, upon request, provide
BOE information concerning any person, firm, or corporation
that has been assessed a penalty for STAKE Act violation
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that resulted in a license suspension or revocation.
V. 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.
VI. 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, are immune from prosecution for
purchase, receipt, or possession of any tobacco,
tobacco-related paraphernalia, or products prepared from
tobacco.
VII. Findings and declarations. AB 1301 makes legislative
findings and declarations that support the bill's purpose.
The bill declares that no proposed changes shall result in
the limitation or termination of BOE's ongoing actions.
State Revenue Impact
None available.
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%. Not only does early tobacco use pose significant
health problems for young people, but early tobacco
engagement increases the likelihood of lifelong tobacco
addiction. CDC attributes the alarming trend of tobacco
use among youth, in part, to access and availability. The
federal Food and Drug Administration conducted stings and
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issued around 1,200 warnings to retailers for unlawfully
selling tobacco to minors. The California Tobacco Control
Program rank 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 syntactical 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. Why break something that's not broke . In 1989,
California was the first in the nation to implement a
comprehensive statewide tobacco control program.
Undoubtedly, the state's longstanding commitment to change
smoking behavior through public education, increased
cigarette excise taxes, and the creation of smoke-free
public and workplaces has resulted with reduced rates of
tobacco users and a transformation of social norms.
According to the Department of Public Health, California
ranks second, behind Utah, for the lowest number of adult
tobacco users -- 11.9% of the population. In September
2011, DPH reported that only 6% of surveyed stores sold
cigarettes to minors, down from 14.6% (2008) and 13.8%
(2010). This is the lowest rate since the inception of the
15-year old survey. California businesses prefer
stability, and local governments can issue their own set of
more stringent local tobacco retail licensing ordinances.
Why enact a penalty scheme that would incur more private
costs, when the existing penalties borne by the private
market are working? The Committee may wish to question the
value of changing an existing policy, which has
successfully helped reduce rates of selling to minors.
3. Lighting up due process . AB 1301 limits a retailer's
due process to appeal a license suspension or revocation or
a $200 civil penalty. If appeals can only be made to
correct mistakes or clerical errors, the bill gravely errs
and assumes that each retailer is immediately guilty of
selling to minors. The bill infringes on retailers' rights
and fails to extend the proper due process allowed to a
retailer to protect its name in court and challenge the
violation's findings.
4. Implementation concerns . According to BOE, there are
approximately 37,000 licensed retailers, 570 licensed
distributors, and 410 license wholesalers. BOE re-inspects
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100% of re-inspections for those retailers cited for a
violation of the Licensing Act and those suspended or
revoked accounts to ensure they are not selling cigarettes
or tobacco products during suspension or after revocation.
The Committee may wish to consider the additional workload
and costs the bill could incur by finding more retailers in
violation of the law in removing the 13% youth purchase
survey trigger.
-----------------------------------------------------------
| | FY | FY | FY | FY |
| |2007-08 | 2008-09 | 2009-10 | 2010-11 |
|--------------+--------+-----------+-----------+-----------|
|Number of | | | | |
|retail |10,364 |9,321 |11,885 |10,209 |
|inspections | | | | |
|--------------+--------+-----------+-----------+-----------|
|Number of | | | | |
|wholesaler | ?? | ?? 52 | ?? 98 | ?? 89 |
|inspections | 64 | | | |
|--------------+--------+-----------+-----------+-----------|
|Number of | | | | |
|distributor | ?? | ?? 122 | ?? 188 | ?? 87 |
|inspections |125 | | | |
|--------------+--------+-----------+-----------+-----------|
|Total | | | | |
| |10,553 |9,495 |12,171 |10,385 |
-----------------------------------------------------------
5. From the agency . DPH's Food and Drug Branch has raised
several technical and fiscal issues.
If the Department of Public Health directs BOE to
suspend or revoke a retailer's license, then the $200
civil penalty must be deposited into the Cigarette and
Tobacco Products Compliance Fund. The BOE estimates
that the figure would cover the administrative costs
without appeal rights. However, the $200 does not
include costs to conduct a follow-up inspections, to
ensure that retailers are not selling tobacco products
during suspension or revocation. Moreover, the bill
does not authorize BOE to assess the fine directly,
since language implies that DPH collects the penalty.
The Committee may wish to consider a clarifying
amendment, so BOE can directly collect the additional
$200 fine.
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It is unclear if the $200 civil penalty is to be
assessed for each violation, or if the $200 is
assessed for only third, fourth, and fifth violations.
AB 1301 deletes language that outlines the civil
penalties for sixth or subsequent violations, which
could indicate that could be no monetary penalty for
the sixth or subsequent violations. If a retailer's
license is revoked, can a retailer apply to reinstate
their license? What would the reinstatement process
look like? Is there an additional fee for applying
for a new license after having accrued of five
violations in previous history? The Committee may
wish to ask if the author's intent is the fifth
violation is the final violation that results in
revocation.
Finally, the Committee may wish to consider an
amendment that would clarify that a license revocation
cannot be accumulated from different properties.
6. 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. However, 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." DPH expects that
increased penalties may lead to increased number of
appeals. To review, prepare, and litigate additional
caseload, DPH estimates that it would need to hire an
additional Staff Counsel, at $131,000 a year. The
Committee may wish to consider an amendment that would
authorize DPH to levy costs that could cover appeal hearing
costs.
7. Who's the boss ? In its previous version, AB 1301
redirected BOE from traditional tax collection and
administration functions to a local and state public health
enforcement agency. Historically, 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. With careful amends, AB 1301 fixed agencies'
jurisdictional concerns and now, requires Department of
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Health to direct BOE to suspend or revoke a license, rather
than having BOE make possible public health determinations.
8. Second-hand coordination . AB 1301 recognizes that the
13% trigger language threshold prevents BOE from acting
against retailers that sell tobacco to minors, so instead,
the bill completely deletes it. However, nothing in
existing statute, or in AB 1301, requires any agency state
or local enforcing agency to notify BOE of a violation.
Instead, local enforcing agencies are left with mere
legislative intent language. AB 1301 coordinates efforts
with another tobacco reform bill, SB 330 (Padilla, 2011),
which requires that DPH create a Tobacco License Query
System, listing retailers that have violated the STAKE Act
or the Penal Code.
9. Suggested technical amendments .
On page 10, line 5, after "Section", strike out
"100171" and insert "131071".
On page 12, line 40, after "subdivision", strike
out "(c)" and insert "(b)".
On page 12, line 7, after "22958", insert "(a)".
10. Legislative efforts . AB 1301 is not the first bill
seeking to reform tobacco retail licensing penalties.
SB 330 (Padilla, 2012) requires the California
Department of Public Health to create, and update
quarterly, a Tobacco Query System. SB 330 imposes a
$100 fee for retailers located within a 600 foot
radius of schools. SB 330 is double-referred to the
Senate Health Committee and will be heard on January
11, 2012, should the bill garner the votes to pass.
SB 331 (Padilla, 2011) adds a 600 feet restriction
on new tobacco retailers to a list of the Board of
Equalization can use to deny a license. SB 331 is
double-referred to the Senate Health Committee and
will be heard on January 11, 2012, should the bill
garner the votes to pass.
SB 601 (Padilla, 2009) 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
AB 1301 - 1/4/12 -- Page 11
Appropriations Committee suspense file.
Before being amended, SB 602 (Padilla) 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 was a bill about
food safety.
SB 603 (Padilla, 2009) 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.
11. Coordination . Should AB 1301 (Hill) pass, it will be
referred to Senate Rules for a possible double-referral to
Senate Health Committee.
Assembly Actions
Assembly Governmental Organization:14-2
Assembly Appropriations: 12-5
Assembly Floor: 61-15
Support and Opposition (1/5/12)
Support : American Heart Association of California;
American Lung Association of California; BREATHE
California; California Law Enforcement Association of
Records Supervisors; California Probation Parole and
Correctional Association; California State Sheriff's
Association; San Mateo County Sheriff; San Mateo County
Tobacco Education Coalition; Asian American Recovery
Services; Youth Leadership Institute.
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Opposition : Unknown.