BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 330 HEARING: 1/11/12
AUTHOR: Padilla FISCAL: Yes
VERSION: As proposed to be amended (mock-up)TAX LEVY: Yes
CONSULTANT: Lui
TOBACCO LICENSE QUERY SYSTEM
Requires Department of Public Health to establish the
Tobacco License Query System. Assesses a $100 annual fee
for retailers located within 600 feet of schools.
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) 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. 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,
SB 330 - As proposed to be amended -- Page 2
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.
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 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
products to any person who is under the age of 18 years.
SB 330 - As proposed to be amended -- Page 3
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 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
SB 330 - As proposed to be amended -- Page 4
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
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.
V. Proposition 26. In November 2010, California voters
approved Proposition 26, which changed how fees and taxes
are defined (Article XIII (3)(b)). A tax is any levy,
charge, or exaction imposed by the State, except for :
A charge imposed for a specific benefit conferred,
or privilege granted directly to the payor that is not
provided to those not charged;
A charge imposed for a specific government service
or product;
A charge imposed for the reasonable regulatory
costs to the State, like issuing licenses and permits,
performing investigations or inspections, enforcing
agricultural marketing orders;
A charge imposed for the entrance to or use of
state property, or the purchase, rental, or lease of
state property; and
A charge fine, penalty, or other monetary charge
imposed by the judicial branch, for violating the law.
SB 330 - As proposed to be amended -- Page 5
Proposed Law
I. Tobacco License Query System. Senate Bill 330 requires
the California Department of Public Health (DPH) to
establish, and maintain quarterly, the Tobacco License
Query System, an electronic database of any retailer's
federal, state, or local infractions in selling tobacco to
minors. The Tobacco License Query system shall include,
but is not limited to all penalties assessed pursuant to:
The STAKE Act;
Penal Code Section 308 by any city attorney, county
counsel, or district attorney; and
The Board of Equalization's Tobacco Licensing Act.
The enforcing agency will submit information to DPH,
regarding any penalties assessed against retailers pursuant
to any law intended to prevent illegal tobacco sales to
minors. DPH will create and provide a form for enforcing
agencies to submit information.
II. License renewal fee. For retail locations located
within 600 feet of a public or private elementary or
secondary school, or retail location which have not
affirmed that the location is located outside the 600-foot
radius, SB 330 requires DPH to collect an annual $100
administrative surcharge fee, after an applicant renews its
license with the Board of Equalization. Revenue generated
by the $100 fee shall be deposited into the Tobacco License
Query System fund, which shall only be used for the
system's operations.
III. Department of Public Health. SB 330 encourages DPH
to coordinate with the U.S. Food and Drug Administration to
include information regarding all penalties assessed in
California, pursuant to the federal Family Smoking
Prevention and Tobacco Control Act.
IV. Findings and declarations. SB 330 makes several
legislative findings and declarations to support the bill's
purpose.
State Revenue Impact
The Department of Public Health estimates a one-time cost
of $3,398,893 and an annual cost of $980,988 to create and
SB 330 - As proposed to be amended -- Page 6
maintain the Tobacco Query License System.
Comments
1. Purpose of the bill . According to the California
Department of Public Health (DPH), more than 35,000
Californians die each year from smoking-related illnesses.
According to the Centers for Disease Control and Prevention
(CDC) over 80% of adult smokers started before they turned
18. Despite existing laws that prohibit the sale of
tobacco products to minors and public media efforts aimed
at deglamorizing tobacco use, retailers may still sell
tobacco products to youth and market increasingly to
younger audiences. Not only does early tobacco use pose
significant health problems for young people, but early
tobacco engagement increases the likelihood of lifelong
tobacco addiction. A study conducted by the
Tobacco-Related Disease Research Program found that nearly
33% of tobacco sales to minors take place within 1,000 feet
of schools. Reducing the number of tobacco retailers by
schools will decrease youth access to tobacco and in turn,
provide California with a healthier future. Federal, state,
and local agencies enforce tobacco laws that prohibit
selling tobacco products to minors. Because local agencies
and DPH conducts separate sting operations, information
about possible mutual repeat offenders may not be shared.
The author proposes synthesizing retail locations'
violations information in an accessible way to better serve
the public.
2. A fee by any other name would smell as sweet . In a
previous form, SB 330, a state-mandate, sought to impose an
additional tax on the distribution of cigarettes at the
rate of ($0.075) or 75 mills for each cigarette
distributed. After a gut-and-amend, the bill proposes
another complicated fee system, aimed to further restrict
retailers' ability to sell tobacco. In hopes to offset
fiscal concerns of implementing the Tobacco License Query
System, the author amended the bill to include a $100
annual surcharge fee on retailers located within 600-feet
of schools. However, it is questionable if the bill's
"fee" is a fee at all. According to the state
Constitution, including the recently passed Proposition 26
SB 330 - As proposed to be amended -- Page 7
(2010), any levy, charge, or exaction is a tax unless it
meets certain exception criteria. The bill's proposed fee
fails to meet any of the exceptions, thereby creating a new
tax. Moreover, imposing a $100 fee on a small subset of
retailers is wrought with additional flaws.
First, punishing retailers on their location to
schools assumes a causal relationship between the
existence of a tobacco retail location and sales to
minors. However, this may certainly not be the case.
There could be retailers that have never have sold to
a minor subject to the same fee as retailers who have
sold to minors. If the author is interested in
preventing youth tobacco access, the bill should
distinguish good and bad actors. The Committee may
wish to ask if whether the fee would be better
constructed as a penalty instead of on all retailers.
Second, the bill fails to recognize that certain
retailers that may have existed long before schools
were even built. The Committee may wish to refine the
heavy-handed fee, so that retailers are not punished
for city and county decisions that occurred after
their retail location's establishment date.
Third, while the author may not have intended the
bill to be a $100 license renewal fee, the fee is
assessed annually after a retail location renews its
license. For small business owners that sell tobacco,
the inequitable application of the $100 fee,
compounded with additional local and state and fees,
may be enough to squeeze businesses out of the market,
creating significant competition issues between
stores. The Committee may wish to ask if the fee
should be commensurate with business volume and
revenue.
Fourth, the bill is silent on BOE's coordination
process with DPH about retail locations within 600
feet of schools. For example, if a retail location is
within 600 feet of a school and its license renewal
date is forthcoming. Will BOE simply notify DPH when
to levy the $100 fee? Will BOE have to create another
database that filters for retailers' locations within
600 feet of schools? What does DPH's $100 fee
collection process look like? How will the state
notify existing retailers that they are now subject to
SB 330 - As proposed to be amended -- Page 8
an additional fee? The Committee may wish to resolve
these pending questions.
Due to the substantive questions the fee raises, the
Committee may wish to ask why a two-year bill with
substantive implementation and constitutionality concerns
is being rushed to meet the Senate Rules House of Origins
deadline, rather than the policy being introduced as a new
bill.
3. Hester Prynne and the Scarlet Letter . The author
suggests that compiling state and local enforcement
agencies' findings about retailers that have sold tobacco
to minors is in the public's best interest. It appears,
however, that the creation of a tobacco registry would
simply employ the shame game tactic, where a list of retail
violators is named, and an infuriated public presses for
change. Yet, the shame game assumes that a) the population
wants to be informed of wrongdoing and b) believes that
that shame is the best way change an individual's behavior.
It is unclear if either of these assumptions exists for
the registry. While there may be bureaucratic frustrations
about the perceived lack of information sharing, it is
unknown if the public is clamoring for this registry at
all. This bill creates a database of retailers that
violated the law, in the hopes that this notice will deter
bad behavior-- similar to how Hester Prynne was branded
with the scarlet letter A to discourage adultery in 17th
century Puritan Boston. However, the Committee may wish to
consider if public shaming is the appropriate mechanism to
achieve the author's intent of reducing tobacco retail
sales to youth.
4. Some say . A registry system that only shows violations
instead of successes may be biased. Some grocers currently
expend significant amounts of time and money training
employees. If one location, out of human error, sells to a
minor, that violation would be documented in the registry,
in spite of the chain's other locations' successes. The
Committee may wish to weigh the benefits of only
documenting retailers' failures rather than provide the
whole perspective on how several chains may be faring. The
Committee may wish to amend the bill to track best
practices around tobacco sales to minors.
5. Wrapping wads . According to the author, the revenue
SB 330 - As proposed to be amended -- Page 9
generated by the $100 annual license renewal fee for
retailers located within 600 feet of schools may be enough
to offset the costs of the creating and maintaining the
Tobacco Query System. However, if the bill only imposes the
fee on those located within 600 feet, presumably,
retailers, who may not be able to absorb the additional
annual fee, will move outside the 600 feet radius. If all
retailers move out of a 600 foot radius, how will the
Tobacco License Query System be funded? The Committee may
wish to consider that the registry is written to be funded
by a possible declining revenue source.
6. All astir for naught ? 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. DPH conducts annual STAKE Act sting operations.
The Department's findings are below.
STAKE Enforcement: Number of tobacco sales to minors
---------------------------------
| | 2008 | 2009 | 2010 |
|------------+------+------+------|
| First | 758 | 598 | 611 |
| violation | | | |
|------------+------+------+------|
| Second | 82 | 71 | 96 |
| violation | | | |
|------------+------+------+------|
| Third | 17 | 3 |9 |
| violation | | | |
|------------+------+------+------|
| Fourth | 1 | 1 | 1 |
| violation | | | |
|------------+------+------+------|
| TOTAL | 858 | 673 |717 |
---------------------------------
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 ever since the
SB 330 - As proposed to be amended -- Page 10
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 an additional $100 fee, 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, and whether adding another
registry will make any difference.
7. Smoke and mirrors . Some retailers may interpret the
$100 surcharge fee as an automatic license renewal fee,
leading them to the question BOE's Licensing Act. The BOE
may have to answer those questions and refer retailers back
to DPH. To address retailers' possible confusion, BOE and
DPH workload may be impacted without any compensation.
Currently, the BOE's Licensing Act administration and
enforcement costs are funded by the Cigarette and Tobacco
Products Compliance Fund. These costs are also backfilled
by the by the cigarette and tobacco products tax funds
(General Fund, Breast Cancer Fund, Cigarette and Tobacco
Products Surtax Fund and California Children and Families
Trust Fund). The Committee may wish to be mindful that
everything comes at a price, and it is unclear if the
existence of a violation registry will change behavior.
8. Double-dipping . Many local cities and counties have
adopted their own local tobacco retailer licensing laws
(TRLs). If California retailers sell tobacco products and
are located in a city or county that has adopted local
TRLs, they have two licenses (state and city/county). Some
local ordinances and penalties are also stricter than the
state's. By requiring retailers within 600 feet of schools
to pay an additional surcharge, the Committee may wish to
ask if the bill double-penalizes retailers that may already
abide by stricter local laws.
9. Agency input . DPH raises several fiscal and technical
issues.
Civil penalties assessed by local, state, or
federal agencies for violation of illegal tobacco
sales to minors, pending adjudication, are not
considered public information nor releasable. The
Committee may wish to ask for an amendment that states
that only information for adjudicated cases or where
the retailer has paid their assessed penalty will be
SB 330 - As proposed to be amended -- Page 11
included in the query system.
SB 330 does not specify the method, type or
frequency of information that is to be provided to DPH
pertaining to violations of local, state, and federal
tobacco sales to minors' laws. The Committee may wish
to ask for an amendment that specifies the Tobacco
License Query System's information needs, like
business name, address, type of penalty assessed,
amount of penalty, amount of previous penalties
assessed, number of previous violations to be accrued,
and date assessed.
The bill is silent on an implementation deadline.
The Committee may wish to ask for an amendment that
specifies when DPH must create this query system.
10. Another agency input . BOE raises the concern that the
inclusion of the Licensing Act violations into the Tobacco
Query System is not related to the author's intent of
shedding sunshine on retailers who have sold to minors.
The purpose of the Licensing Act was to stem the tide of
untaxed distributions and illegal sales of cigarettes and
tobacco products (AB 71, Horton, 2003). The Committee may
wish to ask for an amendment that omits Licensing Act
violations from the registry.
11. Related measures . SB 330 is not the only
tobacco-related measure introduced this session.
SB 331 (Padilla, 2011) adds a 600 feet restriction
on new tobacco retailers to a list of that the Board
of Equalization can use to deny a license. The bill
is double-referred to the Senate Health Committee and
will be heard in Senate Health on January 11, 2012.
AB 1301 (Hill, 2011) repeals the Licensing Act's
eight-strike penalty system and changes the STAKE
Act's five-strike penalty schedule.
In the past:
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
SB 330 - As proposed to be amended -- Page 12
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.
12. Process . SB 330 provides that retail locations, which
may have not affirmed its location outside the 600 foot
radius of schools, may be assessed the $100 license renewal
fee. This affirmation statement is included in the
author's SB 331 bill. Technical amendments may be needed
later to double-joint both bills.
Support and Opposition (1/5/12)
Support : Unknown.
Opposition : Unknown.