BILL NUMBER: SB 626 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 5, 2011
AMENDED IN SENATE APRIL 25, 2011
INTRODUCED BY Senator Calderon
FEBRUARY 18, 2011
An act to add Division 8.9 (commencing with Section 22992) to the
Business and Professions Code, and to add Section 7059 to the Revenue
and Taxation Code, relating to cannabis.
LEGISLATIVE COUNSEL'S DIGEST
SB 626, as amended, Calderon. State Board of Equalization:
cannabis and cannabis products: study.
Existing law provides for the licensure by the State Board of
Equalization of manufacturers, distributors, wholesalers, importers,
and retailers of cigarettes or tobacco products that are engaged in
business in California, and prohibits retailers, manufacturers,
distributors, and wholesalers from distributing or selling those
cigarette and tobacco products unless they are licensed. Existing law
also imposes a tax on the gross receipts from the sale in this state
of, or the storage, use, or other consumption in this state of,
tangible personal property purchased from a retailer for storage,
use, or other consumption in this state.
This bill would require the State Board of Equalization to
establish a task force to conduct a study, and submit the
results of that study to the Legislature by a specified date, to
determine, among other things, the most efficient means to obtain
compliance under the Sales and Use Tax Law by sellers of cannabis and
cannabis products sellers engaged in business in this state, as
provided.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 8.9 (commencing with Section 22992) is added
to the Business and Professions Code, to read:
DIVISION 8.9. Cannabis Certification and Regulation Act of
2011
22992. This division shall be known, and may be cited, as the
Cannabis Certification and Regulation Act of 2011.
22992.2. The Legislature finds and declares all of the following:
(a) The current controversies surrounding California's medical
marijuana dispensaries authorized to sell medical marijuana under the
Compassionate Use Act, enacted by the voters in 1996, have created
problems for the patients, dispensaries, law enforcement, and local
governments. Many issues about the legal sale and distribution of
medical marijuana remain unaddressed.
(b) Although many dispensaries operate within the law, there
(b) There is clear evidence that
some dispensaries are intentionally evading taxes and may
be laundering illegally acquired money and illegally distributing
marijuana for other than medical purposes.
(c) The State Board of Equalization, under its sales tax
authority, has formally registered nearly 300 medical marijuana
dispensaries and issued seller's permits. It has also identified over
500 unregistered dispensaries.
(d) Local governments , in allocating the number and
location of dispensaries, are rightly unwilling to
authorize distribution centers when current state laws are not clear
on how to prevent unlawful activities.
(e) Law enforcement authorities have legitimate concerns about
misuse of these dispensaries as sources of illegal distribution and
consumption.
(f) Dispensaries with the best intentions do not have a clearly
defined legal framework for acquiring and distributing medical
marijuana, and are put unnecessarily at risk in the act of acquiring
an illegal product for legal resale.
(f) A clearly defined legal framework is required to protect the
integrity and distribution of cannabis for medical use.
(g) In 2003 the Legislature enacted the California Cigarette and
Tobacco Products Licensing Act of 2003 (Division 8.6 (commencing with
Section 22970) of the Business and Professions Code) to provide for
the licensure by the State Board of Equalization of manufacturers,
distributors, and retailers of cigarette and other tobacco products
in California. For the first time in California, the distribution and
sale of cigarette and tobacco products were prohibited pursuant to
Division 8.6 (commencing with Section 22970) of the Business and
Professions Code unless those involved in every aspect of the trade
were licensed.
(h) That act authorized the state, through the State Board of
Equalization, to suspend or revoke the license of any licensee in
violation of the strict regulations governing the legal distribution
of tobacco products. The act established criminal penalties for
selling counterfeit cigarette and tobacco products, and imposed fines
or imprisonment for possessing, selling, or buying fraudulent
cigarette tax stamps.
(i) The primary purpose of the act was to prevent the unlawful
distribution of cigarettes and the loss of state tax revenue, which
had been declining by hundreds of millions of dollars due, in part,
to unlawful distributions and untaxed sales by well-organized
criminals.
(j) The act has been a success. According to a June 2006 report by
the State Auditor, cigarette tax compliance has improved, and there
was a positive effect on tax revenues from cigarettes and tobacco
products.
(k) It is the intention of the Legislature in enacting similar
legislation to license and control the distribution of medical
marijuana to do all of the following:
(1) Enable state and local governments to control sales and
distribution of marijuana in the same way the tobacco licensing act
has stemmed the flow of illegal tobacco products into the market
place.
(2) Increase revenue for the state and local governments.
(3) Provide assurances to the dispensaries that are now paying
sales tax that the state has an effective mechanism to collect tax
from their illegal competitors and shut them down if necessary.
(4) Enable the state to control the current legal distribution of
medical marijuana from the cultivator to the consumer and help law
enforcement authorities stop illegal sales in medical marijuana
dispensaries and elsewhere to minors and other individuals.
(5) Allow the state to prescribe secure packaging requirements to
carry out the intent of the division.
SEC. 2. Section 7059 is added to the Revenue and Taxation Code, to
read:
7059. (a) The board shall establish a task force to
conduct a study to determine the most efficient means to obtain
compliance under this part by sellers of cannabis and cannabis
products that are engaged in business in this state in order to
enhance collection of applicable state and local sales and use tax on
retail sales of cannabis or cannabis products and in order to
ensure the proper regulation of the cultivation, transportation, and
distribution of cannabis and cannabis products . In conducting
the study, the board task force shall
consider all of the following:
(1) The current strategies of the board that encourage compliance
with the Sales and Use Tax Law from cannabis or cannabis products
sellers engaged in business in this state.
(2) The advantages or disadvantages of implementing a stamp system
for cannabis or cannabis products similar to that used for
cigarettes under the California Cigarette and Tobacco Products Tax
Law (Part 13 (commencing with Section 30001)).
(3) Strategies that would assist the board in identifying sellers
of cannabis or cannabis products, including the use of
federal, state , or local law
enforcement agencies.
(4) Strategies that would provide incentives for cannabis or
cannabis product sellers to register and pay the tax imposed by this
part without the possibility of self-incrimination.
(5) The potential administrative costs to the board for
implementing and administering any system that the board identifies
that would enhance collection of applicable state and local sales and
use tax on the sale and use of cannabis or cannabis products in this
state.
(6) Strategies that would assure quality control of cannabis and
cannabis products, including laboratory testing for potency,
pathogens, and pesticides.
(7) The advantages or disadvantages of establishing a state level
program for the licensing, regulation, and enforcement of best
practices for the cultivation, processing, and distribution of
cannabis and cannabis products for medical use.
(b) The task force shall be composed of nine persons, as follows:
(1) A representative from the California Police Chiefs
Association.
(2) A representative from the California Narcotic Officers'
Association.
(3) A representative from the California District Attorneys
Association.
(4) A representative from the California Medical Association.
(5) A representative appointed by the Attorney General.
(6) A representative from the California Cannabis Association.
(7) A representative from Americans for Safe Access.
(8) Two representatives appointed by the Chair of the board.
(b)
(c) The board shall submit a report to the Legislature
with the results of the study no later than January 1, 2013
six months after the effective date of the
act adding this section . In the event the report includes a
strategy that is feasible and would benefit the state and local sales
and use tax revenue stream and minimize noncompliance by cannabis or
cannabis products sellers engaged in business in this state, the
report shall also recommend a strategy for implementation.
(c)
(d) (1) The requirement for submitting a report imposed
under subdivision (b) (c) is
inoperative on January 1, 2017, pursuant to Section 10231.5 of the
Government Code.
(2) A report to be submitted pursuant to subdivision (b)
(c) shall be submitted in compliance with
Section 9795 of the Government Code.