Bill Text: CA AB1435 | 2021-2022 | Regular Session | Introduced
Bill Title: Noncannabis cannabinoids.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2022-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB1435 Detail]
Download: California-2021-AB1435-Introduced.html
CALIFORNIA LEGISLATURE—
2021–2022 REGULAR SESSION
Assembly Bill
No. 1435
| Introduced by Assembly Member Carrillo |
February 19, 2021 |
An act to amend Section 26131 of the Business and Professions Code, to add Part 7.5 (commencing with Section 114500) to Division 104 of the Health and Safety Code, and to add Part 14.6 (commencing with Section 34050) to Division 2 of the Revenue and Taxation Code, relating to noncannabis cannabinoids, and making and appropriation therefor, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 1435, as introduced, Carrillo.
Noncannabis cannabinoids.
Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), provides for the licensure and regulation of commercial cannabis activity. MAUCRSA prohibits the manufacture, sale, delivery, holding, or offering for sale of a cannabis product that is adulterated and defines “adulteration” for this purpose.
This bill would impose testing and labeling requirements on products that are, or contain, one or more psychoactive or nonpsychoactive cannabinoids that are derived from a plant that is not cannabis, referred to as noncannabis cannabinoids or NCCs. The bill would require the State Department of Public Health to review each noncannabis cannabinoid in use in products for sale in the state to determine whether the NCC is psychoactive and to determine the safety and efficacy of the substance. The bill would require the
department to publish a list that categorizes NCCs as approved psychoactive, approved, nonpsychoactive, or not approved, as specified.
Existing law imposes an excise tax upon purchasers of cannabis or cannabis products sold in this state at the rate of 15% of the average market price of any retail sale by a cannabis retailer, and a separate cultivation tax on harvested cannabis that enters the commercial market, as specified. Under existing law, those taxes are administered by the California Department of Tax and Fee Administration and are deposited into the California Cannabis Tax Fund, which is continuously appropriated for specified purposes, including youth, education, prevention, and early intervention and treatment services, environmental restoration and protection, and law enforcement, pursuant to a specified schedule.
This bill would impose an excise tax upon purchasers of noncannabis cannabinoids sold in this
state at the rate of $0.01 per milligram of NCC and would prohibit noncannabis cannabinoids from being sold to a purchaser unless the excise tax is paid by the purchaser at the time of sale. The bill would require a manufacturer to report and remit the excise tax to the department, as provided, and to collect the tax from the retailer. The bill would establish the Noncannabis Cannabinoid Tax Fund and would require revenues from the excise tax on NCCs to be deposited into that fund. The bill would continuously appropriate the moneys in the fund for specified purposes, including youth, education, prevention, and early intervention and treatment services, environmental restoration and protection, and social justice and equity programs, pursuant to a specified schedule.
By creating a continuously appropriated fund, the bill would make an appropriation.
This bill would include a change in state statute that
would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature.
This bill would take effect immediately as a tax levy, but its operative date would depend on its effective date.
Digest Key
Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 26131 of the Business and Professions Code is amended to read:26131.
(a) A cannabis product is adulterated if it is any of the following:(1) It has been produced, prepared, packed, or held under unsanitary conditions in which it may have become contaminated with filth or in which it may have been rendered injurious.
(2) It consists consists, in whole or in part part, of any filthy, putrid, or
decomposed substance.
(3) It bears or contains any poisonous or deleterious substance that may render it injurious to users under the conditions of use suggested in the labeling or under conditions as are customary or usual.
(4) It bears or contains a substance that is restricted or limited under this division or regulations promulgated pursuant to this division and the level of substance in the product exceeds the limits specified pursuant to this division or in regulation.
(5) Its concentrations differ from, or its purity or quality is below, that which it is represented to possess.
(6) The methods, facilities, or controls used for its manufacture, packing, or holding do not conform to, or are not operated or administered in conformity with, practices
established by regulations adopted under this division to ensure that the cannabis product meets the requirements of this division as to safety and has the concentrations it purports to have and meets the quality and purity characteristics that it purports or is represented to possess.
(7) Its container is composed, in whole or in part, of any poisonous or deleterious substance that may render the contents injurious to health.
(8) It is an edible cannabis product and a substance has been mixed or packed with it after testing by a testing laboratory so as to reduce its quality or concentration or if any substance has been substituted, wholly or in part, for the edible cannabis product.
(b) A cannabis product is not adulterated by the
inclusion of approved noncannabis cannabinoids, as defined in Section 114500 of the Health and Safety Code, as long as those approved noncannabis cannabinoids meet the requirements of Part 7.5 (commencing with Section 114500) of the Health and Safety Code.
(b)
(c) It is unlawful for a person to manufacture, sell, deliver, hold, or offer for sale a cannabis product that is adulterated.
(c)
(d) It is unlawful for a person to adulterate a cannabis product.
(d)
(e) It is unlawful for a person to receive in commerce a cannabis product that is adulterated or to deliver or proffer for delivery any such cannabis product.
SEC. 2.
Part 7.5 (commencing with Section 114500) is added to Division 104 of the Health and Safety Code, to read:PART 7.5. Noncannabis Cannabinoids
CHAPTER 1. Definitions and General Provisions
114500.
For purposes of this part, the following definitions apply:(a) “Approved noncannabis cannabinoid” or “Approved NCC” means a noncannabis cannabinoid that has been authorized for use in products for sale in this state by the department, pursuant to Section 114501.
(b) “Cannabis” has the same meaning as in Section 11007.
(c) “Department” means the State Department of Public Health.
(d) “Manufacturer” means a person or entity that manufactures noncannabis cannabinoids for use in other products or for retail sale. “Manufacturer” also means a person or entity that manufactures
a product for retail sale that includes noncannabis cannabinoids, even if that entity purchased the NCCs from another manufacturer.
(e) “Noncannabis cannabinoids” or “NCCs” means a psychoactive or nonpsychoactive cannabinoid that is derived from a plant that is not cannabis.
(f) “Testing laboratory” means a laboratory licensed to test cannabis and cannabis products pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.
114501.
(a) The department shall review each noncannabis cannabinoid in use in products for sale in the state to determine whether the NCC is psychoactive and to determine the safety and efficacy of the substance.(b) The department shall publish a list, available upon request, that places all reviewed NCCs into one of three categories:
(1) NCCs that are nonpsychoactive and that may be used in products for sale in this state pursuant to this part.
(2) NCCs that are psychoactive and that may be used in products for sale in this state pursuant to this part.
(3) NCCs that may not be used in products for sale in this state because the NCC is either unsafe or has other properties that make it a danger to the public health or safety.
(c) Review by the federal Food and Drug Administration or the federal Drug Enforcement Agency may be used as a preliminary determination, but the final determination shall be made by the department.
114502.
The department shall adopt rules and regulations to implement this part in conformity with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.CHAPTER 2. Testing
114503.
(a) Except as otherwise provided by law, an approved NCC or a product containing an approved NCC shall not be sold at retail in this state unless a representative sample of the product has been tested in its final retail form by a testing laboratory.(b) The department shall develop criteria to determine which batches shall be tested.
(c) For each batch tested, the testing laboratory shall issue a certificate of analysis for selected lots at a frequency determined by the department with supporting data to report both of the following:
(1) Whether the chemical profile of the sample conforms to the labeled content
of compounds.
(2) That the presence of contaminants does not exceed the levels established by the department. For purposes of this paragraph, “contaminants” includes, but is not limited to, all of the following:
(A) Residual solvent or processing chemicals.
(B) Foreign material, including, but not limited to, hair, insects, or a similar or related adulterant.
(C) Microbiological impurities as identified by the department in regulation.
(d) A testing laboratory may amend a certificate of analysis to correct minor errors, as defined by the department.
(e) Standards for residual levels of volatile organic compounds shall be
established by the department.
(f) The testing laboratory shall conduct all testing required by this section in a manner consistent with general requirements for the competence of testing and calibrations activities, including sampling and using verified methods.
(g) (1) If a test result falls outside the specifications authorized by law or regulation, the testing laboratory shall follow a standard operating procedure to confirm or refute the original result.
(2) If a test result falls outside the specifications authorized by law or regulation, the testing laboratory may retest the sample if both of the following occur:
(A) The testing laboratory notifies the department, in writing, that the test was compromised due to equipment
malfunction, staff error, or other circumstances allowed by the department.
(B) The department authorizes the testing laboratory to retest the sample.
(h) The certificate of analysis shall be sent to the manufacturer and the manufacturer shall keep a copy with the batch of product that was tested and shall keep another copy on file for inspection by the department or the California Department of Tax and Fee Administration.
CHAPTER 3. Labeling
114505.
(a) All NCC product labels and inserts shall include all of the following:(1) The type or types of pharmacologically active NCC included in the product and the date of manufacture and packing.
(2) The amount of each NCC in milligrams per serving and servings per package.
(3) A QR code or other means of accessing all certificates of analysis for the NCCs included in the retail packaged product.
(4) If the product includes any form of the cannabinoid tetrahydrocannabidiol (THC), including, but not limited to, tetrahydrocannabinolic acid (THCA),
Tetrahydrocannabivarin (THCV), Tetrahydrocannabiorcol (THCC), or Delta-8 THC, the universal symbol described in paragraph (7) of subdivision (c) of Section 26130 of the Business and Professions Code.
(5) Any other labeling requirement imposed by law on the product being sold.
(6) Any other requirement imposed by the department.
(b) A manufacturer shall not include on a product label or insert any assertion that is false or untrue in any material particular, or that, irrespective of falsity, directly or by ambiguity omission, or inference, or by addition of irrelevant, scientific, or technical matter, tends to create a misleading impression.
(c) A manufacturer shall not include on a product label or insert a health-related statement that is untrue in any
particular manner or tends to create a misleading impression as to the effects on health of the consumption of the constituent NCCs.
CHAPTER 4. Enforcement
114507.
The department may enforce the provisions of this part by administrative fine, in amounts set in regulation.SEC. 3.
Part 14.6 (commencing with Section 34050) is added to Division 2 of the Revenue and Taxation Code, to read:PART 14.6. Noncannabis Cannabinoids Tax
34050.
(a) “Arm’s length transaction” means a sale entered into in good faith and for valuable consideration that reflects the fair market value in an open market between two informed and willing parties, neither under any compulsion to participate in the transaction.(b) “Department” means the California Department of Tax and Fee Administration or its successor agency.
(c) “Manufacturer” means a person who manufactures noncannabis cannabinoids for the ultimate purposes of sale or transfer.
(d) “Noncannabis cannabinoid” means a psychoactive or nonpsychoactive cannabinoid that is derived from a plant that is not cannabis,
the sale of which is regulated pursuant to Part 7.5 (commencing with Section 114500) of Division 104 of the Health and Safety Code.
(e) “Nonprofit” has the same meaning as set forth in Section 26070.5 of the Business and Professions Code.
(f) “Person” has the same meaning as set forth in Section 6005.
(g) “Retailer” means a person offering noncannabis cannabinoids for sale within the state of California.
(h) “Retail sale” has the same meaning as set forth in Section 6007.
(i) “Sale” and “purchase” mean any change of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, for consideration.
(j) “Tax Fund” means the Noncannabis Cannabinoids Tax Fund created by Section 34054.
(k) “Transfer” means to grant, convey, hand over, assign, sell, exchange, or barter, in any manner or by any means, with or without consideration.
34051.
(a) (1) An excise tax shall be imposed upon purchasers of noncannabis cannabinoids at a rate of one cent ($0.01) per milligram. A purchaser’s liability for the cannabis excise tax is not extinguished until the cannabis excise tax has been paid to this state except that an invoice, receipt, or other document from a retailer given to the purchaser pursuant to this subdivision is sufficient to relieve the purchaser from further liability for the tax to which the invoice, receipt, or other document refers.(2) Each retailer of noncannabis cannabinoids shall provide a purchaser with an invoice, receipt, or other document that includes a statement that reads: “The noncannabis cannabinoids excise taxes are included in the total
amount of this invoice.”
(3) The department may prescribe other means to display the excise tax on an invoice, receipt, or other document from a retailer given to the purchaser.
(b) (1) A manufacturer in an arm’s length transaction shall collect the noncannabis cannabinoids excise tax from the retailer on or before 90 days after the sale or transfer of noncannabis cannabinoids to the retailer. A manufacturer in a nonarm’s length transaction shall collect the excise tax from the retailer on or before 90 days after the sale or transfer of noncannabis cannabinoids to the retailer, or at the time of retail sale by the retailer, whichever is earlier. A manufacturer shall report and remit the excise tax to the department pursuant to Section 34052. A retailer shall be responsible for collecting the excise tax from the purchaser and remitting the excise tax to the
manufacturer in accordance with rules and procedures established under law and any regulations adopted by the department.
(2) A manufacturer shall provide an invoice, receipt, or other similar document to the retailer including the excise tax, and any other information deemed necessary by the department. The department may authorize other forms of documentation under this paragraph.
(3) The excise tax required to be collected by the manufacturer, and any amount unreturned to the retailer that is not tax but was collected from the retailer under the representation by the manufacturer that it was tax, constitute debts owed by the manufacturer to this state.
(4) A manufacturer that has collected any amount of tax in excess of the amount of tax imposed by this part and actually due from a retailer may refund that amount
to the retailer, even though the tax amount has already been paid over to the department and a corresponding credit or refund has not yet been secured. The manufacturer may claim credit for that overpayment against the amount of tax imposed by this part that is due upon any other quarterly return, providing that credit is claimed in a return dated no later than three years from the date of overpayment.
(5) Any tax collected from a retailer that has not been remitted to the department shall be deemed a debt owed to the State of California by the person required to collect and remit the tax.
(c) The excise tax imposed by this section shall be in addition to the sales and use tax imposed by the state and local governments.
(d) Gross receipts from the sale of noncannabis cannabinoids for purposes of assessing the sales
and use taxes under Part 1 (commencing with Section 6001) shall include the tax levied pursuant to this section.
(e) Noncannabis cannabinoids shall not be sold to a purchaser unless the excise tax required by law has been paid by the purchaser at the time of sale.
(f) This section does not impose an excise tax upon medicinal cannabis, medicinal cannabis products, or noncannabis cannabinoids that are used for medicinal purposes.
34052.
(a) Unless otherwise prescribed by the department pursuant to subdivision (c), the excise tax imposed by this part is due and payable to the department quarterly on or before the last day of the month following each quarterly period of three months. On or before the last day of the month following each quarterly period, a return for the preceding quarterly period shall be filed with the department by each manufacturer using electronic media. Returns shall be authenticated in a form or pursuant to methods prescribed by the department.(b) The department may require every person engaged in the manufacture and retail sale of noncannabis cannabinoids to file, on or before the 25th day of each month, a report using electronic media respecting the
person’s inventory, purchases, and sales during the preceding month and any other information the department requires to carry out the purposes of this part. Reports shall be authenticated in a form or pursuant to methods prescribed by the department.
(c) The department may adopt regulations prescribing the due date for returns and remittances of excise tax collected by a manufacturer in an arm’s length transaction pursuant to subdivision (b) of Section 34051.
34053.
(a) The department shall administer and collect the taxes imposed by this part pursuant to the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)). For purposes of this part, the references in the Fee Collection Procedures Law to “fee” shall include the taxes imposed by this part, and references to “feepayer” shall include a person required to pay or collect the taxes imposed by this part.(b) The department may prescribe, adopt, and enforce regulations relating to the administration and enforcement of this part, including, but not limited to, collections, reporting, refunds, and appeals.
(c) The department shall adopt necessary rules and regulations to
administer the taxes in this part. Those rules and regulations may include methods or procedures to tag noncannabis cannabinoids, or the packages thereof, to designate prior tax payment.
(d) The department may bring any necessary legal actions to collect any deficiency in the tax required to be paid, and, upon the department’s request, the Attorney General shall bring the actions.
34054.
(a) The Noncannabis Cannabinoids Tax Fund is hereby created in the State Treasury. The fund shall consist of all taxes, interest, penalties, and other amounts collected and paid to the department pursuant to this part, less payment of refunds.(b) Notwithstanding any other law, the Tax Fund is a special trust fund established solely to carry out the purposes of this part.
(c) Notwithstanding Section 13340 of the Government Code, all revenues deposited into the Tax Fund, together with interest or dividends earned by the fund, are hereby continuously appropriated for the purposes of this part without regard to fiscal year and shall be expended only in accordance with the provisions
of this part and its purposes.
(d) Notwithstanding any other law, the taxes imposed by this part and the revenue derived therefrom, including investment interest, shall not be considered to be part of the General Fund, as that term is used in Chapter 1 (commencing with Section 16300) of Part 2 of Division 4 of Title 2 of the Government Code, shall not be considered General Fund revenue for purposes of Section 8 of Article XVI of the California Constitution and its implementing statutes, and shall not be considered “moneys” for purposes of subdivisions (a) and (b) of Section 8 of Article XVI of the California Constitution and its implementing statutes.
(e) The Controller shall periodically audit the Tax Fund to ensure that those funds are used and accounted for in a manner consistent with this part and as otherwise required by law.
34055.
The taxes imposed by this part shall be in addition to any other tax imposed by a city, county, or city and county.34056.
(a) Beginning with the 2023–24 fiscal year, the Department of Finance shall estimate revenues to be received pursuant to this part and provide those estimates to the Controller no later than June 15 of each year. The Controller shall use these estimates when disbursing funds pursuant to this section. Before any funds are disbursed pursuant to subdivision (b), the Controller shall disburse from the Tax Fund to the appropriate account, without regard to fiscal year, the following:(1) Reasonable costs incurred by the department for administering and collecting the taxes imposed by this part, provided, however, those costs shall not exceed 4 percent of tax revenues received.
(2) Reasonable costs incurred by the State Department of Public Health for any duties prescribed in Part 7.5 (commencing with Section 114500) of the Health and Safety Code.
(3) Reasonable costs incurred by the Controller for performing any duties in connection with this part, including the audit required by Section 34054.
(5) Reasonable costs incurred by the Department of Finance for performing any duties in connection with this part.
(b) The Controller shall next disburse the funds by July 15 of each fiscal year, beginning in the 2024–25 fiscal year, as follows:
(1) Sixty percent shall be deposited in the Youth Education, Prevention, Early Intervention and Treatment Account and disbursed by the Controller to the State Department of Health
Care Services for programs included in the provisions of paragraph (1) of subdivision (f) of Section 34019.
(2) Twenty percent shall be deposited in the Environmental Restoration and Protection Account and disbursed by the Controller to the programs provided in paragraph (2) of subdivision (f) of Section 34019.
(3) Twenty percent to the State Department of Social Services for social justice and equity programs.
(c) Funds allocated pursuant to subdivision (b) shall be used to increase the funding of programs and purposes identified and shall not be used to replace allocation of other funding for these purposes.
