Bill Text: CA AB1627 | 2019-2020 | Regular Session | Amended
Bill Title: Cigarette Tobacco Directory.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2020-06-23 - Referred to Com. on JUD. [AB1627 Detail]
Download: California-2019-AB1627-Amended.html
|
Amended
IN
Assembly
January 15, 2020 |
CALIFORNIA LEGISLATURE—
2019–2020 REGULAR SESSION
Assembly Bill
No. 1627
| Introduced by Assembly Member Robert Rivas |
February 22, 2019 |
An act to amend Section 30165.1 of the Revenue and Taxation Code, relating to cigarettes, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 1627, as amended, Robert Rivas.
Cigarette Tobacco Directory.
Under existing law, states’
States’ attorneys general and various tobacco product manufacturers settled various lawsuits by entering into a Master Settlement Agreement (MSA), which imposes financial obligations on participating manufacturers and provides for the allocation of money to the states and certain territories for recovery of those governments’ tobacco-related health care costs. Existing law requires that a tobacco product manufacturer selling cigarettes to consumers in California either become a participating manufacturer in the
MSA or, as a nonparticipating manufacturer, place funds into a qualified escrow fund, as specified.
The Cigarette and Tobacco Products Tax Law requires every tobacco products manufacturer whose cigarettes are sold in this state to make an annual certification to the Attorney General that the manufacturer is a participating manufacturer that has made all payments due under the MSA or has placed funds into the qualified escrow fund. That law also requires the certification to include specified information, including a complete list of all of the manufacturer’s brand families and, in the case where the nonparticipating manufacturer is not the fabricator or maker of the cigarettes, that the escrow agreement or other forms are signed by the company that fabricates or makes the cigarettes. That law makes a false certification a misdemeanor. That law requires the Attorney General to post on its internet website a directory (Directory) of tobacco product manufacturers that
have submitted compliant certifications, as specified, and requires the directory to include the brand families listed in those certifications, except as provided.
This bill would specify that listings on the Directory expire on April 29 each year. This bill would require, beginning with the 2020
2021 calendar year, a tobacco products manufacturer to renew its listing on the Directory by providing the annual certification and remitting an annual fee of $1,000 payable to the office of the Attorney General. This bill would require any fees received to be deposited into the California Tobacco Directory Fund, which the bill would create in the State Treasury. This bill would continuously appropriate amounts deposited in the California Tobacco Directory Fund to the office of the Attorney General for the purpose of administering the Directory. The bill would allow the Attorney General to retain a listing for a tobacco products manufacturer on the Directory while the renewal for the certification is pending.
This bill would eliminate the requirement, in the case where the nonparticipating manufacturer is not the fabricator or maker of the cigarettes, that the escrow agreement or other forms are signed by the company that
fabricates or makes the cigarettes. This bill would require nonparticipating manufactures to certify that its fabricates all of the brand families of the cigarettes that it seeks to certify.
This bill would require the Attorney General to list the brand styles of cigarettes that are compliant with the annual certification and the qualified escrow requirements. This bill would also prohibit the Attorney General from including or retaining in the Directory any brand style that has not met specified requirements, including if the brand style has not been tested and marked in compliance with the California Cigarette Fire Safety and Firefighter Protection Act.
That law provides that newly qualified and elevated-risk nonparticipating manufacturers are required to file a surety bond with the Attorney General, as specified. That law also prohibits inclusion in the Directory of specified nonparticipating manufacturers and their
brand families until a surety bond is filed, as specified.
This bill would expand the criteria for when a nonparticipating manufacturer may be deemed to pose an elevated risk, including when, as of January 1, 2021, a nonparticipating manufacturer’s cigarettes are sold in or into California by distributors that have not reported their last 12 months of California sales electronically, as prescribed.
By expanding the scope of information required to be on the certification and expanding the scope of the surety bond requirement, the false certification of which is a crime, this bill imposes a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Cigarette and Tobacco Products Tax Law requires that the tax on the distribution of cigarettes imposed by that law be paid through the use of stamps or meter impressions, and requires that these stamps or meter impressions be affixed to each package of cigarettes distributed. That law prohibits (1) any tax stamp or meter impression to be affixed to a package of cigarettes unless the tobacco product manufacturer and brand family are included on the Directory, (2) the sale, offer, or possession for sale in this state, shipment or distribution into or within this state, or importation for personal consumption in this state, of cigarettes of a tobacco product manufacturer or brand family not included in the Directory, and (3) the possession, transportation, and other specified activities of the
cigarettes that the person knows or should have known are intended to be distributed in violation of the other 2 prohibitions. That law requires distributors to submit to the California Department of Tax and Fee Administration or the Attorney General specified information to facilitate compliance with that prohibition and the certification requirements. That law imposes civil penalties for violations of that prohibition and information reporting requirements.
This bill would require the department to disclose to the Attorney General any information it receives under the Cigarette and Tobacco Products Tax Law for specified purposes and would authorize the department and the Attorney General to share information provided by distributors with specified entities for specified purposes.
This bill would additionally authorize the Attorney General to bring a civil action for civil penalties and injunctive relief against specified
persons for specific violations of those prohibitions or information reporting requirements and against any nonparticipating manufacturer that does not submit a timely, complete, and accurate certification as required by the Cigarette and Tobacco Products Tax Law regarding its sales of cigarettes in this state, as provided. This bill would require any civil penalties imposed to be deposited into the General Fund.
Existing law requires each tobacco product manufacturer that elects to place funds into a qualified escrow to annually certify to the Attorney General that it is in compliance with specified requirements. Existing law authorizes the Attorney General to bring a civil action against any tobacco product manufacturer that fails to place into escrow the funds required and authorizes the imposition of civil penalties paid to the General Fund.
This bill would additionally authorize the Attorney General to bring a civil
action for civil penalties and injunctive relief against any nonparticipating manufacturer that does not submit a timely, complete, and accurate certification related to those qualified escrow funds regarding its sales of cigarettes in this state, as provided. This bill would require any civil penalties imposed to be deposited into the General Fund.
Digest Key
Vote: MAJORITY Appropriation: YES Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 30165.1 of the Revenue and Taxation Code is amended to read:30165.1.
(a) The following definitions shall apply for purposes of this section:(1) “Department” means the California Department of Tax and Fee Administration.
(2) “Brand family” means styles of cigarettes sold under the same trademark and differentiated from one another by means of additional modifiers, including, but not limited to, “menthol,” “lights,” “kings,” and “100s” and includes any brand name, alone or in conjunction with any other word, trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, a
previously known brand of cigarettes.
(3) “Cigarette” has the same meaning as in subdivision (d) of Section 104556 of the Health and Safety Code and includes tobacco products defined as a cigarette under that subdivision.
(4) “Distributor” has the same meaning as in Section 30011.
(5) “MSA” means the Master Settlement Agreement, as defined in subdivision (e) of Section 104556 of the Health and Safety Code.
(6) “Nonparticipating manufacturer” means any tobacco product manufacturer that is not a participating manufacturer.
(7) “Participating manufacturer” has the same meaning as in subsection II(jj) of the
MSA.
(8) “Qualified escrow fund” has the same meaning as in subdivision (f) of Section 104556 of the Health and Safety Code.
(9) “Tobacco product manufacturer” has the same meaning as in subdivision (i) of Section 104556 of the Health and Safety Code.
(10) “Units sold” has the same meaning as in subdivision (j) of Section 104556 of the Health and Safety Code.
(11) “Directory” means the California Tobacco Directory developed by the Attorney General and published on its internet website pursuant to subdivision (c).
(b) Every tobacco product manufacturer whose cigarettes are sold in this state, whether
directly or through a distributor, retailer, or similar intermediary or intermediaries, shall execute and deliver on a form and in the manner prescribed by the Attorney General, a certification to the Attorney General no later than the 30th day of April each year that, as of the date of the certification, the tobacco product manufacturer is either a participating manufacturer that has made all payments calculated by the independent auditor to be due under the Master Settlement Agreement, except to the extent the participating manufacturer is disputing any of the payments, or is in full compliance with Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, including all installment payments required by that article and this section, and any regulations promulgated pursuant thereto. A tobacco product manufacturer located outside of the United
States shall provide to the Attorney General and keep current, the names, and addresses, including email addresses, of all importers that sell or will be selling their cigarettes in this state and shall cause each importer to provide to the Attorney General a copy of a valid importer permit issued by the United States Treasury, Alcohol and Tobacco Tax and Trade Bureau, and the importer license issued by the department. The importers who sell or will be selling their cigarettes in this state shall obtain and maintain a license as an importer in compliance with Division 8.6 (commencing with Section 22970) of the Business and Professions Code. Any person who makes a certification pursuant to this subdivision that asserts the truth of any material matter that the person knows to be false is guilty of a misdemeanor punishable by imprisonment of up to one year in the county jail, or a fine of not more
than one thousand dollars ($1,000), or both the imprisonment and the fine.
(1) A participating manufacturer shall include in its certification a complete list of its brand families. The participating manufacturer shall update the list 30 days prior to any addition to or modification of its brand families by executing and delivering a supplemental certification to the Attorney General.
(2) A nonparticipating manufacturer shall include in its certification a complete list of all of its brand families in accordance with the following requirements:
(A) Separately listing brand families of cigarettes and the number of units sold for each brand family that were sold in the state during the preceding calendar year.
(B) Separately listing all of its brand families that have been sold in the state at any time during the current calendar year.
(C) Indicating by an asterisk any brand family sold in the state during the preceding calendar year that is no longer being sold in the state as of the date of the certification.
(D) Identifying by name and address any other manufacturer, including all previous fabricators or makers of the brand families in a form, manner, and detail as required by the Attorney General. The nonparticipating
manufacturer shall update the list 30 days prior to any change in a fabricator for any brand family or any addition to or modification of its brand families by executing and delivering a supplemental certification to the Attorney General.
(3) In the case of a nonparticipating manufacturer, the certification shall further certify all of the following:
(A) That the nonparticipating manufacturer is registered to do business in the state, or has appointed a resident agent for service of process and provided notice thereof as required by subdivision (f).
(B) That the nonparticipating manufacturer has done all of the following:
(i) Established and continues to maintain a qualified escrow fund as that term is defined in subdivision (f) of Section 104556 of the Health and Safety Code and implementing regulations.
(ii) Executed a qualified escrow agreement that has been reviewed and approved by the Attorney General and that governs the qualified escrow fund.
(iii) The certifying nonparticipating manufacturer fabricates all of the brand families of the cigarettes it seeks to certify.
(C) That the nonparticipating manufacturer is in full compliance with both of the following:
(i) Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety
Code, including paragraph (2) of subdivision (a) of Section 104557 of the Health and Safety Code, this section, and any regulations promulgated pursuant thereto.
(ii) Division 8.6 (commencing with Section 22970) of the Business and Professions Code, and any regulations promulgated pursuant thereto. The nonparticipating manufacturer shall also provide a copy of a valid, corresponding federal permit issued by
the United States Treasury, Alcohol and Tobacco Tax and Trade Bureau.
(D) That the nonparticipating manufacturer has provided all of the following:
(i) The name, address, and telephone number of the financial institution where the nonparticipating manufacturer has established the qualified escrow fund required pursuant to Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code and all regulations promulgated thereto.
(ii) The account number of the qualified escrow fund and subaccount number for the State of California.
(iii) The amount the nonparticipating manufacturer placed in the
fund for cigarettes sold in the state during the preceding calendar year, the date and amount of each deposit, and any confirming evidence or verification as may be deemed necessary by the Attorney General.
(iv) The amounts and dates of any withdrawal or transfer of funds the nonparticipating manufacturer made at any time from the fund or from any other qualified escrow fund into which it ever made escrow payments pursuant to Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code and all regulations promulgated thereto.
(E) In the case of a nonparticipating manufacturer located outside the United States, that the manufacturer has provided a declaration in a form prescribed by the Attorney General from each of its importers
into the United States of any of its brand families to be sold in California, that the importer accepts joint and several liability with the nonparticipating manufacturer for all escrow deposits due in accordance with Article 3 (commencing with Section 104555), for all penalties assessed in accordance with
Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, and for payment of all fees, costs, attorney’s fees, penalties, and refunds imposed or required under this section, including, but not limited to, all refunds resulting from the removal of the manufacturer or any of its brand families from the Directory. The declaration shall appoint for the declarant a resident agent for service of process in California in accordance with subdivision (f) and affirm that it has caused every importer that will sell its tobacco products in this state to obtain and maintain a license as an importer pursuant to Division 8.6 (commencing with Section 22970) of the Business and Professions Code.
(4) (A) A tobacco product manufacturer may not include a brand family
in its certification unless either of the following is true:
(i) In the case of a participating manufacturer, the participating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of calculating its payments under the MSA for the relevant year, in the volume and shares determined pursuant to the MSA.
(ii) In the case of a nonparticipating manufacturer, the nonparticipating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, including paragraph (2) of subdivision (a) of Section 104557 of the Health and Safety Code, and any regulations promulgated pursuant thereto and this section.
(B) Nothing in this section shall be construed as limiting or otherwise affecting the state’s right to maintain that a brand family constitutes cigarettes of a different tobacco product manufacturer for purposes of calculating payments under the MSA or for purposes of Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code and any regulations promulgated pursuant thereto.
(5) A tobacco product manufacturer shall maintain all invoices and documentation of sales and other information relied upon for the certification for a period of five years, unless otherwise required by law to maintain them for a longer period of time.
(c) The Attorney General shall develop and publish on
its internet website the California Tobacco Directory, which shall list only the tobacco product manufacturers, brand families, and brand styles of cigarettes that are compliant with this section and Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, and any regulations promulgated pursuant to either statute.
(1) The Attorney General may not include or retain in the Directory the name, brand families, or brand styles of the following:
(A) Any participating manufacturer that fails to provide the required certification or to make a payment calculated by the independent auditor to be due from it under the Master Settlement Agreement except to the extent that it is disputing the payment.
(B) Any nonparticipating manufacturer that fails to provide the required certification or whose certification the Attorney General determines is not in compliance with subdivision (b), unless the Attorney General has determined that the violation has been cured to the satisfaction of the Attorney General.
(C) A tobacco product manufacturer that does not hold a valid and current manufacturer’s license under Section 22979 of the Business and Professions Code, including, but not limited to, a manufacturer whose license has been revoked under subdivision (g) of Section 22979 of the Business and Professions Code.
(2) Neither a tobacco product manufacturer nor brand family shall be included or retained in the Directory if the Attorney
General concludes that any of the following is true:
(A) In the case of a nonparticipating manufacturer, any escrow deposit required pursuant to Section 104557 of the Health and Safety Code for any period for any brand family, whether or not listed by the nonparticipating manufacturer, has not been fully deposited into a qualified escrow fund governed by a qualified escrow agreement that has been approved by the Attorney General.
(B) Any outstanding final judgment, including interest thereon, for violations of Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, this section, Sections 30101.7 and 30165.2, and any regulations promulgated pursuant thereto, has not been fully satisfied for the brand family and the
manufacturer.
(C) In the case of a nonparticipating manufacturer by reason of the business plan, business history, trade connections, or compliance and payment history in California or any other state of any of the principals thereof, the nonparticipating manufacturer fails to provide reasonable assurance that it will comply with the requirements of this section, Section 30165.2, and Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code. As used in this section, “reasonable assurance” may include information and documentation establishing to the satisfaction of the Attorney General that a failure to pay in California or elsewhere was the result of a good faith dispute over the payment obligation.
(D) In the case of a
nonparticipating manufacturer, the manufacturer has knowingly failed to disclose any material information required or knowingly made any material false statements in the certification of any supporting information or documentation provided.
(E) If the manufacturer or its importer, as defined in Section 30019, engages in delivery sales and the manufacturer fails to provide or fails to cause its importer to provide reasonable assurances that the delivery seller has fully complied with all requirements of applicable federal and state law, including, but not limited to, all of the following:
(i) The Prevent All Cigarette Trafficking Act of 2009 (PACT Act; Public Law 111-154).
(ii) The Jenkins Act (Chapter 10A
(commencing with Section 375) of Title 15 of the United States Code).
(iii) The requirements of Section 30101.7.
(iv) All stamping, marking, and labeling requirements, including, but not limited to, Section 30163, and any other information or indicia requirements imposed by state or federal law.
(v) All other state laws generally applicable to the sale and distribution of tobacco products.
(3) The Attorney General may not include or retain in the Directory any brand style that has not been tested and marked in compliance with the California Cigarette Fire Safety and Firefighter Protection Act (Part 8 (commencing with Section 14950))
14950) of Division 12 of the Health and Safety Code).
(4) Beginning with the 2020 2021 calendar year, all listings on the Directory shall expire on April 29 of each year. Beginning with the 2020 2021 calendar year, a tobacco products manufacturer shall renew its listing on the Directory by providing the annual certification in compliance with this section and remitting an annual fee of one thousand dollars ($1,000) payable to the Office of the Attorney General. Any fees received pursuant
to this paragraph shall be deposited into the California Tobacco Directory Fund, which is hereby created in the State Treasury. Notwithstanding Section 13340 of the Government Code, all amounts deposited in the California Tobacco Directory Fund are hereby continuously appropriated without regard to fiscal year to the Office of the Attorney General for the purpose of administering the Directory. The Attorney General may retain a listing for a tobacco products manufacturer on the Directory while the renewal for the certification is pending.
(5) The Attorney General shall update the Directory as necessary in order to correct mistakes and to add or remove a tobacco product manufacturer or brand family to keep the Directory in conformity with the requirements of this section, Section 30165.2, Article 3 (commencing with Section 104555)
of Chapter 1 of Part 3 of Division 103 of the Health and Safety
Code, and the California Cigarette Fire Safety and Firefighter Protection Act (Part 8 (commencing with Section 14950)) 14950) of Division 12 of the Health and Safety Code). The Attorney General shall promptly provide distributors and wholesalers with written notice of each tobacco product manufacturer and brand family that the Attorney General has added to, or excluded or removed from, the Directory.
(A) When the Attorney General’s office informs a manufacturer that it will recommend to the Attorney General that the manufacturer or brand family be delisted for cause, the office shall transmit by email, or other practicable means, a copy of the notice
of the pending administrative action to the manufacturer, all licensed distributors and wholesalers, and to any retailer or other person who has provided an email address to the Attorney General for this purpose.
(B) A licensed distributor may purchase, stamp, or sell, and a licensed wholesaler may purchase or sell, products affected by the notice of pending administrative action for no more than 40 days following issuance of the notice of pending administrative action. Prior to the sale of a product affected by the notice of pending administrative action, and no later than seven days after the notice of pending administrative action, a distributor or wholesaler shall notify each of its existing customers of the pending administrative action.
(C) Upon removal from the Directory
of a tobacco product manufacturer or brand family, the Attorney General shall transmit by email, or other practicable means, a notice of removal, to the manufacturer, all licensed distributors and wholesalers, and to any retailer or other person who has provided an electronic mail address to the Attorney General for this purpose. No later than seven days after issuance of the notice of removal, a distributor or wholesaler shall provide each of its existing customers a copy of the notice of removal.
(D) Notwithstanding subdivision (e), a licensed retailer may possess, transport, and sell the tax-stamped cigarettes of a manufacturer or brand family affected by the notice of removal for no more than 60 days following the effective date of the manufacturer or brand family’s removal from the Directory.
(E) After 60 days following removal from the Directory, the cigarettes of a manufacturer or brand family identified in the notice of removal are contraband and are subject to seizure and destruction under subdivision (e) of Section 30436 and subdivision (b) of Section 30449, and may not be purchased or sold in California.
(F) If the Attorney General declines to remove a tobacco product manufacturer or brand family from the Directory following issuance of the notice of pending
administrative action described in subparagraph (A), the Attorney General shall notify by email, or other practicable means, the manufacturer, all licensed distributors and wholesalers, and any retailer or other person who has provided an email address to the Attorney General for this purpose, of the decision not to pursue administrative action. No later than seven days after issuance of this notice, a distributor or wholesaler shall provide each of its existing customers a copy of this notice, and the purchase, stamping, and sales restrictions imposed by subparagraph (B) shall have no further effect.
(G) Upon request of the Attorney General, the department
shall provide the Attorney General all electronic mail addresses for licensed distributors, wholesalers, and retailers in its possession.
(6) Newly qualified and elevated-risk nonparticipating manufacturers shall file with the Attorney General a surety bond in a form and manner directed by the Attorney General.
(A) Notwithstanding any other law, if a newly qualified nonparticipating manufacturer is to be listed in the
Directory or if the Attorney General reasonably determines that any nonparticipating manufacturer who has filed a certification pursuant to subdivision (b) poses an elevated risk for noncompliance with this section, Section 30165.2, Part 13 (commencing with Section 30001) of Division 2, or with Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, neither the nonparticipating manufacturer nor any of its brand families shall be included in the Directory unless and until the nonparticipating manufacturer, or its United States importer that undertakes joint and several liability for the manufacturer’s
performance in accordance with subparagraph (E) of paragraph (3) of subdivision (b), has posted a bond in accordance with this section.
(B) The bonds shall be posted by a corporate surety located within the United States in an amount equal to the greater of fifty thousand dollars ($50,000) or the amount of escrow the manufacturer in either its current or predecessor form was required to deposit as a result of the largest of its most recent five calendar year’s sales in California. The bond shall be written in favor of the State of California and shall be conditioned on the performance by the nonparticipating manufacturer, or its United States importer that undertakes joint and several liability for the manufacturer’s performance in accordance with subparagraph (E) of paragraph (3) of subdivision (b), of all its duties and
obligations under this section and Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code and payment of all state taxes for the sale or distribution of cigarettes and tobacco products in this state during the year in which the certification is filed and the next succeeding calendar year. The bond may be drawn upon by the department or the Attorney General to cover unsatisfied escrow obligations, tax obligations, claims for penalties, claims for monetary damages, and any other liabilities that are subject to the licensee’s claim of sovereign immunity against enforcement of the laws specified above.
(C) A nonparticipating manufacturer may be deemed to pose an elevated risk for noncompliance with this section, Section 30165.2, or Article 3 (commencing with Section 104555) of Chapter
1 of Part 3 of Division 103 of the Health and Safety Code if:
(i) The nonparticipating manufacturer or any affiliate thereof has failed to deposit fully the amount due on an escrow obligation with respect to any state at any time during the calendar year or within the past three calendar years unless either of the following occur:
(I) The manufacturer did not underdeposit knowingly or recklessly and the manufacturer promptly cured the underdeposit within 180 days of notice of it.
(II) The underdeposit or lack of deposit is the subject of a good faith dispute as documented to the satisfaction of the Attorney General and the underdeposit is cured within 180 days of entry of a final order establishing the amount
of the required escrow deposit.
(ii) Any state has removed the manufacturer or its brands
or an affiliate or any of the affiliate’s brands from the state’s tobacco Directory for noncompliance with a state escrow deposit or tobacco tax law at any time during the calendar year or within the past three calendar years.
(iii) Any state has litigation pending against, or an unsatisfied final judgment against, the manufacturer or any affiliate thereof for escrow or for penalties, fees, costs, refunds, or attorney’s fees related to noncompliance with state escrow laws.
(iv) The nonparticipating manufacturer sells its cigarettes or tobacco products directly to consumers via remote or other non-face-to-face means.
(v) A state or federal court has determined that the nonparticipating manufacturer
has violated any tobacco tax or tobacco control law or engaged in unfair business practice or unfair competition.
(vi) Any state has suspended or revoked its license to engage in any aspect of tobacco business.
(vii) Any state or federal court has determined that it failed to comply with state or federal law imposing marking, labeling, and stamping requirements or requiring information to be affixed to, or contained in, the labels, markings, or packaging.
(viii) During any of the past three years, escrow and equity fee payments were made on less than 80 percent of the nonparticipating manufacturer’s nationwide cigarette sales as measured by excise taxes collected by the federal government and, in the case of Puerto
Rico, arbitrios de cigarrillos collected by the Puerto Rico taxing authority.
(ix) As of January 1, 2021, the nonparticipating manufacturer’s cigarettes are sold in or into California by distributors that have not reported their last 12 months of California sales electronically and the manner prescribed by both the department and in the Attorney General.
(x) For a domestic manufacturer, the nonparticipating manufacturer’s cigarettes are sold in California through one or more distributors that do not purchase directly from the nonparticipating manufacturer. For a foreign manufacturer, the nonparticipating manufacturer’s cigarettes are sold in California through one or more distributors that do not purchase directly from an importer that has accepted joint and several liability
pursuant to paragraph (4) of subdivision (f).
(xi) The nonparticipating manufacturer fails to submit or complete any required forms, documents, certification, or notices, in a timely manner or, to the satisfaction of the Attorney General or the department.
(D) As used in this section, “newly qualified nonparticipating manufacturer” means a nonparticipating manufacturer that has not
previously been listed in the Directory. These manufacturers may be required to post a bond in accordance with this section for the first three years of their listing, or longer if they have been determined to pose an elevated risk for noncompliance.
(7) The Attorney General shall provide each tobacco product manufacturer that has provided all certifications and other information required by this section with a written acknowledgment of receipt within seven business days after receiving the certifications and other materials. Each tobacco product manufacturer shall provide to each distributor to whom it sells or ships cigarettes a copy of each acknowledgment of receipt provided to the manufacturer by the Attorney General. Upon request, the Attorney General shall provide any distributor with a copy of the most recent
written acknowledgment of receipt provided to the tobacco product manufacturer.
(d) (1) The Attorney General may exclude or remove from the Directory a tobacco product manufacturer or any of its brand families, based on a determination that the manufacturer is not a participating manufacturer that has provided the required certification and made all payments calculated by the independent auditor to be due from it under the Master Settlement Agreement, except to the extent that it is disputing the payment, or in the case of a nonparticipating manufacturer, has not made all escrow payments required by paragraph (2) of subdivision (a) of Section 104557 of the Health and Safety Code, in accordance with that subdivision, or has not complied with this section, Section 30165.2, or the tobacco product manufacturer
has not complied with any state or federal delivery sales laws applicable to sales and distribution of tobacco products in this state. Before the exclusion or removal may take effect, the Attorney General shall notify the manufacturer of this determination.
(2) Upon receiving notice from the Attorney General pursuant to paragraph (1), the manufacturer may challenge the Attorney General’s determination as erroneous, and may seek relief from the determination, by filing a petition for writ of mandate pursuant to Section 1085 of the Code of Civil Procedure for that purpose in the Superior Court for the County of Sacramento, or as otherwise provided by law. The filing of the petition shall operate to stay the Attorney General’s determination, if the participating manufacturer has made all payments calculated by the independent auditor to be due
from it under the Master Settlement Agreement, except to the extent that it is disputing payment, or if a nonparticipating manufacturer has paid into escrow the full amount of any deficiency in the escrow payments that the Attorney General has determined the tobacco product manufacturer was required to have made under paragraph (2) of subdivision (a) of Section 104557 of the Health and Safety Code, including any installment payments required under subdivision (h), pending final resolution of the action.
(e) (1) No person shall affix, or cause to be affixed, any tax stamp or meter impression to a package of cigarettes pursuant to subdivision (a) of Section 30163, or pay the tax levied pursuant to Sections 30123 and 30131.2 on a tobacco product defined as a cigarette under this section, unless the brand family of the
cigarettes or tobacco product, and the tobacco product manufacturer that makes or sells the cigarettes or tobacco product, are included on the
Directory.
(2) No person shall sell, offer, or possess for sale in this state, ship or otherwise distribute into or within this state or import for personal consumption in this state, cigarettes of a tobacco product manufacturer or brand family not included in the Directory.
(3) No person shall do either of the following:
(A) Sell or distribute cigarettes that the person knows or should know are intended to be distributed in violation of paragraphs (1) and (2).
(B) Acquire, hold, own, possess, transport, import, or cause to be imported cigarettes that the person knows or should know are intended to be distributed in violation of paragraphs
(1) and (2).
(f) (1) Any nonresident or foreign nonparticipating manufacturer that has not registered to do business in the state as a foreign corporation or business entity shall, as a condition precedent to having its brand families listed or retained in the Directory, appoint and continually engage without interruption the services of an agent in this state to act as agent for the service of process on whom all process, and any action or proceeding against it concerning or arising out of the enforcement of this section, Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, and any regulations promulgated pursuant thereto, may be served in any manner authorized by law. This service shall constitute legal and valid service of process on the nonparticipating
manufacturer. The nonparticipating manufacturer shall provide the name, address, telephone number, and proof of the appointment and availability of the agent to the satisfaction of the Attorney General. Any nonparticipating manufacturer located outside of the United States shall, as an additional condition precedent to having its brand families listed or retained in the Directory, cause each of its importers into the United States of any of its brand families to be sold in California to appoint and continually engage without interruption the services of an agent in the state in accordance with this section. All obligations of a nonparticipating manufacturer imposed by this section with respect to appointment of its agent shall likewise apply to importers with respect to appointment of their agents.
(2) The nonparticipating
manufacturer shall provide notice to the Attorney General 30 calendar days prior to termination of the authority of an agent and shall further provide proof to the satisfaction of the Attorney General of the appointment of a new agent no less than five calendar days prior to the termination of an existing agent appointment. In the event an agent terminates an agency appointment, the nonparticipating manufacturer shall notify the Attorney General of said termination within five calendar days and shall include proof to the satisfaction of the Attorney General of the appointment of a new agent.
(3) Any nonparticipating manufacturer whose products are sold in this state without appointing or designating an agent as herein required shall be deemed to have appointed the Secretary of State as its agent, as provided in Section 2105 of the
Corporations Code, and may be proceeded against in courts of this state by service of process upon the Secretary of State. However, the appointment of the Secretary of State pursuant to this provision as the agent for service of process does not satisfy the condition precedent specified in paragraph (1) to having its brand families listed or retained in the Directory.
(4) For each nonparticipating manufacturer located outside the United States, each importer into the United States of any nonparticipating manufacturer’s brand families that are sold in
California shall bear joint and several liability with the nonparticipating manufacturer for deposit of all escrow due under Section 104557 of the Health and Safety Code, payment of all costs and attorney’s fees imposed in accordance with Section 104557 of the Health and Safety Code, and payment of all fees, costs, attorney’s fees, penalties, and refunds imposed or required by this section or Section 30165.2. Each manufacturer and importer, that sells or intends to sell cigarettes in California, shall obtain and maintain a license as a manufacturer or importer in compliance with Division 8.6 (commencing with Section 22970) of the Business and Professions Code. Each nonparticipating manufacturer and its importers shall report in the manner, including electronically, as required by the Attorney General, all cigarettes and tobacco products sold in this state each month, including, but not
limited to, the quantity, including tobacco weight and number of cigarette sticks, the wholesale cost and sale price of each brand family. Any manufacturer or importer that fails to file the report as required by the Attorney General shall be liable for a civil penalty in an amount not to exceed the greater of either of the following:
(A) Five times the retail value of the
cigarettes that were not reported as required by the Attorney General.
(B) Five thousand dollars ($5,000).
(g) (1) Not later than 25 days after the end of each calendar quarter, and more frequently if so directed by the department or the Attorney General, each distributor shall submit any information as the department or Attorney General requires to facilitate compliance with this section, including, but not limited to, a list by brand family of the total number of cigarettes or, in the case of roll your own, the total ounces for which the distributor affixed stamps during the previous calendar month or otherwise paid the tax due. The distributor shall maintain, and shall make available to the department and the Attorney General, all invoices
and documentation of sales of all nonparticipating manufacturer cigarettes and any other information relied upon in reporting to the department and the Attorney General for a period of five years.
(2) Notwithstanding Section 30455, the
department shall disclose to the Attorney General any information received under this part for purposes of determining compliance with and enforcing the provisions of this section, Sections 30101.7 and 30165.2, and Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, and any regulations promulgated pursuant thereto. The department and Attorney General may share the information specified under this subdivision with any of the following: (A) federal agencies, agencies of other states, and state or local agencies for the purposes of enforcement of corresponding laws of other states; and (B) a court, arbitrator, data clearinghouse or similar entity for the purpose of resolving disputes arising under, and making calculations and determinations required by, the Master Settlement Agreement or related settlement agreements and
with counsel for the parties or expert witnesses in any such proceeding, provided that the recipients agree to maintain the confidentiality of confidential information. The department and Attorney General shall not publicly disclose confidential information except as necessary to carry out their functions and duties.
(3) At any time, the Attorney General may require from the nonparticipating manufacturer proof from the financial institution in which the manufacturer has established a qualified escrow fund for the purpose of compliance with Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, and any regulations promulgated pursuant thereto, of the amount of money in the fund being held on behalf of the state and the dates of deposits, and listing the amounts of all withdrawals
from the fund and the dates thereof.
(4) In addition to the information required to be submitted pursuant to this section or Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code and any regulations promulgated pursuant thereto, the Attorney General may require a retailer, wholesaler, distributor, importer, or tobacco product manufacturer to submit any additional information, including, but not limited to, samples of the packaging or labeling of each brand family, as is necessary to enable the Attorney General to determine whether a tobacco product manufacturer or importer has complied, is in compliance, and, if applicable pursuant to subparagraph (C) of paragraph (2) of subdivision (c), has provided reasonable assurance that it will comply or continue to comply with this section,
Section 30165.2, Part 8 (commencing with Section 14950) of Division 12 of the Health and Safety Code, and Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, and any regulations promulgated pursuant thereto.
(h) To promote compliance with this section, the Attorney General may promulgate regulations requiring a tobacco product manufacturer subject to the requirements of paragraph (2) of subdivision (a) of Section 104557 to make the escrow deposits required in quarterly or other specified installments during the year in which the sales covered by the deposits are made. The Attorney General may require production of information sufficient to enable the Attorney General to determine the adequacy of the amount of the installment deposit.
(i) (1) In addition to any other civil or criminal penalty provided by law, upon a finding that a distributor licensed by the department has violated subdivision (e), or paragraph (1) of subdivision (g), the department may take the following actions:
(A) In the case of the first offense, the department may revoke or suspend the license or licenses issued to the distributor by the department, pursuant to the procedures applicable to the revocation of a license set forth in Sections 30148 and 30158, and Section 22980.3 of the Business and Professions Code. Each stamp affixed and each sale or offer to sell cigarettes in violation of subdivision (e) shall constitute a separate violation.
(B) In the case of a second or any subsequent offense that the
department determines to be a violation of subdivision (e), in addition to the action authorized under subparagraph (A), the department may impose a civil penalty in an amount not to exceed the greater of either of the following:
(i) Five times the retail value of the cigarettes.
(ii) Five thousand dollars ($5,000).
(2) (A) A distributor licensed by the department in any action for a violation of subdivision (e) shall have a defense provided that either of the following is true:
(i) At the time of the violation, the cigarettes or tobacco products claimed to be the subject of the alleged violation belonged to a brand
family that was included on the
Directory.
(ii) At the time of the violation, the distributor possessed a copy of the Attorney General’s most recent written acknowledgment of receipt of the certifications and other information required as a condition of including the brand family on the Directory.
(B) The defense described in clause (ii) of subparagraph (A) is not available to a distributor if, at the time of the violation, the Attorney General had provided the distributor with written notice that the brand family had been excluded or removed from the Directory, or the distributor failed to provide the Attorney General with a current address for the receipt of written notice through
email as required by paragraph (4) of subdivision (c).
(3) In addition to any other civil or criminal penalty provided by law, the Attorney General may bring a civil action on behalf of the state for civil penalties and injunctive relief against a retailer, distributor, wholesaler, manufacturer, importer, or other person that violates subdivision (e), or paragraph (1) or (4) of subdivision (g). The court, upon a finding of a violation, shall impose a civil penalty to be paid to the General Fund. The amount of the civil penalty may not exceed the greater of either of the following:
(A) Five times the retail value of the cigarettes.
(B) Five thousand dollars ($5,000).
(4) In addition to any other civil or criminal penalty provided by law, the Attorney General may bring a civil action on behalf of the state for civil penalties and injunctive relief against any nonparticipating manufacturer that does not submit timely, complete, and accurate certifications to the Attorney General under this section and subdivision (c) of Section 104557 of the Health and Safety Code regarding its sales of cigarettes in this state, whether directly or through a distributor, retailers, or similar intermediary or intermediaries, and tobacco escrow account compliance for its ongoing and previous sales in this state. The court, upon a finding of a violation, may do both of the following:
(A) Impose a civil penalty to be paid to the General Fund not to exceed one thousand dollars ($1,000) for each day the nonparticipating
manufacturer fails to timely, completely, and accurately certify to the Attorney General.
(B) Issue an injunction prohibiting the nonparticipating manufacturer’s cigarettes from being sold in or into California until the failure to certify has been fully cured.
(5) A violation of paragraph (3) of subdivision (e) shall constitute a misdemeanor.
(j) If a distributor affixes a stamp or meter impression to a package of cigarettes under subdivision (a) of Section 30163, or pays the tax levied under Sections 30123 and 30131.2 on a tobacco product defined as a cigarette under this section, during the period between the date on which the brand family of the cigarettes or tobacco product was excluded or removed from the
Directory and the date on which the distributor received notice of the exclusion or removal under paragraph (4) of subdivision (c), then both of the following shall apply:
(1) The distributor shall be entitled to a credit for the tax paid by the distributor with respect to the cigarette or tobacco product to which the stamp or meter impression was affixed, or the tax paid during that period. The distributor shall comply with regulations prescribed by the department regarding refunds and credits that are adopted pursuant to Section 30177.5. If the distributor has sold the cigarette or tobacco product to a wholesaler or retailer, and has received payment from the wholesaler or retailer, the distributor shall provide the credit to the wholesaler or retailer.
(2) The brand family may not be included on or restored to the
Directory until the tobacco product manufacturer has reimbursed the distributor for the cost to the distributor of the cigarettes or tobacco product to which the stamp or meter impression was affixed, or the tax paid, during that period.
(k) Any tobacco product manufacturer that falsely represents any of the following to any person shall be guilty of a misdemeanor for each false representation:
(1) Any information required under subdivision (b).
(2) That the tobacco product manufacturer is a participating manufacturer.
(3) That the tobacco product manufacturer or any other person has made any or all escrow payments required by paragraph (2) of
subdivision (a) of Section 104557 of the Health and Safety Code, if applicable to the manufacturer.
(4) That it has complied with subdivision (b), or with paragraph (1) of subdivision (g), if applicable to the manufacturer.
(l) A violation of subdivision (e) shall constitute unfair competition under Section 17200 of the Business and Professions Code.
(m) No person shall be issued a distributor’s license, pursuant to Section 30140, unless that person has certified in writing that the person will comply fully with this section. Any person who makes a certification pursuant to this subdivision that asserts the truth of any material matter that the person knows to be false is guilty of a misdemeanor punishable by
imprisonment of up to one year in the county jail, or a fine of not more than one thousand dollars ($1,000), or both the imprisonment and the fine.
(n) The Attorney General may adopt rules and regulations to implement this section. The rules and regulations may establish procedures for including in the Directory tobacco product manufacturers that are not participating manufacturers and were not required to make escrow payments under paragraph (2) of subdivision (a) of Section 104557 of the Health and Safety Code, for sales made during any preceding calendar year, and brand families of those manufacturers. The rules and regulations may also establish procedures for seizure and destruction of cigarettes forfeited to the state pursuant to Section 30436 or Section 30449, including, but not limited to, the state facilities that may
be used for the destruction of contraband cigarettes. Nothing in this section shall affect the authority of local law enforcement and local government officials to seize and destroy contraband under existing state or local law. The regulations adopted to effect the purposes of this section are emergency regulations in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. For purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulations shall be considered by the Office of Administrative Law to be necessary for the immediate preservation of the public peace, health and safety, and general welfare. Notwithstanding subdivision (e) of Section 11346.1 of the Government Code, the regulations shall be repealed 180 days after their effective date, unless the adopting authority or agency complies
with that chapter, as provided in subdivision (e) of Section 11346.1 of the Government Code.
(o) In any action brought by the state to enforce this section, the state shall be entitled to recover the costs of investigation, expert witness fees, costs of the action, and reasonable attorney’s fees.
(p) The Attorney General or their authorized representative shall have the authority to:
(1) Conduct audits and investigations of the following:
(A) A nonparticipating manufacturer and its importers.
(B) Distributors, retailers, and wholesalers, as defined in Division 8.6 (commencing with Section 22970)
of the Business and Profession Code, and this part.
(C) Persons or entities engaged in delivery sales as defined in Section 30101.7.
(2) Upon reasonable cause to believe that a violation of this article or of Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, or of Section 22963 of the Business and Professions Code, or of Section 30101.7, has occurred or is reasonably likely to occur, issue subpoenas, compel the attendance of witnesses, administer oaths, certify to official acts, take depositions within and without the state, as now provided by law, and compel the production of pertinent books, payrolls, accounts, papers, records, documents, and testimony relevant to investigations. If a person refuses, without
good cause, to be examined or to answer a legal and pertinent question, or to produce a document or other evidence when ordered to do so by the Attorney General or their authorized representative, the Attorney General or their authorized representative may apply to the superior court of the county where the person is in attendance or located, upon affidavit, for an order returnable in no less than two nor more than five days, directing the person to show cause why the person should not be examined, answer a legal or pertinent question or produce a document, record or other evidence. Upon the hearing, if the court determines that the person, without good cause, has refused to be examined or to answer legal or pertinent questions, or to produce a document, record, or other evidence, the court may order compliance with the subpoena and assess all costs and reasonable attorney’s fees against the
person. If the motion for an order is granted and the person thereafter fails to comply with the order, the court may make orders as are provided for by law. Subpoenas shall be served and witness fees and mileage paid as allowed in civil cases in the courts of the State of California.
(q) In any action regarding a violation of this article or of Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, or of Section 22963 of the Business and Professions Code, or of Section 30101.7, or of Section 17200 of the Business and Professions Code, reports submitted to the department pursuant to Section 30182 or Section 22978.1, 22978.4, or 22978.5 of the Business and Professions Code, shall be admissible in evidence and shall be presumed to accurately state the number of cigarettes stamped during
the time period by the stamping agent that submitted the report absent a contrary showing by the nonparticipating manufacturer or importer. Nothing in this section shall be construed as limiting or otherwise affecting the right of the state to maintain that reports are incorrect or do not accurately reflect a nonparticipating manufacturer’s sales in the state during the time period in question, and the presumption shall not apply in the event the state does so maintain.
(r) In any action regarding a violation of this article or of Article 3 (commencing with Section 104555) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code, or of Section 22963 of the Business and Professions Code, or of Section 30101.7, or of Section 17200 of the Business and Professions Code, sufficient notice of the action to the alleged violator shall be
given by complaint written in the English language. The state shall not be required to bear any expense of translating complaint into another language.
(s) Unless otherwise expressly provided, the remedies or penalties provided by this section are cumulative to each other and to the remedies or penalties available under all other laws of this state.
