Bill Text: CA SB768 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Cigarette and tobacco products taxes: California Tobacco

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB768 Detail]

Download: California-2013-SB768-Amended.html

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BILL NUMBER: SB 768	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 17, 2013

INTRODUCED BY   Senator De León

                        FEBRUARY 22, 2013

   An act  to amend Sections 30104, 30108, and 30181 of, and to
add Article 2.5 (commencing with Section 30130.50) to Chapter 2 of
Part 13 of Division 2 of, the Revenue and Taxation Code, 
relating to  taxation.   taxation, and making an
appropriation therefor, to take effect immediately, tax levy. 


	LEGISLATIVE COUNSEL'S DIGEST


   SB 768, as amended, De León. Cigarette and tobacco products
 taxes.   taxes: California Tobacco Tax Act of
2014. 
   The Cigarette and Tobacco Products Tax Law, the violation of which
is a crime, imposes a tax on every distributor of cigarettes and
tobacco products at specified rates, including additional taxes
imposed under the Tobacco Tax and Health Protection Act of 1988
(Proposition 99) and the California Families and Children Act of 1998
(Proposition 10). A provision of that law imposes a tax upon the
distribution of tobacco products at a tax rate that is equivalent to
the combined rate of all taxes imposed on cigarettes, which is
deposited in specified accounts. 
   This bill would state the intent of the Legislature to review the
structure of the Cigarette and Tobacco Products Tax Law. 

    This bill would, on or after the first day of the first calendar
quarter commencing more than 90 days on or after the effective date
of the bill, impose an additional tax on the distribution of
cigarettes at the rate of $0.10 for each cigarette distributed; would
require a dealer and a wholesaler to file a return with the State
Board of Equalization showing the number of cigarettes in its
possession or under its control on that date, and impose a related
floor stock tax; and would require a licensed cigarette distributor
to file a return with the board and pay a cigarette indicia
adjustment tax for cigarette tax stamps in its possession or under
its control on that date. Because the bill would impose an additional
tax on cigarettes under the Cigarette and Tobacco Products Tax Law,
it would increase the tax upon the distribution of tobacco products
under that law.  
   The bill would require, not later than December 1 of the 2nd year
following a specified date, and each 2nd December 1 thereafter, the
State Board of Equalization to review the cigarette taxes imposed by
other states, determine the 5 highest taxes imposed by other states,
and calculate the median tax per cigarette. The bill would increase
the tax on the distribution of cigarettes, as specified, if the
median of the 5 highest taxes imposed by other states is greater than
a specified amount.  
   The bill would provide that the revenues collected from the
additional tax be deposited in the California Tobacco Tax Act of 2014
Fund created by this bill, which would be a continuously
appropriated fund, and transferred into the Tobacco Prevention and
Education Account, the Tobacco Disease Related Health Care Account,
and the Tobacco Law Enforcement Account to be expended for specified
purposes. Because the California Tobacco Tax Act of 2014 Fund is a
continuously appropriated fund, the bill would make an appropriation.
 
   The bill would require moneys in the California Tobacco Tax Act of
2014 Fund to be transferred from the fund to the California Children
and Families First Trust Fund, which is a continuously appropriated
fund, the Cigarette and Tobacco Products Surtax Fund, the Breast
Cancer Fund, and the General Fund, as necessary to offset revenue
decreases to those funds directly resulting from imposition of
additional taxes by these provisions. Because this bill would require
funds to be transferred to a continuously appropriated fund, it
would make an appropriation.  
   Because this bill would impose new requirements under the
Cigarette and Tobacco Products Tax Law, the violation of which is a
crime, it would impose 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 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 provide that no reimbursement is required by this
act for a specified reason.  
   This bill would take effect immediately as a tax levy. 
   Vote:  majority   2/3  . Appropriation:
 no   yes  . Fiscal committee:  no
  yes  . State-mandated local program:  no
  yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    The Legislature hereby finds and
declares all of the following:  
   (a) Tobacco use is the single most preventable cause of death and
disease in California, claiming the lives of more than 35,000 people
every year. California still has approximately 3.4 million adult
smokers and 300,000 youth smokers.  
   (b) The inevitable health, environmental, and economic costs of
smoking come to over $22 for every pack of cigarettes sold in
California.  
   (c) Tobacco use costs Californians more than $9.6 billion in
medical expenses every year. The cost of lost productivity due to
tobacco use adds an additional estimated $8.5 billion to the annual
economic consequences of smoking in California.  
   (d) The treatment of cancer, heart disease and stroke, lung
disease, diabetes, and other diseases related to tobacco use
continues to impose a significant burden upon California's
overstressed health care system, including publicly funded health
care programs.  
   (e) In 2013-14, it is estimated that the General Fund cost of
publicly funded health care programs to the state will be more than
$15 billion. In 2013-14, it is estimated that publicly funded health
care programs will provide health care coverage to more than 1.4
million families and more than 700,000 children. At the same time,
hundreds of thousands of families and children go without any medical
coverage due to financial constraints upon the state and local
government budgets and recent cutbacks in publicly funded health care
programs.  
   (f) A recent cost-benefit analysis concluded that if states
followed the United States Centers for Disease Control and Prevention'
s Best Practices for Comprehensive Tobacco Control Programs-2007
funding guidelines, up to 14 to 20 times the cost of program
implementation could be saved through reduced medical and
productivity costs as well as reduced Medicaid costs.  
   (g) The California Tobacco Tax Act of 2014 will help fund the
comprehensive California Tobacco Control Program designed to change
social norms about tobacco and discourage individuals from taking up
smoking and the use of other tobacco products through educational
programs, thereby saving the state and local governments significant
money now and in the future.  
   (h) Tobacco tax increases are an appropriate way to mitigate the
impacts of tobacco-related diseases and improve existing programs
providing for quality and access to health care services for families
and children.  
   (i) An increase in the tobacco tax will have an immediate effect
on smoking and is the most appropriate mechanism to fund services to
prevent tobacco use, help people quit smoking, and discourage many
people from taking up smoking.  
   (j) California taxes cigarettes at only $0.87 per pack, and ranks
33rd in tobacco tax rates, reflecting one of the lowest tobacco taxes
in the United States. Thirty states have cigarette tax rates of $1
per pack or higher, and California is well below other west coast
states (Washington: $3.025, Oregon: $1.18, and Arizona: $2).
California last raised its tobacco tax in 1998.  
   (k) The burden of smoking is not equally shared across California
populations and communities. Tobacco use rates are much higher than
the general population in African Americans, white men, Korean men,
enlisted military personnel, lesbian, gay, bisexual and transgender,
young adult, rural, and low-income populations.  
   (l) A reinvigorated tobacco control program will allow targeted
public health and research efforts to combat the tobacco industry's
predatory marketing to ethnic groups, driving down smoking rates and
ultimately reducing heart disease, stroke, lung disease, and cancer
in these California communities, which together represent more than
half of our state's residents. 
  SEC. 2.    Section 30104 of the   Revenue and
Taxation Code   is amended to read: 
   30104.  The taxes imposed by this part shall not apply to the sale
of cigarettes or tobacco products by a distributor to a common
carrier engaged in interstate or foreign passenger service or to a
person authorized to sell cigarettes or tobacco products on the
facilities of the carrier. Whenever cigarettes or tobacco products
are sold by distributors to common carriers engaged in interstate or
foreign passenger service for use or sale on facilities of the
carriers, or to persons authorized to sell cigarettes or tobacco
products on those facilities, the tax imposed  by Sections
30101, 30123, and 30131.2   under this part  shall
not be levied with respect to the sales of the cigarettes or tobacco
products by the distributors, but a tax is hereby levied upon the
carriers or upon the persons authorized to sell cigarettes or tobacco
products on the facilities of the carriers, as the case may be, for
the privilege of making sales in California at the same rate as set
forth  in Sections 30101, 30123, and 30131.2  
under this part  . Those common carriers and authorized persons
shall pay the tax imposed by this section and file reports with the
board, as provided in Section 30186.
   SEC. 3.    Section 30108 of the   Revenue
and Taxation Code   is amended to read: 
   30108.  (a) Every distributor engaged in business in this state
and selling or accepting orders for cigarettes or tobacco products
with respect to the sale of which the tax imposed  by
Sections 30101, 30123, and 30131.2   under this part
 is inapplicable shall, at the time of making the sale or
accepting the order or, if the purchaser is not then obligated to pay
the tax with respect to his or her distribution of the cigarettes or
tobacco products, at the time the purchaser becomes so obligated,
collect the tax from the purchaser, if the purchaser is other than a
licensed distributor, and shall give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
   (b) Every person engaged in business in this state and making
gifts of untaxed cigarettes or tobacco products as samples with
respect to which the tax imposed  by Sections 30101, 30123,
and 30131.2   under this part  is inapplicable
shall, at the time of making the gift or, if the donee is not then
obligated to pay the tax with respect to his or her distribution of
the cigarettes or tobacco products, at the time the donee becomes so
obligated, collect the tax from the donee, if the donee is other than
a licensed distributor, and shall give the donee a receipt therefor
in the manner and form prescribed by the board. This section shall
not apply to those distributions of cigarettes or tobacco products
which are exempt from tax under Section 30105.5.
   (c) "Engaged in business in the state" means and includes any of
the following:
   (1) Maintaining, occupying, or using, permanently or temporarily,
directly or indirectly, or through a subsidiary, or agent, by
whatever name called, an office, place of distribution, sales or
sample room or place, warehouse or storage place, or other place of
business.
   (2) Having any representative, agent, salesperson, canvasser or
solicitor operating in this state under the authority of the
distributor or its subsidiary for the purpose of selling, delivering,
or the taking of orders for cigarettes or tobacco products.
   (d) The taxes required to be collected by this section constitute
debts owed by the distributor, or other person required to collect
the taxes, to the state.
   SEC. 4.    Article 2.5 (commencing with Section
30130.50) is added to Chapter 2 of Part 13 of Division 2 of the 
 Revenue and Taxation Code   , to read: 

      Article 2.5.  The California Tobacco Tax Act of 2014


   30130.50.  For the purposes of this article:
   (a) "Cigarette" has the same meaning as in Section 30003 as it
read on January 1, 2013.
   (b) "Tobacco products" includes, but is not limited to, all forms
of cigars, smoking tobacco, chewing tobacco, snuff, and any other
articles or products made of, or containing at least 50 percent,
tobacco, but does not include cigarettes.
   30130.51.  (a) In addition to any other taxes imposed upon the
distribution of cigarettes, there shall be imposed an additional tax
upon every distributor of cigarettes at the rate of one hundred mills
($0.10) for each cigarette distributed on or after the first day of
the first calendar quarter commencing more than 90 days after the
effective date of this act.
   (b) (1) To offset the effects of inflation and further reduce
smoking prevalence, on or before March 1 of each year, the State
Board of Equalization shall calculate the percentage increase in the
California Consumer Price Index for all items of December of the
prior calendar year over the December of the preceding calendar year
immediately preceding the prior calendar year. Each fiscal year, the
tax imposed by subdivision (a) on the distribution of cigarettes and
tobacco products shall be adjusted by the State Board of Equalization
to reflect the California Consumer Price Index for all items
percentage increase, if any. The adjusted tax shall be effective
during the state's next fiscal year.
   (2) In no event shall the tax be less than the tax imposed under
this part as of the effective date of this act.
   30130.52.  (a) (1) Every dealer and wholesaler, for the privilege
of holding or storing cigarettes for sale, use, or consumption, shall
pay a floor stock tax for each cigarette in its possession or under
its control in this state at 12:01 a.m. on the first day of the first
calendar quarter commencing more than 90 days after the effective
date of this act at the rate of one hundred mills ($0.10) for each
cigarette.
   (2) Every dealer and wholesaler shall file a return with the State
Board of Equalization on or before the first day of the first
calendar quarter commencing more than 180 days after the effective
date of this act on a form prescribed by the State Board of
Equalization, showing the number of cigarettes in its possession or
under its control in this state at 12:01 a.m. on the first day of the
first calendar quarter commencing more than 90 days after the
effective date of this act. The amount of tax shall be computed and
shown on the return.
   (b) (1) Every licensed cigarette distributor, for the privilege of
distributing cigarettes and for holding or storing cigarettes for
sale, use, or consumption, shall pay a cigarette indicia adjustment
tax for each California cigarette tax stamp that is affixed to any
package of cigarettes and for each unaffixed California cigarette tax
stamp in its possession or under its control at 12:01 a.m. on the
first day of the first calendar quarter commencing more than 90 days
after the effective date of this act at the following rates:
   (A) Two dollars and fifty cents ($2.50) for each stamp bearing the
designation "25."
   (B) Two dollars ($2) for each stamp bearing the designation "20."
   (C) One dollar ($1) for each stamp bearing the designation "10."
   (2) Every licensed cigarette distributor shall file a return with
the board on or before the first day of the first calendar quarter
commencing 180 days after the effective date of this act on a form
prescribed by the board, showing the number of stamps described in
subparagraphs (A), (B), and (C) of paragraph (1). The amount of tax
shall be computed and shown on the return.
   (c) The taxes required to be paid by this section are due and
payable on or before the first day of the first calendar quarter
commencing 180 days after the effective date of this act. Payments
shall be made by remittances payable to the board and the payments
shall accompany the return and forms required to be filed by this
section.
   (d) Any amount required to be paid by this section that is not
timely paid shall bear interest at the rate and by the method
established pursuant to Section 30202 from the first day of the first
calendar quarter commencing 180 days after the effective date of
this act, until paid, and shall be subject to determination, and
redetermination, and any penalties provided with respect to
determinations and redeterminations.
   30130.53.  (a) The State Board of Equalization shall determine
within one year of the effective date of this act, and annually
thereafter, the effect that the additional taxes imposed on
cigarettes by this article, and the resulting increase in the tax on
tobacco products required by subdivision (b) of Section 30123, have
on the consumption of cigarettes and tobacco products in this state.
To the extent that a decrease in consumption is determined by the
State Board of Equalization to be a direct result of the additional
tax imposed by this article, or the resulting increase in the tax on
tobacco products required by subdivision (b) of Section 30123, the
State Board of Equalization shall determine the fiscal effect the
decrease in consumption has on the Cigarette and Tobacco Products
Surtax Fund created by Section 30122 (Proposition 99 as approved by
the voters at the November 8, 1988, statewide general election), the
Breast Cancer Fund created by Section 30461.6, the California
Children and Families Trust Fund created by Section 30131
(Proposition 10 as approved by the voters at the November 3, 1998,
statewide general election), and the General Fund with respect to
revenues derived from Section 30101.
   (b) Funds shall be transferred from the California Tobacco Tax Act
of 2014 Fund to the Cigarette and Tobacco Products Surtax Fund, the
Breast Cancer Fund, the California Children and Families Trust Fund,
and the General Fund, to offset the revenue decrease directly
resulting from imposition of additional taxes by this article.
   (c) Transfers under this section shall be made by the board at
times as the board determines necessary to further the intent of this
section.
   30130.54.  (a) The California Tobacco Tax Act of 2014 Fund is
hereby established in the State Treasury for the purposes set forth
in this article. All revenues, less refunds, derived from the taxes
imposed by this article shall be deposited in the California Tobacco
Tax Act of 2014 Fund.
   (b) Moneys in the California Tobacco Tax Act of 2014 Fund, less
moneys transferred pursuant to Section 30130.53, shall be transferred
as follows:
   (1) ___ percent to the Tobacco Prevention and Education Account,
which is hereby created in the California Tobacco Tax Act of 2014
Fund.
   (2) ___ percent to the Tobacco Disease Related Health Care
Account, which is hereby created in the California Tobacco Tax Act of
2014 Fund.
   (3) ___ percent to the Tobacco Law Enforcement Account, which is
hereby created in the California Tobacco Tax Act of 2014 Fund.
   (c) Funds deposited into the California Tobacco Tax Act of 2014
Fund may be placed into the Pooled Money Investment Account for
investment only, and interest earned shall be credited to the fund
and deposited, apportioned, and expended only in accordance with the
act that added this section and its purposes.
   (d) Notwithstanding any other law, the California Tobacco Tax Act
of 2014 Fund is a trust fund established solely to carry out the
purposes of this act and all revenues deposited into the California
Tobacco Tax Act of 2014 Fund, together with interest earned by the
fund, are hereby continuously appropriated for the purposes of the
act that added this section without regard to fiscal year and shall
be expended only in accordance with this act and its purposes.
   (e) Notwithstanding any other law, the taxes imposed by the act
that added this section 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 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 to be applied by the
state for the support of school districts and community college
districts" pursuant to Section 8 of Article XVI of the California
Constitution, and its implementing statutes.
   (f) Notwithstanding  any other law, revenues deposited into the
California Tobacco Tax Act of 2014 Fund, and any interest earned by
the fund, shall only be used for the specific purposes set forth in
Section 30130.55. Revenues deposited into California Tobacco Tax Act
of 2014 Fund shall not be subject to appropriation, reversion, or
transfer by the Legislature, the Governor, the Director of Finance,
or the Controller for any other purpose, nor shall the funds be
loaned to the General Fund or any other fund of the state or any
local government fund.
   (g) All revenues deposited into the California Tobacco Tax Act of
2014 Fund shall be appropriated and expended only for the purposes
expressed in this article, and shall be used only to supplement
existing levels of service and not to fund existing levels of
service. Moneys in the fund shall not be used to supplant state or
local general fund moneys for any purpose.
   30130.55.  After transferring the moneys as required pursuant to
subdivision (b) of Section 30130.53 and pursuant to subdivision (b)
of Section 30130.54, the Controller shall appropriate the moneys from
the accounts in the California Tobacco Tax Act of 2014 Fund as
follows:
   (a) The Tobacco Prevention and Education Account shall be
allocated to supplement tobacco prevention and control programs as
follows:
   (1) __ percent to the State Department of Public Health.
   (2) __ percent to the State Department of Education.
   (3) ___percent to the University of California.
   (b) The Tobacco Disease Related Health Care Account shall be
allocated to the State Department of Health Care Services to improve
existing programs to provide quality and access to health care
programs for families and children pursuant to Chapter 7 (commencing
with Section 14000) to Chapter 8.9 (commencing with Section 14700),
inclusive, of Part 3 of Division 9 of the Welfare and Institutions
Code.
   (c) The Tobacco Law Enforcement Account shall be allocated to the
State Board of Equalization, Department of Justice, and the State
Department of Public Health for the purpose of supplementing funding
for the enforcement of laws that regulate the distribution and sale
of cigarettes and other tobacco products, including, but not limited
to, laws that prohibit cigarette smuggling, counterfeiting, selling
untaxed tobacco, selling tobacco without a proper license and selling
tobacco to minors, and enforcing tobacco-related laws, court
judgments, and settlements.
   (d) Not more than 2 percent of the funds received from the
California Tobacco Tax Act of 2014 Fund shall be used by any
department for administrative costs.
   (e) The Department of Justice, the State Department of Public
Health, the State Department of Education, the State Department of
Health Care Services, and the University of California shall, on an
annual basis, publish on their respective Internet Web sites an
accounting of moneys received from the California Tobacco Tax Act of
2014 Fund and how the moneys were spent. 
   SEC. 5.    Section 30181 of the   Revenue
and Taxation Code   is amended to read: 
   30181.  (a) When any tax imposed upon cigarettes under 
Article 1 (commencing with Section 30101), Article 2 (commencing with
Section 30121), and Article 3 (commencing with Section 30131) of
Chapter 2   this part  is not paid through the use
of stamps or meter impressions, the tax shall be due and payable
monthly on or before the 25th day of the month following the calendar
month in which a distribution of cigarettes occurs, or in the case
of a sale of cigarettes on the facilities of a common carrier for
which the tax is imposed pursuant to Section 30104, the tax shall be
due and payable monthly on or before the 25th day of the month
following the calendar month in which a sale of cigarettes on the
facilities of the carrier occurs.
   (b) Each distributor of tobacco products shall file a return in
the form, as prescribed by the board, which may include, but not be
limited to, electronic media respecting the distributions of tobacco
products and their wholesale cost during the preceding month, and any
other information as the board may require to carry out this part.
The return shall be filed with the board on or before the 25th day of
the calendar month following the close of the monthly period for
which it relates, together with a remittance payable to the board, of
the amount of tax, if any, due under Article 2 (commencing with
Section 30121) or Article 3 (commencing with Section 30131) of
Chapter 2 for that period.
   (c) To facilitate the administration of this part, the board may
require the filing of the returns for longer than monthly periods.
   (d) Returns shall be authenticated in a form or pursuant to
methods as may be prescribed by the board. 
   (e) This section shall become operative on January 1, 2007.

   SEC. 6.    No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution. 
   SEC. 7.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  SECTION 1.    It is the intent of the Legislature
to conduct a review of the structure of the Cigarette and Tobacco
Products Tax Law.