Bill Text: CA SBX213 | 2015-2016 | Regular Session | Introduced


Bill Title: Public health: cigarette and tobacco products: electronic cigarettes: taxes: California Health Care,

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Failed) 2016-03-10 - From committee without further action. [SBX213 Detail]

Download: California-2015-SBX213-Introduced.html
BILL NUMBER: SBX2 13	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Pan and Hernandez

                        AUGUST 26, 2015

   An act to add Section 22971.05 to the Business and Professions
Code, and to amend Sections 30014, 30104, 30108, 30166, and 30181 of,
and to add Article 2.5 (commencing with Section 30130.51) to Chapter
2 of Part 13 of Division 2 of, the Revenue and Taxation Code,
relating to public health, and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 13, as introduced, Pan. Public health: cigarette and tobacco
products: electronic cigarettes: taxes: California Health Care,
Research, and Prevention Tobacco Tax Act of 2015.
   The Cigarette and Tobacco Products Licensing Act of 2003 requires
the State Board of Equalization to administer a statewide program to
license manufacturers, importers, distributors, wholesalers, and
retailers of cigarettes and tobacco products. Under existing law, a
violation of this act is a misdemeanor.
   This bill would expand the definition of tobacco products for
purposes of that act to include electronic cigarettes, as defined,
thereby subjecting manufacturers, importers, distributors,
wholesalers, and retailers of electronic cigarettes to the same
licensing requirements imposed pursuant to that act on manufacturers,
importers, distributors, wholesalers, and retailers of tobacco
products. By broadening the act to apply to manufacturers, importers,
distributors, wholesalers, and retailers of electronic cigarettes,
this bill would expand the scope of an existing crime, thereby
imposing a state-mandated local program.
   The Cigarette and Tobacco Products Tax Law, the violation of which
is a crime, imposes a tax on distributors of cigarettes at the rate
of $0.87 per package of 20 cigarettes and a tax on distributors of
tobacco products, based on wholesale cost, at a rate determined
annually that is equivalent to the combined rate of all taxes imposed
on cigarettes, and at a rate equivalent to $0.50 per package of 20
cigarettes. Revenues from taxes imposed under this law are deposited
in specified accounts. These taxes are inclusive of the 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).
    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, which
would be $2 per pack; 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 at the rate equal to the difference
between the existing tax rate and the tax rate imposed by this bill
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
thereby increase the tax upon the distribution of tobacco products
pursuant to Proposition 99, the revenues from which are required to
be deposited in the Cigarette and Tobacco Products Surtax Fund.
   This bill would additionally, 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 a tax on the distribution of
electronic cigarettes, as defined, based on the wholesale cost, at a
rate determined annually that is equivalent to the cigarette tax
rate, which would be $2.87 per package of 20 cigarettes.
    This bill would expand the definition of "tobacco products" for
purposes of the Cigarette and Tobacco Products Tax Law to include
electronic cigarettes, thereby subjecting distributors, wholesalers,
and transporters of electronic cigarettes to, among other things, the
same licensing, bonding, and registration requirements imposed on
distributors, wholesalers, and transporters of tobacco products.
   This bill would provide that the revenues collected from the taxes
imposed on cigarettes and electronic cigarettes by this bill, less
refunds, would not be considered General Fund revenues and would be
deposited in the California Health Care, Research, and Prevention
Tobacco Tax Act of 2015 Fund created by this bill. The bill would
require moneys in the California Health Care, Research, and
Prevention Tobacco Tax Act of 2015 Fund to be continuously
appropriated without regard to fiscal year to the Controller, to be
used to fund health care and prevention programs.
   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 provide that no reimbursement is required by this
act for a specified reason.
   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.
   Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: 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 40,000 people
every year. Each year thousands of Californians require medical and
dental treatment as a result of tobacco use.
   (b) Health care treatment of all types of cancer, cardiovascular
and lung disease, oral disease, and tobacco-related diseases and
conditions continues to impose a significant financial burden upon
California's overstressed health care system. Tobacco use costs
Californians more than $13.29 billion in health care expenses every
year, of which $3.5 billion is paid for by taxpayers through existing
health care programs and services that provide health care,
treatment, and services for Californians. The cost of lost
productivity due to tobacco use adds an additional estimated $10.35
billion to the annual economic consequences of smoking and tobacco
use in California.
   (c) An increase in the tobacco tax is an appropriate way to
decrease tobacco use and mitigate the costs of health care treatment
and improve existing programs providing quality health care and
access to health care services for families and children. It will
save lives and save state and local governments money in the future.
   (d) Most electronic cigarettes contain nicotine, which is derived
from tobacco and is a highly addictive drug. Electronic cigarettes
are currently not subject to any tobacco taxation, making them
cheaper and potentially more attractive, especially to young people.
   (e) There are more than 470 electronic cigarette brands for sale
today offered in over 7,700 flavors including candy-flavors that
appeal to youth, such as Captain Crunch, gummy bear, cotton candy,
Atomic Fireball, and fruit loops. The fastest growing age range for
electronic cigarettes is middle school and high school students and
according to the Centers for Disease Control, electronic cigarette
use among this group tripled from 2013 to 2014.
   (f) Increasing the cost of cigarettes and tobacco products is
widely recognized as the most effective way to reduce smoking across
California, especially by young people. The 2000 U.S. Surgeon General'
s Report, Reducing Tobacco Use, found that raising tobacco-product
prices decreases the prevalence of tobacco use, particularly among
kids and young adults, and that tobacco tax increases produce
"substantial long-term improvements in health." From its review of
existing research, the report concluded that raising tobacco taxes is
one of the most effective tobacco prevention and control strategies.
Reducing smoking will save lives and saves state and local
governments money in the future.
   (g) Because increasing the tobacco tax will reduce smoking and use
of other tobacco products, it is important to protect existing
tobacco tax-funded programs from a decline in tax revenues.
   (h) It is important that funding be dedicated to health care and
prevention programs.
   (i) California currently taxes cigarettes at only $0.87 per pack,
and ranks 35th in tobacco tax rates, reflecting one of the lowest
tobacco tax rates in the United States. The national average is $1.60
per pack. Thirty-five states have cigarette tax rates of $1.00 per
pack or higher, and California is well below other western states
(Washington: $3.025, Oregon: $1.31, Nevada: $1.80, and Arizona:
$2.00). California last raised its tobacco tax in 1998.
  SEC. 2.  Section 22971.05 is added to the Business and Professions
Code, to read:
   22971.05.  For purposes of this division, beginning on and after
the first day of the first calendar quarter commencing more than 90
days after the effective date of this section, "tobacco products"
also includes electronic cigarettes, as that term is defined in
subdivision (b) of Section 30130.51 of the Revenue and Taxation Code.

  SEC. 3.  Section 30014 of the Revenue and Taxation Code is amended
to read:
   30014.  (a) "Transporter" means any person transporting into or
within this state any of the following:
   (1) Cigarettes not contained in packages to which are affixed
California cigarette tax stamps or meter impressions.
   (2) Tobacco products upon which the tobacco products surtax
imposed by Article 2 (commencing with Section 30121) and Article 3
(commencing with Section 30131) of Chapter 2 has not been paid. 
   (3) Electronic cigarettes upon which the electronic cigarette tax
imposed by Section 30130.52 has not been paid. 
   (b) "Transporter" shall not include any of the following:
   (1) A licensed distributor.
   (2) A common carrier.
   (3) A person transporting cigarettes and tobacco products under
federal internal revenue bond or customs control that are
non-tax-paid under Chapter 52 of the Internal Revenue Act of 1954 as
amended.
  SEC. 4.  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. 5.  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   that  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   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. 6.  Article 2.5 (commencing with Section 30130.51) is added to
Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code,
to read:

      Article 2.5.  The California Health Care, Research, and
Prevention Tobacco Tax Act of 2015


   30130.51.  For the purposes of this article:
   (a) "Cigarette" has the same meaning as in Section 30003 as it
read on January 1, 2015.
   (b) "Electronic cigarettes" means any device that is intended to
be used to deliver aerosolized or vaporized nicotine to the person
inhaling from the device, including, but not limited to, an
e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah. Electronic
cigarettes include any component, part, or accessory of that a device
that is used during the operation of the device, whether sold
separately or as a package with that device, if it is intended to be
used to deliver aerosolized or vaporized nicotine to the person using
the device. Electronic cigarettes also include any liquid or
substance containing nicotine intended to be inhaled during the use
of the device. Electronic cigarettes do not include any battery,
battery charger, carrying case, or other accessory not used in the
operation of the device if sold separately. E-cigarettes shall not
include any product that has been approved by the United States Food
and Drug Administration for sale as a tobacco cessation product or
for other therapeutic purposes where that product is marketed and
sold solely for such an approved purpose.
   (c) The references to "tobacco products" in this part, except in
Article 2 (commencing with Section 30121) and Article 3 (commencing
with Section 30131) of Chapter 2 (commencing with Section 30101), and
Chapter 9 (commencing with Section 30461), shall include electronic
cigarettes, unless the context otherwise requires.
   30130.52.  (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 article.
   (b) (1) There shall be imposed upon every distributor a tax upon
the distribution of electronic cigarettes, based on the wholesale
cost of these products, at a tax rate, as determined annually by the
State Board of Equalization, that is equivalent to the total rate of
tax imposed on cigarettes by this part, on or after the first day of
the first calendar quarter commencing more than 90 days after the
effective date of this article.
   (2) The board may adopt any regulations necessary to enforce and
administer the tax imposed in paragraph (1), as provided for in
subdivision (c) of Section 30130.51, including, but not limited to,
regulations that address the following:
   (A) The imposition of tax on the distribution of any liquid or
substance containing nicotine, any device intended to be used to
deliver aerosolized or vaporized nicotine to the person inhaling from
the device, and any component, part, or accessory of such a device
that is intended to be used to deliver aerosolized or vaporized
nicotine to the person inhaling from the device.
   (B) Describing who is a distributor of electronic cigarettes,
which is consistent with the definition of the term "distributor" in
Section 30111.
   (c) The wholesale cost used to calculate the amount of tax due
under subdivision (b) does not include the wholesale cost of
electronic cigarettes that were returned by a customer during the
same reporting period in which the electronic cigarettes were
distributed, when the distributor refunds the entire amount the
customer paid for the tobacco products either in cash or credit. For
purposes of this subdivision, refund or credit of the entire amount
shall be deemed to be given when the purchase price less rehandling
and restocking costs is refunded or credited to the customer. The
amount withheld for rehandling and restocking costs may be a
percentage of the sales price determined by the average cost of
rehandling and restocking returned merchandise during the previous
accounting cycle.
   30130.53.  (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 article 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 article. 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 article at the following rates:
   (A) Two dollars and fifty cents ($2.50) for each stamp bearing the
designation "25."
   (B) Two dollars ($2.00) for each stamp bearing the designation
"20."
   (C) One dollar ($1.00) 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 article until paid, shall be subject to determination,
redetermination, and any penalties provided with respect to
determinations and redeterminations.
   30130.54.  (a) The California Health Care, Research, and
Prevention Tobacco Tax Act of 2015 Fund is hereby established in the
State Treasury for the purposes set forth in this article.
Notwithstanding Section 30461, all revenues, less refunds, derived
from the taxes imposed by this article on cigarettes and electronic
cigarettes shall be deposited in the California Health Care,
Research, and Prevention Tobacco Tax Act of 2015 Fund.
   (b) Notwithstanding any other law, the California Health Care,
Research, and Prevention Tobacco Tax Act of 2015 Fund is a trust fund
established solely to carry out the purposes set forth in this
article, and all revenues deposited into the California Health Care,
Research, and Prevention Tobacco Tax Act of 2015 Fund, together with
interest earned by the fund, are hereby continuously appropriated
without regard to fiscal year to the Controller, to be used to fund
health care and prevention programs.
   (c) Notwithstanding any other law, the taxes imposed by this
article 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, and shall not
be considered General Fund revenue for purposes of Section 8 of
Article XVI of the California Constitution, and its implementing
statutes.
   (d) Notwithstanding any other law, revenues deposited into the
California Health Care, Research, and Prevention Tobacco Tax Act of
2015 Fund, and any interest earned by the fund, shall only be used
for the specific purposes set forth in this article. Revenues
deposited into the California Health Care, Research, and Prevention
Tobacco Tax Act of 2015 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.
  SEC. 7.  Section 30166 of the Revenue and Taxation Code is amended
to read:
   30166.  Stamps and meter register settings shall be sold at their
denominated values less  a discount of  0.85 
percent to licensed distributors.   percent, which shall
be calculated on the first one dollar ($1.00) in denomination value.
 Payment for stamps or meter register settings shall be made at
the time of purchase, provided that a licensed distributor, subject
to the conditions and provisions of this article, may be permitted to
defer payments therefor.
  SEC. 8.  Section 30181 of the Revenue and Taxation Code is amended
to read:
   30181.  (a)  When   If  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  
that  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. 9.  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.                      
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