AB 16

Bill Subjects

Abstract

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 XIIIA of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.