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SB-768 Cigarette and tobacco products taxes: California Tobacco Tax Act of 2014.(2013-2014)

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SB768:v96#DOCUMENT

Amended  IN  Senate  May 14, 2013
Amended  IN  Senate  May 01, 2013
Amended  IN  Senate  April 17, 2013

CALIFORNIA LEGISLATURE— 2013–2014 REGULAR SESSION

Senate Bill
No. 768

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, 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: 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, 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 the board, each fiscal year, to adjust the tax on the distribution of cigarettes, as specified, based upon the percentage increase in the California Consumer Price Index for all items, if any.

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 would be 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 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.
This bill would take effect immediately as a tax levy.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   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 36,000 people every year. California still has approximately 3.4 million adult smokers and 200,000 youth smokers.
(b) The inevitable health care costs of smoking come to almost $10 for every pack of cigarettes sold in California.
(c) Tobacco use costs Californians more than $9.1 billion in tobacco-related 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 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 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 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 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 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 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. 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 in 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 percentage increase in the California Consumer Price Index for all items, 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 this article 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 set forth in this article and all revenues deposited into the California Tobacco Tax Act of 2014 Fund, together with interest earned by the fund, are hereby continuously appropriated without regard to fiscal year to be expended only in accordance with this article and its purposes.
(e) 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 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 this article. Revenues deposited into the 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 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 allocate 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) Funds in 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) Funds in the Tobacco Law Enforcement Account shall be allocated to the State Board of Equalization, the 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 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) If any tax imposed upon cigarettes under 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, 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.

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.