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SB-591 Cigarette and tobacco products taxes: California Tobacco Tax Act of 2015.(2015-2016)

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Amended  IN  Senate  June 02, 2015
Amended  IN  Senate  April 16, 2015

CALIFORNIA LEGISLATURE— 2015–2016 REGULAR SESSION

Senate Bill No. 591


Introduced by Senator Pan
(Principal coauthor: Assembly Member Bonta)

February 26, 2015


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 public health finance.


LEGISLATIVE COUNSEL'S DIGEST


SB 591, as amended, Pan. Cigarette and tobacco products taxes: California Tobacco Tax Act of 2015.
The Cigarette and Tobacco Products Tax Law, the violation of which is a crime, imposes a tax of $0.87 per package of 20 cigarettes on every distributor of cigarettes and a tax on the wholesale cost of tobacco products distributed at a tax rate that is equivalent to the combined rate of all taxes imposed on cigarettes, and at a rate equivalent to $0.50 per pack cigarette tax. 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 Children and Families Act of 1998 (Proposition 10).
This bill, beginning January 1, 2016, would impose an additional tax on the distribution of cigarettes at the rate of $0.10 for each cigarette distributed, which would be $2.00 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 increase the tax upon the distribution of tobacco products under that law.
The bill would provide that the revenues collected from the additional tax be deposited in the California Tobacco Tax Act of 2015 Fund created by this bill, and transferred into accounts within that fund, which are created by this bill, the Tobacco Prevention and Education Account, the Tobacco Disease Related Health Care Account, and the Tobacco Law Enforcement Account. The bill would provide that revenue from this tax would not be considered General Fund revenue, and would limit the use or loan of those revenues, as provided.
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 become operative only if AB 1396 of the 2015–16 Regular Session is also enacted and takes effect on or before January 1, 2016.
Vote: 2/3   Appropriation: NO   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 40,000 people every year. California still has approximately 3.64 million adult smokers and 224,000 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 $13.29 billion in tobacco-related medical expenses every year. The cost of lost productivity due to tobacco use adds an additional estimated $10.35 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 2015–16, it is estimated that the General Fund cost of publicly funded health care programs to the state will be more than $18 billion. In 2015–16, it is estimated that publicly funded health care programs will provide health care coverage to more than 12 million Californians. 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 2015 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: $1.31, 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 one-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, 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 2015

30130.50.
 For the purposes of this article:
(a) “Cigarette” has the same meaning as in Section 30003 as it read on January 1, 2015.
(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.
 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 January 1, 2016.

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 January 1, 2016, at the rate of one hundred mills ($0.10) for each cigarette.
(2) Every dealer and wholesaler shall file a return with the board on or before July 1, 2016, on a form prescribed by the board, showing the number of cigarettes in its possession or under its control in this state at 12:01 a.m. on January 1, 2016. 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 January 1, 2016, 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 July 1, 2016, 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 July 1, 2016. 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 July 1, 2016, until paid, and shall be subject to determination, and redetermination, and any penalties provided with respect to determinations and redeterminations.

30130.54.
 (a) The California Tobacco Tax Act of 2015 Fund is hereby established in the State Treasury for the purposes set forth in this article. All revenues, less refunds and moneys transferred pursuant to Section 30130.53, derived from the taxes imposed by this article shall be deposited in the California Tobacco Tax Act of 2015 Fund.
(b) Moneys in the California Tobacco Tax Act of 2015 Fund shall be transferred as follows:
(1) ___ Fourteen percent to the Tobacco Prevention and Education Account, which is hereby created in the California Tobacco Tax Act of 2015 Fund.
(2) ___ Eighty-four percent to the Tobacco Disease Related Health Care Account, which is hereby created in the California Tobacco Tax Act of 2015 Fund.
(3) ___ Two percent to the Tobacco Law Enforcement Account, which is hereby created in the California Tobacco Tax Act of 2015 Fund.
(c) Funds deposited into the California Tobacco Tax Act of 2015 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 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.
(e) Notwithstanding any other law, revenues deposited into the California 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 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.
(f) All revenues deposited into the California Tobacco Tax Act of 2015 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.

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 shall become operative only if Assembly Bill 1396 of the 2015–16 Regular Session is also enacted and takes effect on or before January 1, 2016.