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AB-963 Taxation: marijuana.(2017-2018)

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Date Published: 05/30/2017 02:00 PM
AB963:v96#DOCUMENT

Amended  IN  Assembly  May 30, 2017
Amended  IN  Assembly  April 05, 2017
Amended  IN  Assembly  March 28, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 963


Introduced by Assembly Member Gipson

February 16, 2017


An act to amend Sections 6592, 6901, 34010, 34011, 34012, 34013, 34014, 34015, 34016, 34018, and 34019 and 34018 of, to add Sections 6369.6, 6471.5, 34011.51, 34011.52, 34011.53, 34011.54, 34011.55, 34011.56, 34011.57, 34013.1, 34013.2, 34014.1, 34016.05, 34016.1, 34016.11, 34016.12, 34016.13, 34016.14, and 34016.15 to, and to add Article 1.7 (commencing with Section 6480.50) to Chapter 5 of Part 1 of Division 2 of, the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


AB 963, as amended, Gipson. Taxation: marijuana.
(1) The Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, commencing January 1, 2018, imposes an excise tax on the purchase of marijuana and marijuana products, as defined, and a separate cultivation tax on marijuana that enters the commercial market, and requires revenues from those taxes, interest, penalties, and other related amounts to be deposited into the California Marijuana Tax Fund, which is continuously appropriated for specified purposes pursuant to a specified schedule. AUMA provides for the administration of both taxes by the State Board of Equalization (board) and requires persons required to be licensed involved in the cultivation and retail sale of marijuana or marijuana products to obtain a separate permit from the board. Under AUMA, a violation of provisions relating to these taxes is a crime unless otherwise specified.
This bill would provide for the suspension or revocation of those permits, would authorize the board to deny an application for a permit if the applicant had previously been issued a permit that was suspended or revoked, among other reasons, and would set forth the process for appealing permit suspensions, revocations, and application denials. The bill would also impose specific criminal penalties, including fines and imprisonment, for certain violations of the provisions relating to the cultivation and excise taxes on marijuana. By modifying the scope of a crime and imposing new crimes, the bill would impose a state-mandated local program. As revenues from the fines imposed by the bill would be deposited into the California Marijuana Tax Fund, a continuously appropriated fund, this bill would make an appropriation.
(2) Existing sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. Existing law requires a collection of prepayment of retail sales tax at the time that motor vehicle fuel tax or diesel fuel tax is imposed, and on each subsequent sale other than the retail sale, as specified. AUMA
AUMA authorizes the board to prescribe a method and manner for payment of the marijuana cultivation tax that utilizes tax stamps or state-issued product bags, as specified.
This bill, commencing July 1, 2018, would require a wholesaler, which this bill would define as a person that makes a distribution of marijuana or marijuana products to a retailer, to collect prepayments of both marijuana excise tax and sales tax on the marijuana or marijuana products distributed, as specified. The bill would require the wholesaler to provide the retailer with evidence of the prepayment amounts collected and would grant a retailer that retains that evidence and other documents to credits in the amount of the marijuana excise tax and sales tax prepayments against its marijuana excise tax or sales and use tax obligations, respectively, for the same period. The bill would require a wholesaler not required to hold a seller’s permit to register with the board, would require all wholesalers to obtain a permit from the board for the purposes of the marijuana taxes, and would authorize the board to require wholesalers to place a security with the board.
This bill would authorize the board to prescribe a method and manner for prepayment of the marijuana excise tax that utilizes tax stamps or other markings and would further authorize the board to prescribe a method and manner for collection and remittance of the marijuana cultivation tax by wholesalers, as specified.
As a violation of this bill’s requirements would be a crime, this bill would impose a state-mandated local program.
(3) AUMA exempts from sales and use taxes retail sales of medical cannabis, medical cannabis concentrate, edible medical cannabis products, or topical cannabis, as defined, to qualified patients or primary caregivers that provide identification cards issued under the Medical Marijuana Program and other government-issued identification cards.
This bill would revise and recast that provision to exempt from sales and use taxes retail sales of medical cannabis, medical cannabis concentrate, edible medical cannabis products, or topical cannabis to persons with identification cards, as defined, or primary caregivers that provide the above-described identification. The bill would subject a purchaser that furnishes a seller with a false or falsified identification card to specified fines.

(4)The Revenue Recovery and Collaborative Enforcement Team Act, until January 1, 2019, establishes the Revenue Recovery and Collaborative Enforcement Team as a pilot program for combating criminal tax evasion associated with the underground economy, as specified.

Under AUMA, reasonable costs incurred by the board for administering and collecting the taxes imposed by AUMA, as long as those costs do not exceed 4% of tax revenues received, are continuously appropriated to the board from the California Marijuana Tax Fund, as specified.

This bill would require the board to create a Cannabis Criminal Enforcement Team for the purpose of combating criminal tax evasion associated with marijuana, marijuana products, and marijuana accessories with representatives from the board, the Franchise Tax Board, the Employment Development Department, and state licensing authorities under AUMA and the Medical Cannabis Regulation and Safety Act. The bill would authorize those team members to exchange information for those purposes, would provide for the continued confidentiality of exchanged confidential information, and would prohibit the disclosure of any confidential information received by, or reported to, the team, as specified. The bill would modify the above-described allocation to the board to include enforcement activity costs incurred by the board through participation in the Cannabis Criminal Enforcement Team as that participation relates to the taxes imposed by AUMA. By expanding the purposes for which the California Marijuana Tax Fund is continuously appropriated, this bill would make an appropriation.

(5)

(4) 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.

(6)

(5) AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a 2/3 vote of the membership of each house of the Legislature, except as provided.
This bill would declare that it furthers the purposes and intent of AUMA for specified reasons.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 6369.6 is added to the Revenue and Taxation Code, to read:

6369.6.
 (a) There are exempted from the taxes imposed by this part the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, medical cannabis, medical cannabis concentrate, edible medical cannabis products, or topical cannabis as those terms are defined in Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code when a person with an identification card or primary caregiver furnishes the seller with both his or her card issued under Section 11362.71 of the Health and Safety Code and a valid government-issued identification card.
(b) For purposes of this section, “person with an identification card” and “primary caregiver” have the same meanings as those terms are defined in Section 11362.7 of the Health and Safety Code.
(c) Any purchaser that furnishes the seller with a false or falsified identification card shall be liable to the state for the amount of tax that would be due if he or she had not given such a card. In addition to the tax, the purchaser shall be liable to the state for a penalty of 10 percent of the tax or five hundred dollars ($500), whichever is greater, for each purchase made for personal gain or to evade the payment of tax. For purposes of this subdivision, a “false or falsified identification card” includes any driver’s license or other identification card issued by a governmental agency, including a card issued under Section 11362.71 of the Health and Safety Code, that has been stolen, altered, forged, duplicated, reproduced, or counterfeited.
(d) A seller is relieved of liability for the sales tax if the purchaser furnishes the seller with valid identification cards described in subdivision (a), and the seller takes the identification cards in good faith.

SEC. 2.

 Section 6471.5 is added to the Revenue and Taxation Code, to read:

6471.5.
 Any person required to make prepayment pursuant to Article 1.7 (commencing with Section 6480.50) may not be required to make additional prepayment pursuant to this article, provided that more than 75 percent of the gross receipts of that person are from the retail sale of marijuana or marijuana products.

SEC. 3.

 Article 1.7 (commencing with Section 6480.50) is added to Chapter 5 of Part 1 of Division 2 of the Revenue and Taxation Code, to read:
Article  1.7. Prepayment of Sales Tax on Marijuana and Marijuana Products

6480.50.
 For purposes of the imposition of the prepayment of sales tax on marijuana and marijuana products pursuant to this article:
(a) “Marijuana” and “marijuana products” have the same meanings as those terms are defined in Section 34010.
(b) “Cultivator” and “manufacturer” shall have the same meaning as those terms are defined pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code.
(c) “Distribution” shall mean the sale or delivery of marijuana and marijuana products from a wholesaler to a retailer.
(d) “Wholesaler” has the same meaning as that term is defined in Section 34010.
(e) With respect to marijuana and marijuana products, “sale” means the transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of marijuana or marijuana products to a retailer for a consideration, or a distribution without consideration.

6480.51.
 (a) At any time a wholesaler makes a distribution of marijuana or marijuana products in this state to a retailer, the wholesaler shall collect a prepayment of the retail sales tax, in the following manner:
(1) When the distribution is a sale, the prepayment shall be based on the gross receipts derived from that sale of marijuana or those marijuana products.
(2) If a cultivator or a manufacturer is also the retailer, the prepayment shall be based on the wholesale cost of the marijuana or marijuana products, as determined by the board.
(3) If the wholesaler is not required to hold a seller’s permit pursuant to this part, the prepayment shall be based on the wholesale cost, as determined by the board.
(b) (1) Each wholesaler shall report and pay the prepayment amounts to the board, in a form as prescribed by the board, in the period in which the marijuana or marijuana products are distributed. The prepayment amounts shall be collected by the wholesaler from the retailer to which the marijuana or marijuana products are distributed. Subject to any credit or refund due to the retailer, the prepayment amount is deemed to be public moneys that are the property of the State of California. The wholesaler required to collect and remit the prepayment amount shall hold the prepayment amount in trust for the state. The prepayment amount constitutes a debt owed by the wholesaler to this state until reported and paid to the board, until satisfactory proof has been submitted to prove that the retailer of the marijuana or marijuana products has paid the retail sales tax to the board, or until a wholesaler that has consumed the marijuana or marijuana products has paid the use tax to the board on the sales price, if applicable, of the amount consumed.
(2) Each wholesaler shall provide the retailer with an invoice for, or other evidence of the collection of, the prepayment amounts, which shall be separately stated on the invoice.
(3) Each wholesaler shall report to the board, in a form as prescribed by the board and for the period in which the marijuana and marijuana products were distributed, all of the following:
(A) The amount of marijuana and marijuana products distributed, the gross receipts derived from any sale, or the wholesale cost, whichever is applicable, the amount of sales tax prepayments collected by the wholesaler, and any other information deemed necessary by the board.
(B) If the amount of sales tax prepayments collected by the wholesaler is greater than the amount of sales tax prepayments made by the wholesaler, then subject to any credit or refund due to the retailer, the excess is deemed to be public moneys that are the property of the State of California. The wholesaler required to collect and remit the sales tax prepayment shall hold the amount of the excess in trust for the state. The excess constitutes a debt owed by the wholesaler to the state until reported and paid to the board, or until satisfactory proof has been submitted that the retailer of the marijuana or marijuana products has paid the tax to the board.
(c) The amount of a prepayment paid by the retailer shall constitute a credit against its sales and use taxes due and payable for the period in which the retail sale was made. Failure of the wholesaler to report prepayments or a wholesaler’s failure to comply with any other duty under this article shall not constitute grounds for denial of the credit to the retailer, either on a temporary or permanent basis or otherwise. To be entitled to the credit, the retailer shall retain for inspection by the board any receipts, invoices, or other documents showing the amount of sales tax prepaid to its wholesaler, together with the evidence of payment.
(d) The rate of the prepayment required to be collected shall be the combined rate of tax imposed pursuant to this part, Part 1.5 (commencing with Section 7200), and Section 35 of Article XIII of the California Constitution on all sales of marijuana or marijuana products sold by wholesalers in this state.

6480.52.
 (a) If the board determines that it is necessary for the efficient administration of this part, the board may require a wholesaler to provide the board with a list of retailers to which the marijuana or marijuana products were distributed.
(b) In addition to any other reports required under this article, the board may, by rule and otherwise, require additional, other, or supplemental reports, in any form which the board may require, from wholesalers with respect to their distributions of marijuana or marijuana products, which shall include, but not be limited to, the name of the retailer to whom the marijuana or marijuana products was distributed, the retailer’s license number issued pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26001) of the Business and Professions Code, a description of the product distributed, including the weight of the marijuana included in each distribution, the date of each sale or distribution, and any gross receipts derived from each sale of marijuana or marijuana product.
(c) Any wholesaler that fails to comply with this section is guilty of a misdemeanor punishable as provided in Section 7153.

6480.53.
 The wholesaler shall file its prepayment form together with a remittance of the prepayment amounts, if any, required to be collected pursuant to Section 6480.51 payable to the board, on or before the last day of the month following the monthly period to which the prepayment form or each prepayment relates.

6480.54.
 (a) Any wholesaler that fails to make a timely remittance to the board of the prepayment amounts, if any, required pursuant to Sections 6480.51 and 6480.53 shall also pay a penalty of 10 percent of the amount of the prepayment due but not paid, plus interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date the prepayment became due and payable to the state until the date of payment.
(b) The penalty amount specified in subdivision (a) shall be 25 percent if the wholesaler knowingly or intentionally fails to make a timely remittance.

6480.55.
 (a) The following persons that have paid prepayment amounts either directly to the board or to the wholesaler from which the marijuana or marijuana products were purchased shall be refunded those amounts:
(1) Any retailer that sells marijuana or marijuana products that are exempt from the sales or use tax pursuant to Section 6352 or 6381.
(2) Any retailer that has lost the marijuana or marijuana products through fire, flood, theft, spoilage, or accident, prior to any retail sale.
(3) Any retailer that has paid prepayment amounts on products exempted from the sales and use tax pursuant to Section 6369.6, when the prepayment amounts paid are in excess of the amount due and payable for the period in which the retail sale of those products was made.
(b) In lieu of a refund, the board may authorize a credit to be taken by the person to whom the refund is due upon his or her prepayment form or sales and use tax return.

6480.56.
 (a) The board may require any wholesaler subject to this article to place with the board any security that the board determines is necessary to ensure compliance with this article. The amount of the security shall be fixed by the board but shall not be greater than three times the estimated average liability of wholesalers required to file returns for monthly periods, determined in any manner that the board deems proper, or five hundred thousand dollars ($500,000), whichever amount is less. These amounts apply regardless of the type of security placed with the board. The amount of the security may be increased or decreased by the board subject to the maximum amounts.
(b) The board may sell the security at public auction if it becomes necessary to so do in order to recover any tax or any amount required to be collected or penalty due. Notice of the sale may be served upon the person that placed the security personally or by mail. If service is by mail, service shall be made in the manner prescribed for service of a notice of a deficiency determination and shall be addressed to the person’s address as it appears in the records of the board. However, security in the form of a bearer bond issued by the United States or the State of California which has a prevailing market price may be sold by the board at a private sale at a price not lower than the prevailing market price thereof. Upon any sale, any surplus above the amounts due shall be returned to the wholesaler that placed the security.

6480.57.
 A wholesaler that is not required to hold a seller’s permit pursuant to this part shall register with the board on a form prescribed by the board and shall set forth the name under which the wholesaler transacts or intends to transact business, the location of the wholesaler’s place or places of business, and other information as the board may require.

6480.58.
 This article shall become operative on July 1, 2018.

SEC. 4.

 Section 6592 of the Revenue and Taxation Code is amended to read:

6592.
 (a) If the board finds that a person’s failure to make a timely return or payment is due to reasonable cause and circumstances beyond the person’s control, and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, the person shall be relieved of the penalties provided by Sections 6476, 6477, 6479.3, 6480.4, 6480.8, 6480.54, 6511, 6565, 6591, 7051.2, 7073, and 7074.
(b) Except as provided in subdivision (c) any person seeking to be relieved of the penalty shall file with the board a statement under penalty of perjury setting forth the facts upon which he or she bases his or her claim for relief.
(c) The board shall establish criteria that provides for efficient resolution of requests for relief pursuant to this section.

SEC. 5.

 Section 6901 of the Revenue and Taxation Code is amended to read:

6901.
 If the board determines that any amount, penalty, or interest has been paid more than once or has been erroneously or illegally collected or computed, the board shall set forth that fact in the records of the board and shall certify the amount collected in excess of the amount legally due and the person from whom it was collected or by whom paid. The excess amount collected or paid shall be credited by the board on any amounts then due and payable from the person from whom the excess amount was collected or by whom it was paid under this part, and the balance shall be refunded to the person, or his or her successors, administrators, or executors, if a determination by the board is made in any of the following cases:
(a) Any amount of tax, interest, or penalty was not required to be paid.
(b) Any amount of prepayment of sales tax, interest, or penalty paid pursuant to Article 1.5 (commencing with Section 6480) or Article 1.7 (commencing with Section 6480.50) of Chapter 5 was not required to be paid.
(c) Any amount that is approved as a settlement pursuant to Section 7093.5.
Any overpayment of the use tax by a purchaser to a retailer who is required to collect the tax and who gives the purchaser a receipt therefor pursuant to Article 1 (commencing with Section 6201) of Chapter 3 shall be credited or refunded by the state to the purchaser. Any proposed determination by the board pursuant to this section with respect to an amount in excess of fifty thousand dollars ($50,000) shall be available as a public record for at least 10 days prior to the effective date of that determination.

SEC. 6.

 Section 34010 of the Revenue and Taxation Code is amended to read:

34010.
 For purposes of this part:
(a) “Board” shall mean the State Board of Equalization or its successor agency.
(b) “Bureau” shall mean the Bureau of Marijuana Control within the Department of Consumer Affairs.
(c) “Tax Fund” means the California Marijuana Tax Fund created by Section 34018.
(d) “Marijuana” shall have the same meaning as set forth in Section 11018 of the Health and Safety Code and shall also mean medical cannabis.
(e) “Marijuana products” shall have the same meaning as set forth in Section 11018.1 of the Health and Safety Code and shall also mean medical concentrates and medical cannabis products.
(f) “Marijuana flowers” shall mean the dried flowers of the marijuana plant as defined by the board.
(g) “Marijuana leaves” shall mean all parts of the marijuana plant other than marijuana flowers that are sold or consumed.
(h) “Gross receipts” shall have the same meaning as set forth in Section 6012.
(i) “Retail sale” shall have the same meaning as set forth in Section 6007.
(j) “Person” shall have the same meaning as set forth in Section 6005.
(k) “Microbusiness” shall have the same meaning as set forth in paragraph (3) of subdivision (a) of Section 26070 of the Business and Professions Code.
(l) “Nonprofit” shall have the same meaning as set forth in Section 26070.5 of the Business and Professions Code.
(m) “Wholesaler” shall mean a person that makes a distribution of marijuana or marijuana products. For purposes of this subdivision and for the imposition of marijuana excise taxes pursuant to this part, “distribution” shall mean sale or delivery of marijuana or marijuana products from a wholesaler to a retailer.

SEC. 7.

 Section 34011 of the Revenue and Taxation Code is amended to read:

34011.
 (a) Effective January 1, 2018, a marijuana excise tax shall be imposed upon purchasers of marijuana or marijuana products sold in this state at the rate of 15 percent of the gross receipts of any retail sale by a dispensary or other person required to be licensed pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or a retailer, microbusiness, nonprofit, or other person required to be licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code to sell marijuana and marijuana products directly to a purchaser.
(b) Except as otherwise provided by regulation, the tax levied under this section shall apply to the full price, if nonitemized, of any transaction involving both marijuana or marijuana products and any other otherwise distinct and identifiable goods or services, and the price of any goods or services, if a reduction in the price of marijuana or marijuana products is contingent on purchase of those goods or services.
(c) A dispensary or other person required to be licensed pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or a retailer, microbusiness, nonprofit, or other person required to be licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code shall be responsible for collecting this tax and remitting it to the board in accordance with rules and procedures established under law and any regulations adopted by the board.
(d) The excise tax imposed by this section shall be in addition to the sales and use tax imposed by the state and local governments.
(e) Gross receipts from the sale of marijuana or marijuana products for purposes of assessing the sales and use tax under Part 1 (commencing with Section 6001) shall include the tax levied pursuant to this section.
(f) No marijuana or marijuana products may be sold to a purchaser unless the excise tax required by law has been paid by the purchaser at the time of sale.

SEC. 8.

 Section 34011.51 is added to the Revenue and Taxation Code, to read:

34011.51.
 (a) For purposes of the imposition of the prepayment of marijuana excise tax pursuant to this part:
(1) “Arm’s length transaction” is defined as a sale in good faith and for valuable consideration that reflects the fair market value in the open market between two informed and willing parties, neither under any compulsion to participate in the transaction. A sale between relatives, related companies, or partners is presumed not to be made at “arm’s length.”
(2) “Retailer” means a dispensary or other person required to be licensed pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code, or a retailer, microbusiness, nonprofit, or other person required to be licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code, to sell marijuana or marijuana products directly to a purchaser.
(3) “Sale” means the transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of marijuana or marijuana products to a retailer for a consideration.
(b) At any time that marijuana or marijuana products are distributed to a retailer in this state, the wholesaler shall collect a prepayment of the marijuana excise tax as follows:
(1) When the distribution is a sale, the prepayment shall be based on the gross receipts derived from the sale of marijuana or marijuana products to that retailer in an arm’s length transaction.
(2) If a cultivator or a manufacturer is also the retailer, the prepayment shall be based on the wholesale cost of the marijuana and marijuana products, as determined by the board.
(c) (1) Each wholesaler shall report and pay the prepayment amounts to the board, in a form as prescribed by the board, in the period in which the marijuana or marijuana products are distributed. The prepayment amounts shall be collected by the wholesaler from the retailer to which the marijuana or marijuana products are distributed.
(2) Subject to any credit or refund due to the retailer, prepayment amount is deemed to be public moneys that are the property of the State of California and shall be used for the purposes set forth in Sections 34018 and 34019. The wholesaler required to collect and remit the prepayment amount shall hold the prepayment amount in trust for these purposes. The prepayment amount constitutes a debt owed by the wholesaler to this state until reported and paid to the board, or until satisfactory proof has been submitted to prove that the retailer of the marijuana or marijuana products has paid the marijuana excise tax to the board.
(d) (1) Each wholesaler shall provide the retailer with an invoice for, or other evidence of the collection of, the prepayment amounts, which shall be separately stated thereon.
(2) Each wholesaler shall report to the board, using electronic media, for the period in which the marijuana and marijuana products were distributed, all of the following:
(A) The amount of marijuana and marijuana products distributed, the gross receipts derived from the sale or wholesale cost, the amount of marijuana excise tax prepayments collected by the wholesaler, and any other information deemed necessary by the board.
(B) If the amount of marijuana excise tax prepayments collected by the wholesaler is greater than the amount of marijuana excise tax prepayments made by the wholesaler, then subject to any credit or refund due to the retailer, the excess is deemed to be public moneys that are the property of the State of California and shall be used for the purposes set forth in Sections 34018 and 34019. The wholesaler required to collect and remit the marijuana excise tax prepayments shall hold the excess in trust for these purposes. The excess constitutes a debt owed by the wholesaler to the state until reported and paid to the board, or until satisfactory proof has been submitted that the retailer of the marijuana or marijuana products has paid the tax to the board.
(e) The amount of a prepayment paid by the retailer shall constitute a credit against its marijuana excise taxes due and payable for the period in which the sale was made. Failure of the wholesaler to report prepayments or a wholesaler’s failure to comply with any other duty under this part shall not constitute grounds for denial of the credit to the retailer, either on a temporary or permanent basis or otherwise. To be entitled to the credit, the retailer shall retain for inspection by the board any receipts, invoices, or other documents showing the amount of marijuana excise tax prepaid to its wholesaler, together with the evidence of payment.
(f) (1) The rate of the prepayment required to be collected shall be ____ on the gross receipts or wholesale cost of the marijuana or marijuana products distributed to a retailer by a wholesaler in this state.
(2) (A) In the case where a wholesaler does not make a sale to a dispensary at the time of distribution, the wholesaler shall maintain a copy of the contract provided in paragraph (3) of subdivision (c) of Section 19326 of the Business and Professions Code, or other information deemed necessary by the board, indicating the price and quantity of marijuana or marijuana products to be sold and any other information deemed necessary by the board.
(B) In the case of a person with a Type 10A, or producing dispensary, license or other person required to be licensed under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26001) of the Business and Professions Code where the cultivator or manufacturer and dispensary or retailer to whom the marijuana or marijuana product is distributed are the same person, a wholesaler shall maintain any information deemed necessary by the board to ascertain wholesale cost.
(g) Returns or reports shall be authenticated in a form or pursuant to methods as may be prescribed by the board. If the prepayment of marijuana excise tax is paid by stamp or other marking pursuant to Section 34011.57, the board may by regulation determine when and how the tax shall be paid.
(h) This section shall become operative on July 1, 2018.

SEC. 9.

 Section 34011.52 is added to the Revenue and Taxation Code, to read:

34011.52.
 (a) If the board determines that it is necessary for the efficient administration of this part, the board may require a wholesaler to provide the board with a list of purchasers to which the marijuana or marijuana products were sold.
(b) In addition to any other reports required under this part, the board may, by rule and otherwise, require additional, other, or supplemental reports, in any form which the board may require, from wholesalers with respect to their distribution of marijuana or marijuana products to a retailer, which shall include, but not be limited to, the name of the purchaser, the number of the purchaser’s license issued pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code, a description of the product distributed, including the date of each distribution, and the wholesale cost or gross receipts derived from each sale of marijuana or marijuana products.
(c) Any wholesaler that fails to comply with this section is guilty of a misdemeanor punishable as provided in subdivision (e) of Section 34016.
(d) This section shall become operative on July 1, 2018.

SEC. 10.

 Section 34011.53 is added to the Revenue and Taxation Code, to read:

34011.53.
 (a) The wholesaler shall file its prepayment form together with a remittance of the prepayment amounts, if any, required to be collected pursuant to Section 34011.51 payable to the State Board of Equalization, on or before the last day of the month following the monthly period to which the prepayment form or each prepayment relates.
(b) This section shall become operative on July 1, 2018.

SEC. 11.

 Section 34011.54 is added to the Revenue and Taxation Code, to read:

34011.54.
 (a) Any wholesaler that fails to make a timely remittance to the board of the prepayment amounts, if any, required pursuant to Sections 34011.51 and 34011.53 shall also pay a penalty of 10 percent of the amount of the prepayment due but not paid, plus interest at the modified adjusted rate per month, or fraction thereof, established pursuant to Section 6591.5, from the date the prepayment became due and payable to the state until the date of payment.
(b) The penalty amount specified in subdivision (a) shall be 25 percent if the wholesaler knowingly or intentionally fails to make a timely remittance.
(c) The board may relieve the penalty imposed by this section in accordance with Section 55044.
(d) This section shall become operative on July 1, 2018.

SEC. 12.

 Section 34011.55 is added to the Revenue and Taxation Code, to read:

34011.55.
 (a) Any person that has paid prepayment amounts either directly to the board or to the person from which the marijuana or marijuana products were distributed shall be refunded those amounts with respect to marijuana or marijuana products lost through fire, flood, theft, spoilage, or accident, prior to any retail sale.
(b) In lieu of a refund, the board may authorize a credit to be taken by the person to whom the refund is due upon his or her prepayment form or marijuana excise tax return.
(c) This section shall become operative on July 1, 2018.

SEC. 13.

 Section 34011.56 is added to the Revenue and Taxation Code, to read:

34011.56.
 (a) The board may require any wholesaler subject to this part to place with the board any security that the board determines is necessary to ensure compliance with this part. The amount of the security shall be fixed by the board but shall not be greater than three times the estimated average liability of wholesalers required to file returns for monthly periods, determined in any manner that the board deems proper, or five hundred thousand dollars ($500,000), whichever amount is less. These amounts apply regardless of the type of security placed with the board. The amount of the security may be increased or decreased by the board subject to the maximum amounts.
(b) The board may sell the security at public auction if it becomes necessary to so do in order to recover any tax or any amount required to be collected or penalty due. Notice of the sale may be served upon the person that placed the security personally or by mail. If service is by mail, service shall be made in the manner prescribed for service of a notice of a deficiency determination and shall be addressed to the person’s address as it appears in the records of the board. However, security in the form of a bearer bond issued by the United States or the State of California which has a prevailing market price may be sold by the board at a private sale at a price not lower than the prevailing market price thereof. Upon any sale, any surplus above the amounts due shall be returned to the wholesaler that placed the security.
(c) This section shall become operative on July 1, 2018.

SEC. 14.

 Section 34011.57 is added to the Revenue and Taxation Code, to read:

34011.57.
 The board may prescribe by regulation a method and manner for prepayment of the marijuana excise tax that utilizes tax stamps or other markings that indicate that all required tax has been paid on the product to which the tax stamp or marking is affixed.

SEC. 15.

 Section 34012 of the Revenue and Taxation Code is amended to read:

34012.
 (a) Effective January 1, 2018, there is hereby imposed a cultivation tax on all harvested marijuana that enters the commercial market upon all persons required to be licensed to cultivate marijuana pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code. The tax shall be due after the marijuana is harvested.
(1) The tax for marijuana flowers shall be nine dollars and twenty-five cents ($9.25) per dry-weight ounce.
(2) The tax for marijuana leaves shall be set at two dollars and seventy-five cents ($2.75) per dry-weight ounce.
(b) The board may adjust the tax rate for marijuana leaves annually to reflect fluctuations in the relative price of marijuana flowers to marijuana leaves.
(c) The board may from time to time establish other categories of harvested marijuana, categories for unprocessed or frozen marijuana or immature plants, or marijuana that is shipped directly to manufacturers. These categories shall be taxed at their relative value compared with marijuana flowers.
(d) The board may prescribe the following by regulation:
(1) A method and manner for payment of the cultivation tax that utilizes tax stamps or state-issued product bags that indicate that all required tax has been paid on the product to which the tax stamp is affixed or in which the marijuana is packaged.
(2) A method and manner for collection and remittance of the cultivation tax by wholesalers.
(A) Subject to any credit or refund due to the cultivator all sums of money paid by a person as the cultivation tax are public moneys that are the property of the State of California and shall be used for the purposes set forth in Sections 34018 and 34019. The wholesaler required to collect and remit the cultivation tax shall hold the cultivation tax in trust for these purposes. The collected cultivation tax constitutes a debt owed to the state until reported and paid to the board, or until satisfactory proof has been submitted that the cultivator has paid the cultivation tax to the board. A wholesaler that has collected any amount of cultivation tax in excess of the amount of the cultivation tax actually due from a cultivator, may refund that overpayment to the cultivator, even though the overpayment has already been paid over to the board and a corresponding credit or refund has not yet been secured. The wholesaler may claim a credit for that overpayment against the amount of cultivation tax due upon any other quarterly return, if the credit is claimed in a return dated no later than three years from the date of overpayment.
(B) Every cultivator in this state is liable for the cultivation tax until it has been paid to this state, except that payment to a wholesaler with a permit issued under this part is sufficient to relieve the cultivator from further liability for the tax. Any cultivation tax collected from a cultivator that has not been remitted to the board shall be deemed public moneys that are the property of the State of California. The collected tax constitutes a debt owed to the state by the wholesaler until reported and paid to the board. Nothing in this part shall impose any obligation upon a wholesaler to take any legal action to enforce the collection of the cultivation tax. The wholesaler shall provide the board with amounts uncollected which total ____ dollars ($____) or more on a cumulative basis with respect to a single cultivator along with the names, addresses, and reasons of the cultivators refusing to pay the cultivation tax.
(C) The tax required to be collected by the wholesaler from the cultivator shall be stated separately from the price or value of the harvested marijuana on the invoice or other price or value displayed on any proof of sales or documentation of a transaction.
(e) The tax stamps and product bags shall be of the designs, specifications, and denominations as may be prescribed by the board and may be purchased by any licensee under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or under Division 10 (commencing with Section 26000) of the Business and Professions Code.
(f) Subsequent to the establishment of a tax stamp program, the board may by regulation provide that no marijuana may be removed from a licensed cultivation facility or transported on a public highway unless in a state-issued product bag bearing a tax stamp in the proper denomination.
(g) The tax stamps and product bags shall be capable of being read by a scanning or similar device and must be traceable utilizing the track and trace system pursuant to Section 26170 of the Business and Professions Code.
(h) Persons required to be licensed to cultivate marijuana pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code shall be responsible for payment of the tax pursuant to regulations adopted by the board. No marijuana may be sold unless the tax has been paid as provided in this part.
(i) All marijuana removed from a cultivator’s premises, except for plant waste, shall be presumed to be sold and thereby taxable under this section.
(j) The tax imposed by this section shall be imposed on all marijuana cultivated in the state pursuant to rules and regulations promulgated by the board, but shall not apply to marijuana cultivated for personal use under Section 11362.1 of the Health and Safety Code or cultivated by a qualified patient or primary caregiver in accordance with the Compassionate Use Act of 1996 (Section 11362.5 of the Health and Safety Code).
(k) Beginning January 1, 2020, the rates set forth in subdivisions (a), (b), and (c) shall be adjusted by the board annually thereafter for inflation.

SEC. 16.

 Section 34013 of the Revenue and Taxation Code is amended to read:

34013.
 (a) The board shall administer and collect the taxes imposed by this part pursuant to the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)). For purposes of this part, the references in the Fee Collection Procedures Law to “fee” shall include the tax imposed by this part, and references to “feepayer” shall include a person required to pay or collect the tax imposed by this part.
(b) The board may prescribe, adopt, and enforce regulations relating to the administration and enforcement of this part, including, but not limited to, collections, reporting, refunds, and appeals.
(c) The board shall adopt necessary rules and regulations to administer the taxes in this part. Such rules and regulations may include methods or procedures to tag marijuana or marijuana products, or the packages thereof, to designate prior tax payment.
(d) The board may prescribe, adopt, and enforce any emergency regulations as necessary to implement, administer, and enforce its duties under this division. Any emergency regulation prescribed, adopted, or enforced pursuant to this section shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare. Notwithstanding any other provision of law, the emergency regulations adopted by the board may remain in effect for two years from adoption.
(e) Any person who fails to pay the taxes imposed under this part shall, in addition to owing the taxes not paid, be subject to a penalty of at least one-half the amount of the taxes not paid, and shall be subject to having its license revoked pursuant to Section 26031 of the Business and Professions Code or pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code.
(f) Whenever any person fails to comply with any provision of this part or any rule or regulation of the board prescribed and adopted under this part, the board, upon hearing, after giving the person at least 10 days’ notice in writing specifying the time and place of the hearing and requiring the person to show cause why the permit should not be suspended or revoked, may suspend or revoke the permit held by the person. The board shall give to the person written notice of the suspension or revocation of any of the person’s permits. The notices herein required may be served personally or by mail in the manner prescribed for service of notice of a deficiency determination. The board shall not issue a new permit after the revocation of a permit unless it is satisfied that the former holder of the permit will comply with the provisions of this part and the regulations of the board prescribed and adopted under this part.
(g) The board may bring such legal actions as are necessary to collect any deficiency in the tax required to be paid, and, upon the board’s request, the Attorney General shall bring the actions.

SEC. 17.Section 34013.1 is added to the Revenue and Taxation Code, to read:
34013.1.

The board shall create a Criminal Cannabis Enforcement Team for the purpose of combating criminal tax evasion associated with marijuana, marijuana products, and marijuana accessories, as those terms are defined in Division 10 (commencing with Section 11000) of the Health and Safety Code, that may include, but not be limited to, representatives from the following:

(a)The board.

(b)The Franchise Tax Board.

(c)Employment Development Department.

(d)State licensing authorities under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code.

SEC. 18.Section 34013.2 is added to the Revenue and Taxation Code, to read:
34013.2.

(a)Duly authorized team members listed in Section 34013.1 may exchange intelligence, data, documents, information, complaints, or lead referrals for the purpose of investigating criminal tax evasion associated with marijuana, marijuana products, and marijuana accessories, as those terms are defined in Division 10 (commencing with Section 11000) of the Health and Safety Code.

(b)Any member or ex-member of the Criminal Cannabis Enforcement Team, any agent employed by any agency listed in Section 34013.1, or any person who has at any time obtained knowledge from any of the foregoing agencies or persons shall not divulge, or make known in any manner not provided by law, any of the confidential information received by, or reported to, the team. Information exchanged pursuant to this section shall retain its confidential status and shall remain subject to any applicable confidentiality provisions.

SEC. 19.SEC. 17.

 Section 34014 of the Revenue and Taxation Code is amended to read:

34014.
 (a) All persons required to be licensed involved in the cultivation, retail sale, or distribution of marijuana or marijuana products must obtain a separate permit from the board pursuant to regulations adopted by the board. No fee shall be charged to any person for issuance of the permit. Any person required to obtain a permit who engages in business as a cultivator, dispensary, retailer, microbusiness, distributor, or nonprofit pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code without a permit or after a permit has been canceled, suspended, or revoked, and each officer of any corporation which so engages in business, is guilty of a misdemeanor.
(b) The board may require every licensed dispensary, cultivator, microbusiness, nonprofit, or other person required to be licensed, to provide security to cover the liability for taxes imposed by state law on marijuana produced or received by the cultivator, microbusiness, nonprofit, or other person required to be licensed in accordance with procedures to be established by the board. Notwithstanding anything herein to the contrary, the board may waive any security requirement it imposes for good cause, as determined by the board. “Good cause” includes, but is not limited to, the inability of a cultivator, microbusiness, nonprofit, or other person required to be licensed to obtain security due to a lack of service providers or the policies of service providers that prohibit service to a marijuana business. A person may not commence or continue any business or operation relating to marijuana cultivation until any surety required by the board with respect to the business or operation has been properly prepared, executed, and submitted under this part.
(c) In fixing the amount of any security required by the board, the board shall give consideration to the financial hardship that may be imposed on licensees as a result of any shortage of available surety providers.

SEC. 20.SEC. 18.

 Section 34014.1 is added to the Revenue and Taxation Code, to read:

34014.1.
 (a) The board shall issue a permit to a cultivator, retailer, or wholesaler upon receipt of a completed application and any security required by the board, unless any of the following apply:
(1) The cultivator, retailer, or wholesaler, or if the cultivator, retailer, or wholesaler is not an individual, any person controlling the cultivator, retailer, or wholesaler, has previously been issued a permit that is suspended or revoked by the board for violation of any of the provisions of this division.
(2) The cultivator’s, retailer’s, or wholesaler’s permit was revoked or is subject to revocation proceedings for violation of any of the provisions of this division, unless it has been more than five years since a previous permit for the cultivator, retailer, or wholesaler was revoked.
(3) The cultivator, retailer, or wholesaler is applying for a permit for a premises or business that is the same as that of a cultivator, retailer, or wholesaler whose license was revoked or is subject to revocation proceedings for violation of any of the provisions of this part, unless the person applying for the permit provides the board with documentation demonstrating that the applicant has acquired or is acquiring the premises or business in an arm’s length transaction. For purposes of this section, an “arm’s length transaction” is defined as a sale in good faith and for valuable consideration that reflects the fair market value in the open market between two informed and willing parties, neither under any compulsion to participate in the transaction. A sale between relatives, related companies, or partners, or a sale for the primary purpose of avoiding the effect of the violations of this division that occurred at the cultivator or retailer location, is presumed not to be made at “arm’s length.”
(4) The cultivator, retailer, or wholesaler, or if the cultivator, retailer, or wholesaler is not an individual, any person controlling the cultivator, retailer, or wholesaler, has been convicted of a felony pursuant to Section 34016.1 or 34016.13.
(5) The cultivator, retailer, or wholesaler does not possess all required permits or licenses required under this code.
(b) (1) Any cultivator, retailer, or wholesaler who is denied a permit may petition for a redetermination of the board’s denial of the permit within 30 days after service upon that cultivator, retailer, or wholesaler, of the notice of the denial of the permit. If a petition for redetermination is not filed within the 30-day period, the determination of denial becomes final at the expiration of the 30-day period.
(2) Every petition for redetermination shall be in writing and shall state the specific grounds upon which the petition is founded. The petition may be amended to state additional grounds at any time prior to the date on which the board issues its order or decision upon the petition for redetermination.
(3) If the petition for redetermination is filed within the 30-day period, the board shall reconsider the determination of the denial and, if the cultivator, retailer, or wholesaler has so requested in the petition, shall grant the cultivator, retailer, or wholesaler an oral hearing and shall give the cultivator, retailer, or wholesaler at least 10 days’ notice of the time and place of the hearing. The board may continue the hearing from time to time as may be necessary.
(4) The order or decision of the board upon a petition for redetermination becomes final 30 days after mailing of notice thereof.

SEC. 21.SEC. 19.

 Section 34015 of the Revenue and Taxation Code is amended to read:

34015.
 (a) The marijuana excise tax and cultivation tax imposed by this part is due and payable to the board quarterly on or before the last day of the month following each quarterly period of three months. On or before the last day of the month following each quarterly period, a return for the preceding quarterly period shall be filed with the board by each person required to be licensed for cultivation or retail sale under Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code using electronic media. Returns shall be authenticated in a form or pursuant to methods as may be prescribed by the board. If the cultivation tax is paid by stamp or remitted by the wholesaler pursuant to subdivision (d) of Section 34012 the board may by regulation determine when and how the tax shall be paid.
(b) The board may require every person engaged in the cultivation, distribution, or retail sale of marijuana and marijuana products required to be licensed pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code or Division 10 (commencing with Section 26000) of the Business and Professions Code to file, on or before the 25th day of each month, a report using electronic media respecting the person’s inventory, purchases, and sales during the preceding month and any other information as the board may require to carry out the purposes of this part. Reports shall be authenticated in a form or pursuant to methods as may be prescribed by the board.

SEC. 22.SEC. 20.

 Section 34016 of the Revenue and Taxation Code is amended to read:

34016.
 (a) Any peace officer or board employee granted limited peace officer status pursuant to paragraph (6) of subdivision (a) of Section 830.11 of the Penal Code, upon presenting appropriate credentials, is authorized to enter any place as described in paragraph (3) and to conduct inspections in accordance with the following paragraphs, inclusive.
(1) Inspections shall be performed in a reasonable manner and at times that are reasonable under the circumstances, taking into consideration the normal business hours of the place to be entered.
(2) Inspections may be at any place at which marijuana or marijuana products are sold to purchasers, cultivated, or stored, or at any site where evidence of activities involving evasion of tax may be discovered.
(3) Inspections shall be requested or conducted no more than once in a 24-hour period.
(b) Any person who fails or refuses to allow an inspection shall be guilty of a misdemeanor. Each offense shall be punished by a fine not to exceed five thousand dollars ($5,000), or imprisonment not exceeding one year in a county jail, or both the fine and imprisonment. The court shall order any fines assessed be deposited in the California Marijuana Tax Fund.
(c) Upon discovery by the board or a law enforcement agency that a licensee or any other person possesses, stores, owns, or has made a retail sale of marijuana or marijuana products, without evidence of tax payment or not contained in secure packaging, the board or the law enforcement agency shall be authorized to seize the marijuana or marijuana products. Any marijuana or marijuana products seized by a law enforcement agency or the board shall within seven days be deemed forfeited and the board shall comply with the procedures set forth in Sections 30436 through 30449, inclusive.
(d) Any person who renders a false or fraudulent report is guilty of a misdemeanor and subject to a fine not to exceed one thousand dollars ($1,000) for each offense.
(e) Any violation of any provisions of this part, except as otherwise provided, is a misdemeanor and is punishable as such.
(f) Any person required to make, render, sign, or verify any return or report who makes any false or fraudulent return or report with intent to defeat or evade the determination required by law to be made is guilty of a misdemeanor. The person shall for each offense be fined not less than three hundred dollars ($300) and not more than five thousand dollars ($5,000), or be imprisoned for not exceeding one year in the county jail, or be subject to both fine and imprisonment, in the discretion of the court.

SEC. 23.SEC. 21.

 Section 34016.05 is added to the Revenue and Taxation Code, to read:

34016.05.
 Any person who fails or refuses to file any report required to be made or who fails or refuses to furnish a supplemental report or other data required by the board is guilty of a misdemeanor and subject to a fine not to exceed one thousand dollars ($1,000) for each offense.

SEC. 24.SEC. 22.

 Section 34016.1 is added to the Revenue and Taxation Code, to read:

34016.1.
 (a) Any person who falsely or fraudulently makes, forges, alters, reuses, or counterfeits any evidence of the cultivation tax or marijuana excise tax imposed by this part, or tampers with any metering machine authorized by regulation under this part, or causes or procures to be falsely or fraudulently made, forged, altered, reused, or counterfeited, any such evidence of the cultivation tax or marijuana excise tax or knowingly and willfully utters, publishes, passes, or tenders as genuine any such false, forged, altered, reused, or counterfeited evidence of the cultivation tax or marijuana excise tax, for the purpose of evading the taxes imposed by this part, is guilty of a felony and subject to imprisonment for two, three, or four years, or to a fine of not less than one thousand dollars ($1,000) and not more than twenty-five thousand dollars ($25,000), or to both fine and imprisonment.
(b) Any person who possesses, sells or offers to sell, or buys or offers to buy, any false or fraudulent evidence of the cultivation tax or marijuana excise tax imposed by this part in a dollar amount of less than ____ dollars ($____) is guilty of a misdemeanor, punishable by a fine not to exceed five thousand dollars ($5,000) or imprisonment not exceeding one year in a county jail, or by both the fine and imprisonment.
(c) Any person who possesses, sells or offers to sell, or buys or offers to buy, any false or fraudulent evidence of the cultivation tax or marijuana excise tax imposed by this part in a dollar amount of ____ dollars ($____) or greater, is guilty of a misdemeanor, punishable by a fine not to exceed fifty thousand dollars ($50,000) or imprisonment not exceeding one year in a county jail, or by both the fine and imprisonment.
(d) The board shall destroy any evidence of the cultivation tax or marijuana excise tax seized under this section.

SEC. 25.SEC. 23.

 Section 34016.11 is added to the Revenue and Taxation Code, to read:

34016.11.
 (a) Any person who knowingly possesses, or keeps, stores, or retains for the purpose of sale, or sells or offers to sell, any marijuana flowers, marijuana leaves, marijuana, marijuana products, and any other product subject to tax under this part to which there is no evidence of the cultivation tax or marijuana excise tax authorized to be made upon secure packaging under this part, or on which tax is due but has not been paid, when those products have been obtained from any source whatever, is guilty of a misdemeanor and shall for each offense be fined an amount not to exceed twenty-five thousand dollars ($25,000), or be imprisoned for a period not to exceed one year in the county jail, or, at the discretion of the court, be subject to both fine and imprisonment in the county jail.
(b) This section shall not apply to a permitted cultivator that possesses, keeps, stores, or retains marijuana flowers, marijuana leaves, or any other product subject to tax pursuant to Section 34012 before the necessary evidence of cultivation tax is affixed.

SEC. 26.SEC. 24.

 Section 34016.12 is added to the Revenue and Taxation Code, to read:

34016.12.
 If any cultivator, retailer, or wholesaler is convicted under any provision of this part, the board shall revoke all permits issued to that person under the Sales and Use Tax Law (Part 1 (commencing with Section 6001)).

SEC. 27.SEC. 25.

 Section 34016.13 is added to the Revenue and Taxation Code, to read:

34016.13.
 Notwithstanding any other provision of this part, any person who violates this part with intent to defeat or evade the determination of an amount due required by law to be made is guilty of a felony when the amount of tax liability aggregates twenty-five thousand dollars ($25,000) or more in any 12-consecutive-month period. The determination shall be approved by the executive director or his or her designee. Each offense shall be punished by a fine of not less than five thousand dollars ($5,000) and not more than twenty thousand dollars ($20,000), or imprisonment for 16 months, two years, or three years, or by both the fine and imprisonment in the discretion of the court.

SEC. 28.SEC. 26.

 Section 34016.14 is added to the Revenue and Taxation Code, to read:

34016.14.
 Any person convicted of a crime under this part may be charged the costs of investigation and prosecution at the discretion of the court.

SEC. 29.SEC. 27.

 Section 34016.15 is added to the Revenue and Taxation Code, to read:

34016.15.
 (a) (1) Restitution orders or any other amounts imposed by a court of competent jurisdiction for criminal offenses upon a person or any other entity that are due and payable to the board may be collected by the board in any manner provided by law for collection of a delinquent cultivation tax or marijuana excise tax liability, including, but not limited to, issuance of an order and levy under Article 4 (commencing with Section 706.070) of Chapter 5 of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure in the manner provided for earnings withholding orders for taxes.
(2) Amounts imposed by a court of competent jurisdiction as an order of restitution for criminal offenses shall be treated as final and due and payable to the State of California on the date that amount is established on the records of the board.
(b) This part shall apply to amounts collected under this section in the same manner and with the same force and effect and to the full extent as if the language of those laws had been incorporated in full into this section, except to the extent that any provision is either inconsistent with this section or is not relevant to this section.
(c) Notwithstanding Chapter 5 (commencing with Section 55221) of Part 30, a refund or credit shall not be allowed for any amounts paid or payments applied under this section.
(d) Amounts authorized to be collected pursuant to this section may accrue interest at the greater of the rate applicable to the amounts being collected or the rate provided under Section 6591.5 from and after the date the amounts are established on the records of the board.
(e) Amounts authorized to be collected pursuant to this section shall not be subject to any statute of limitations set forth in Section 55365.
(f) Notwithstanding Chapter 14 (commencing with Section 7150) of Division 7 of Title 1 of the Government Code, any portion of the amounts authorized to be collected under this section that remain unsatisfied may be collected by the recording of a notice of state tax lien. The board may record or extend a recorded notice of state tax lien at any time until the amount due, including any accrued interest, is paid in full.

SEC. 30.SEC. 28.

 Section 34018 of the Revenue and Taxation Code is amended to read:

34018.
 (a) The California Marijuana Tax Fund is hereby created in the State Treasury. All taxes, interest, penalties, and other amounts collected and paid, or otherwise remitted, to the board pursuant to this part, less payment of refunds, shall be credited to the Tax Fund.
(b) Notwithstanding any other law, the California Marijuana Tax Fund is a special trust fund established solely to carry out the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act and all revenues deposited into the Tax Fund, together with interest or dividends earned by the fund, are hereby continuously appropriated for the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act without regard to fiscal year and shall be expended only in accordance with the provisions of this part and its purposes.
(c) Notwithstanding any other law, the taxes imposed by this part 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” for purposes of subdivisions (a) and (b) of Section 8 of Article XVI of the California Constitution and its implementing statutes.

SEC. 31.Section 34019 of the Revenue and Taxation Code is amended to read:
34019.

(a)Beginning with fiscal year 2017–2018 the Department of Finance shall estimate revenues to be received pursuant to Sections 34011 and 34012 and provide those estimates to the Controller no later than June 15 of each year. The Controller shall use these estimates when disbursing funds pursuant to this section. Before any funds are disbursed pursuant to subdivisions (b), (c), (d), and (e) of this section, the Controller shall disburse from the Tax Fund to the appropriate account, without regard to fiscal year, the following:

(1)Reasonable costs incurred by the board for administering and collecting the taxes imposed by this part, including enforcement activity costs incurred by the board through participation in the Cannabis Criminal Enforcement Team as that participation relates to the taxes imposed by this part; provided, however, such costs shall not exceed 4 percent of tax revenues received.

(2)Reasonable costs incurred by the bureau, the Department of Consumer Affairs, the Department of Food and Agriculture, and the State Department of Public Health for implementing, administering, and enforcing Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code and Division 10 (commencing with Section 26000) of the Business and Professions Code to the extent those costs are not reimbursed pursuant to Section 26180 of the Business and Professions Code or pursuant to Chapter 3.5 (commencing with Section 19300) of Division 8 of the Business and Professions Code. This paragraph shall remain operative through fiscal year 2022–2023.

(3)Reasonable costs incurred by the Department of Fish and Wildlife, the State Water Resources Control Board, and the Department of Pesticide Regulation for carrying out their respective duties under Chapter 3.5 (commencing with Section 19300) of Division 8 or Division 10 (commencing with Section 26000) of the Business and Professions Code to the extent those costs are not otherwise reimbursed.

(4)Reasonable costs incurred by the Controller for performing duties imposed by the Control, Regulate and Tax Adult Use of Marijuana Act, including the audit required by Section 34020.

(5)Reasonable costs incurred by the State Auditor for conducting the performance audit pursuant to Section 26191 of the Business and Professions Code.

(6)Reasonable costs incurred by the Legislative Analyst’s Office for performing duties imposed by Section 34017.

(7)Sufficient funds to reimburse the Division of Labor Standards Enforcement and the Division of Occupational Safety and Health within the Department of Industrial Relations and the Employment Development Department for the costs of applying and enforcing state labor laws to licensees under Chapter 3.5 (commencing with Section 19300) of Division 8 and Division 10 (commencing with Section 26000) of the Business and Professions Code.

(b)The Controller shall next disburse the sum of ten million dollars ($10,000,000) to a public university or universities in California annually beginning with fiscal year 2018–2019 until fiscal year 2028–2029 to research and evaluate the implementation and effect of the Control, Regulate and Tax Adult Use of Marijuana Act, and shall, if appropriate, make recommendations to the Legislature and Governor regarding possible amendments to the Control, Regulate and Tax Adult Use of Marijuana Act. The recipients of these funds shall publish reports on their findings at a minimum of every two years and shall make the reports available to the public. The bureau shall select the universities to be funded. The research funded pursuant to this subdivision shall include but not necessarily be limited to:

(1)Impacts on public health, including health costs associated with marijuana use, as well as whether marijuana use is associated with an increase or decrease in use of alcohol or other drugs.

(2)The impact of treatment for maladaptive marijuana use and the effectiveness of different treatment programs.

(3)Public safety issues related to marijuana use, including studying the effectiveness of the packaging and labeling requirements and advertising and marketing restrictions contained in the act at preventing underage access to and use of marijuana and marijuana products, and studying the health-related effects among users of varying potency levels of marijuana and marijuana products.

(4)Marijuana use rates, maladaptive use rates for adults and youth, and diagnosis rates of marijuana-related substance use disorders.

(5)Marijuana market prices, illicit market prices, tax structures and rates, including an evaluation of how to best tax marijuana based on potency, and the structure and function of licensed marijuana businesses.

(6)Whether additional protections are needed to prevent unlawful monopolies or anti-competitive behavior from occurring in the nonmedical marijuana industry and, if so, recommendations as to the most effective measures for preventing such behavior.

(7)The economic impacts in the private and public sectors, including, but not necessarily limited to, job creation, workplace safety, revenues, taxes generated for state and local budgets, and criminal justice impacts, including, but not necessarily limited to, impacts on law enforcement and public resources, short and long term consequences of involvement in the criminal justice system, and state and local government agency administrative costs and revenue.

(8)Whether the regulatory agencies tasked with implementing and enforcing the Control, Regulate and Tax Adult Use of Marijuana Act are doing so consistent with the purposes of the act, and whether different agencies might do so more effectively.

(9)Environmental issues related to marijuana production and the criminal prohibition of marijuana production.

(10)The geographic location, structure, and function of licensed marijuana businesses, and demographic data, including race, ethnicity, and gender, of license holders.

(11)The outcomes achieved by the changes in criminal penalties made under the Control, Regulate and Tax Adult Use of Marijuana Act for marijuana-related offenses, and the outcomes of the juvenile justice system, in particular, probation-based treatments and the frequency of up-charging illegal possession of marijuana or marijuana products to a more serious offense.

(c)The Controller shall next disburse the sum of three million dollars ($3,000,000) annually to the Department of the California Highway Patrol beginning fiscal year 2018–2019 until fiscal year 2022–2023 to establish and adopt protocols to determine whether a driver is operating a vehicle while impaired, including impairment by the use of marijuana or marijuana products, and to establish and adopt protocols setting forth best practices to assist law enforcement agencies. The department may hire personnel to establish the protocols specified in this subdivision. In addition, the department may make grants to public and private research institutions for the purpose of developing technology for determining when a driver is operating a vehicle while impaired, including impairment by the use of marijuana or marijuana products.

(d)The Controller shall next disburse the sum of ten million dollars ($10,000,000) beginning fiscal year 2018–2019 and increasing ten million dollars ($10,000,000) each fiscal year thereafter until fiscal year 2022–2023, at which time the disbursement shall be fifty million dollars ($50,000,000) each year thereafter, to the Governor’s Office of Business and Economic Development, in consultation with the Labor and Workforce Development Agency and the State Department of Social Services, to administer a community reinvestments grants program to local health departments and at least 50 percent to qualified community-based nonprofit organizations to support job placement, mental health treatment, substance use disorder treatment, system navigation services, legal services to address barriers to reentry, and linkages to medical care for communities disproportionately affected by past federal and state drug policies. The office shall solicit input from community-based job skills, job placement, and legal service providers with relevant expertise as to the administration of the grants program. In addition, the office shall periodically evaluate the programs it is funding to determine the effectiveness of the programs, shall not spend more than 4 percent for administrative costs related to implementation, evaluation and oversight of the programs, and shall award grants annually, beginning no later than January 1, 2020.

(e)The Controller shall next disburse the sum of two million dollars ($2,000,000) annually to the University of California San Diego Center for Medicinal Cannabis Research to further the objectives of the center including the enhanced understanding of the efficacy and adverse effects of marijuana as a pharmacological agent.

(f)By July 15 of each fiscal year beginning in fiscal year 2018–2019, the Controller shall, after disbursing funds pursuant to subdivisions (a), (b), (c), (d), and (e), disburse funds deposited in the Tax Fund during the prior fiscal year into sub-trust accounts, which are hereby created, as follows:

(1)Sixty percent shall be deposited in the Youth Education, Prevention, Early Intervention and Treatment Account, and disbursed by the Controller to the State Department of Health Care Services for programs for youth that are designed to educate about and to prevent substance use disorders and to prevent harm from substance use. The State Department of Health Care Services shall enter into interagency agreements with the State Department of Public Health and the State Department of Education to implement and administer these programs. The programs shall emphasize accurate education, effective prevention, early intervention, school retention, and timely treatment services for youth, their families and caregivers. The programs may include, but are not limited to, the following components:

(A)Prevention and early intervention services including outreach, risk survey and education to youth, families, caregivers, schools, primary care health providers, behavioral health and substance use disorder service providers, community and faith-based organizations, fostercare providers, juvenile and family courts, and others to recognize and reduce risks related to substance use, and the early signs of problematic use and of substance use disorders.

(B)Grants to schools to develop and support student assistance programs, or other similar programs, designed to prevent and reduce substance use, and improve school retention and performance, by supporting students who are at risk of dropping out of school and promoting alternatives to suspension or expulsion that focus on school retention, remediation, and professional care. Schools with higher than average dropout rates should be prioritized for grants.

(C)Grants to programs for outreach, education and treatment for homeless youth and out-of-school youth with substance use disorders.

(D)Access and linkage to care provided by county behavioral health programs for youth, and their families and caregivers, who have a substance use disorder or who are at risk for developing a substance use disorder.

(E)Youth-focused substance use disorder treatment programs that are culturally and gender competent, trauma-informed, evidence-based and provide a continuum of care that includes screening and assessment (substance use disorder as well as mental health), early intervention, active treatment, family involvement, case management, overdose prevention, prevention of communicable diseases related to substance use, relapse management for substance use and other co-occurring behavioral health disorders, vocational services, literacy services, parenting classes, family therapy and counseling services, medication-assisted treatments, psychiatric medication and psychotherapy. When indicated, referrals must be made to other providers.

(F)To the extent permitted by law and where indicated, interventions shall utilize a two-generation approach to addressing substance use disorders with the capacity to treat youth and adults together. This would include supporting the development of family-based interventions that address substance use disorders and related problems within the context of families, including parents, foster parents, caregivers and all their children.

(G)Programs to assist individuals, as well as families and friends of drug using young people, to reduce the stigma associated with substance use including being diagnosed with a substance use disorder or seeking substance use disorder services. This includes peer-run outreach and education to reduce stigma, anti-stigma campaigns, and community recovery networks.

(H)Workforce training and wage structures that increase the hiring pool of behavioral health staff with substance use disorder prevention and treatment expertise. Provide ongoing education and coaching that increases substance use treatment providers’ core competencies and trains providers on promising and evidenced-based practices.

(I)Construction of community-based youth treatment facilities.

(J)The departments may contract with each county behavioral health program for the provision of services.

(K)Funds shall be allocated to counties based on demonstrated need, including the number of youth in the county, the prevalence of substance use disorders among adults, and confirmed through statistical data, validated assessments or submitted reports prepared by the applicable county to demonstrate and validate need.

(L)The departments shall periodically evaluate the programs they are funding to determine the effectiveness of the programs.

(M)The departments may use up to 4 percent of the moneys allocated to the Youth Education, Prevention, Early Intervention and Treatment Account for administrative costs related to implementation, evaluation and oversight of the programs.

(N)If the Department of Finance ever determines that funding pursuant to marijuana taxation exceeds demand for youth prevention and treatment services in the state, the departments shall provide a plan to the Department of Finance to provide treatment services to adults as well as youth using these funds.

(O)The departments shall solicit input from volunteer health organizations, physicians who treat addiction, treatment researchers, family therapy and counseling providers, and professional education associations with relevant expertise as to the administration of any grants made pursuant to this paragraph.

(2)Twenty percent shall be deposited in the Environmental Restoration and Protection Account, and disbursed by the Controller as follows:

(A)To the Department of Fish and Wildlife and the Department of Parks and Recreation for the cleanup, remediation, and restoration of environmental damage in watersheds affected by marijuana cultivation and related activities including, but not limited to, damage that occurred prior to enactment of this part, and to support local partnerships for this purpose. The Department of Fish and Wildlife and the Department of Parks and Recreation may distribute a portion of the funds they receive from the Environmental Restoration and Protection Account through grants for purposes specified in this paragraph.

(B)To the Department of Fish and Wildlife and the Department of Parks and Recreation for the stewardship and operation of state-owned wildlife habitat areas and state park units in a manner that discourages and prevents the illegal cultivation, production, sale and use of marijuana and marijuana products on public lands, and to facilitate the investigation, enforcement and prosecution of illegal cultivation, production, sale, and use of marijuana or marijuana products on public lands.

(C)To the Department of Fish and Wildlife to assist in funding the watershed enforcement program and multiagency taskforce established pursuant to subdivisions (b) and (c) of Section 12029 of the Fish and Game Code to facilitate the investigation, enforcement, and prosecution of these offenses and to ensure the reduction of adverse impacts of marijuana cultivation, production, sale, and use on fish and wildlife habitats throughout the state.

(D)For purposes of this paragraph, the Secretary of the Natural Resources Agency shall determine the allocation of revenues between the departments. During the first five years of implementation, first consideration should be given to funding purposes specified in subparagraph (A).

(E)Funds allocated pursuant to this paragraph shall be used to increase and enhance activities described in subparagraphs (A), (B), and (C), and not replace allocation of other funding for these purposes. Accordingly, annual General Fund appropriations to the Department of Fish and Wildlife and the Department of Parks and Recreation shall not be reduced below the levels provided in the Budget Act of 2014 (Chapter 25 of the Statutes of 2014).

(3)Twenty percent shall be deposited into the State and Local Government Law Enforcement Account and disbursed by the Controller as follows:

(A)To the Department of the California Highway Patrol for conducting training programs for detecting, testing and enforcing laws against driving under the influence of alcohol and other drugs, including driving under the influence of marijuana. The department may hire personnel to conduct the training programs specified in this subparagraph.

(B)To the Department of the California Highway Patrol to fund internal California Highway Patrol programs and grants to qualified nonprofit organizations and local governments for education, prevention and enforcement of laws related to driving under the influence of alcohol and other drugs, including marijuana; programs that help enforce traffic laws, educate the public in traffic safety, provide varied and effective means of reducing fatalities, injuries and economic losses from collisions; and for the purchase of equipment related to enforcement of laws related to driving under the influence of alcohol and other drugs, including marijuana.

(C)To the Board of State and Community Corrections for making grants to local governments to assist with law enforcement, fire protection, or other local programs addressing public health and safety associated with the implementation of the Control, Regulate and Tax Adult Use of Marijuana Act. The board shall not make any grants to local governments which have banned the cultivation, including personal cultivation under paragraph (3) of subdivision (b) of Section 11362.2 of the Health and Safety Code, or retail sale of marijuana or marijuana products pursuant to Section 26200 of the Business and Professions Code or as otherwise provided by law.

(D)For purposes of this paragraph, the Department of Finance shall determine the allocation of revenues between the agencies; provided, however, beginning in fiscal year 2022–2023 the amount allocated pursuant to subparagraph (A) shall not be less than ten million dollars ($10,000,000) annually and the amount allocated pursuant to subparagraph (B) shall not be less than forty million dollars ($40,000,000) annually. In determining the amount to be allocated before fiscal year 2022–2023 pursuant to this paragraph, the Department of Finance shall give initial priority to subparagraph (A).

(g)Funds allocated pursuant to subdivision (f) shall be used to increase the funding of programs and purposes identified and shall not be used to replace allocation of other funding for these purposes.

(h)Effective July 1, 2028, the Legislature may amend this section by majority vote to further the purposes of the Control, Regulate and Tax Adult Use of Marijuana Act, including allocating funds to programs other than those specified in subdivisions (d) and (f). Any revisions pursuant to this subdivision shall not result in a reduction of funds to accounts established pursuant to subdivisions (d) and (f) in any subsequent year from the amount allocated to each account in fiscal year 2027–2028. Prior to July 1, 2028, the Legislature may not change the allocations to programs specified in subdivisions (d) and (f).

SEC. 32.SEC. 29.

 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. 33.SEC. 30.

 The Legislature finds and declares that this act furthers the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act (Act) by providing the State Board of Equalization with the authority and resources necessary to collect the taxes imposed by the Act and thereby protecting the Act’s anticipated funding for education, public health programs, law enforcement training, environmental cleanup, and marijuana business licensing. By providing the board with the authority and resources, this act will simplify compliance with the Act’s tax laws, arrest sales of marijuana by criminal operations, level the playing field for marijuana businesses complying with the laws, prevent marijuana businesses from going underground, and further the Act’s purposes of curbing illegal growing, distribution, and retail sales of marijuana, while also driving out the illicit market.