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

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Date Published: 02/16/2017 09:00 PM
AB963:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 963


Introduced by Assembly Member Gipson

February 16, 2017


An act to amend Section 15924 of, and to add Section 15919 to, the Government Code, to amend Section 11362.71 of the Health and Safety Code, to amend Sections 6592, 6901, 34011, 34012, 34013, 34014, 34015, 34016, and 34018 of, to add Sections 6369.6, 6471.5, 34011.51, 34011.52, 34011.53, 34011.54, 34011.55, 34011.56, 34011.57, 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.


LEGISLATIVE COUNSEL'S DIGEST


AB 963, as introduced, 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 tax on the cultivation of marijuana that enters the commercial market, and requires revenues from those taxes to be deposited into the California Marijuana Tax Fund and allocated for specified purposes pursuant to a specified schedule. AUMA provides for the administration of both taxes by the State Board of Equalization 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 and would require funds derived from those fines and collected or paid to the board to be deposited into the Marijuana Tax Fines and Penalties Account, which this bill would create in the California Marijuana Tax Fund. By modifying the scope of a crime and imposing new crimes, the bill would impose a state-mandated local program.
(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 authorizes the State Board of Equalization 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 would require a distributor, 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 distributor 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 distributor not required to hold a seller’s permit to register with the board, would require all distributors to obtain a permit from the board for the purposes of the marijuana taxes, and would authorize the board to require distributors to place security with the board. The 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, as specified, and would further authorize the board to prescribe a method and manner for collection and remittance of the cultivation tax by distributors. As a violation of these 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. The bill would require the State Department of Health Care Services to, on or before July 1, 2018, develop a magnetic encoding or similar capability of storing data for identification cards issued under the Medical Marijuana Program, would require identification cards issued after that development to contain the encoding or similar capability of storing data, and on or before January 1, 2019, would require every seller to employ a sales tracking system through a card reader with the capability of reading that encoding or similar capability of storing data, as specified. By requiring county health departments to issue identification cards containing the encoding or similar capability of storing data, this bill would impose a state-mandated local program. On or after July 1, 2019, the bill would limit the sales and use tax exemption to sales made to purchasers with identification cards with the encoding or similar capability of storing data and tracked according to the sales tracking system.
(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. The act requires the team to include the board, the Franchise Tax Board, the Department of Justice, and the Employment Development Department, and further requires the team to operate the pilot program using existing funding of those state agencies.
This bill would extend that pilot program until January 1, 2020, and would establish within the team the Cannabis Criminal Enforcement Team for the purpose of combating criminal tax evasion associated with marijuana, marijuana products, and marijuana accessories. The bill would require the Cannabis Criminal Enforcement Team to consist of the state entities described above and would require those entities and state medical cannabis or nonmedical marijuana licensing authorities to exchange data for those purposes. The bill would require moneys in the Marijuana Tax Fines and Penalties Account created by the bill to be available, upon appropriation, to the Cannabis Criminal Enforcement Team for those purposes and, if those moneys are insufficient to adequately fund the team, would require revenues derived from sales and use taxes on marijuana and marijuana products to also be used to fund the team.
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 with regard to certain mandates no reimbursement is required by this act for a specified reason.
With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
(6) 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: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 15919 is added to the Government Code, to read:

15919.
 (a) The Cannabis Criminal Enforcement Team shall be established within the Revenue Recovery and Collaborative Enforcement Team established pursuant to this part. The Cannabis Criminal Enforcement Team shall combat 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) The Cannabis Criminal Enforcement Team shall consist of the state entities listed in subdivision (a) of Section 15914. Those entities and 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 may exchange intelligence, data, documents, information, complaints, or lead referrals for the purposes described in subdivision (a).
(c) The Cannabis Criminal Enforcement Team shall be funded using the following:
(1) Funds derived from fines and penalties imposed pursuant to Part 14.5 (commencing with Section 34010) of Division 2 of the Revenue and Taxation Code and deposited into the Marijuana Tax Fines and Penalties Account in the California Marijuana Tax Fund.
(2) If the amounts in paragraph (1) are insufficient to adequately fund the Cannabis Criminal Enforcement Team, revenues derived from the imposition of sales and use taxes on marijuana and marijuana products and transferred to the General Fund pursuant to Section 7102 of the Revenue and Taxation Code.

SEC. 2.

 Section 15924 of the Government Code is amended to read:

15924.
 This part shall remain in effect only until January 1, 2019, 2020, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2019, deletes or extends that date. repealed.

SEC. 3.

 Section 11362.71 of the Health and Safety Code is amended to read:

11362.71.
 (a) (1) The department shall establish and maintain a voluntary program for the issuance of identification cards to qualified patients who satisfy the requirements of this article and voluntarily apply to the identification card program.
(2) The department shall establish and maintain a 24-hour, toll-free telephone number that will enable state and local law enforcement officers to have immediate access to information necessary to verify the validity of an identification card issued by the department, until a cost-effective Internet Web-based system can be developed for this purpose.
(b) Every county health department, or the county’s designee, shall do all of the following:
(1) Provide applications upon request to individuals seeking to join the identification card program.
(2) Receive and process completed applications in accordance with Section 11362.72.
(3) Maintain records of identification card programs.
(4) Utilize protocols developed by the department pursuant to paragraph (1) of subdivision (d).
(5) Issue identification cards developed by the department to approved applicants and designated primary caregivers. On and after the development of magnetic encoding or similar capability of storing data pursuant to paragraph (4) of subdivision (d), the identification cards shall include the magnetic encoding or similar capability of storing data.
(c) The county board of supervisors may designate another health-related governmental or nongovernmental entity or organization to perform the functions described in subdivision (b), except for an entity or organization that cultivates or distributes marijuana.
(d) The department shall develop all of the following:
(1) Protocols that shall be used by a county health department or the county’s designee to implement the responsibilities described in subdivision (b), including, but not limited to, protocols to confirm the accuracy of information contained in an application and to protect the confidentiality of program records.
(2) Application forms that shall be issued to requesting applicants.
(3) An identification card that identifies a person authorized to engage in the medical use of marijuana and an identification card that identifies the person’s designated primary caregiver, if any. The two identification cards developed pursuant to this paragraph shall be easily distinguishable from each other.
(4) On or before July 1, 2018, for purposes of identification cards to be issued pursuant to paragraph (5) of subdivision (b), a magnetic encoding or similar capability of storing data that allows a dispensary to comply with subdivision (e) of Section 6369.6 of the Revenue and Taxation Code.
(e) No person or designated primary caregiver in possession of a valid identification card shall be subject to arrest for possession, transportation, delivery, or cultivation of medical marijuana in an amount established pursuant to this article, unless there is reasonable cause to believe that the information contained in the card is false or falsified, the card has been obtained by means of fraud, or the person is otherwise in violation of the provisions of this article.
(f) It shall not be necessary for a person to obtain an identification card in order to claim the protections of Section 11362.5.

SEC. 4.

 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 subdivision (a), and the seller takes the identification cards in good faith.
(e) (1) On or before January 1, 2019, every seller shall employ a sales tracking system through a card reader with the capability of reading the magnetic encoding or similar capability of storing data included in identification cards pursuant to paragraph (5) of subdivision (b) of Section 11362.71 of the Health and Safety Code. The tracking system shall maintain a record of each sale to each purchaser described in this section, which shall include the purchaser’s identification card number issued under Section 11362.71 of the Health and Safety Code, the date of each sale, a description of the property sold, and the gross receipts derived from each sale. The information shall be made available to the board upon request.
(2) On or after July 1, 2019, the exemption provided by this section shall only apply to a sale made to a purchaser with an identification card with magnetic encoding or similar capability of storing data included in identification cards pursuant to paragraph (5) of subdivision (b) of Section 11362.71 of the Health and Safety Code and tracked in accordance with this subdivision.
(f) This section shall become operative on January 1, 2018.

SEC. 5.

 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. 6.

 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 distributor to a retailer.
(d) “Distributor” has the same meaning as that term is defined in Section 34011.51.
(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 distributor makes a distribution of marijuana or marijuana products in this state to a retailer, the distributor 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 distributor 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 distributor 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 distributor from the retailer to which the marijuana or marijuana products are distributed. The prepayment amount constitutes a debt owed by the distributor to this state until 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 distributor 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 distributor 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 distributor 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 distributor, and any other information deemed necessary by the board.
(B) If the amount of sales tax prepayments collected by the distributor is greater than the amount of sales tax prepayments made by the distributor, then the excess constitutes a debt owed by the distributor to the state until 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 distributor to report prepayments or a distributor’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 distributor, 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 distributors 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 distributor 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 distributors 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 distributor that fails to comply with this section is guilty of a misdemeanor punishable as provided in Section 7153.

6480.53.
 The distributor 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 distributor 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 distributor 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 distributor 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 distributor 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 distributors 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 distributor that placed the security.

6480.57.
 A distributor 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 distributor transacts or intends to transact business, the location of the distributor’s place or places of business, and other information as the board may require.

SEC. 7.

 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. 8.

 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. 9.

 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 of this division (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.

(g)The sales and use tax imposed by Part 1 (commencing with Section 6001) shall not apply to retail sales 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 qualified patient or primary caregiver for a qualified patient provides his or her card issued under Section 11362.71 of the Health and Safety Code and a valid government-issued identification card.

SEC. 10.

 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) “Distribution” shall mean the transfer of marijuana or marijuana products from a distributor to a retailer.
(3) “Distributor” means a person that makes a distribution of marijuana or marijuana products to a retailer.
(4) “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.
(5) “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 distributor 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 distributor 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 distributor from the retailer to which the marijuana or marijuana products are distributed.
(2) The prepayment amount constitutes a debt owed by the distributor to this state until 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 distributor 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 distributor 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 distributor, and any other information deemed necessary by the board.
(B) If the amount of marijuana excise tax prepayments collected by the distributor is greater than the amount of marijuana excise tax prepayments made by the distributor, then the excess constitutes a debt owed by the distributor to the state until 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 distributor to report prepayments or a distributor’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 distributor, 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 distributor in this state.
(2) (A) In the case where a distributor does not make a sale to a dispensary at the time of distribution, the distributor 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 distributor 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 34011.57, the board may by regulation determine when and how the tax shall be paid.

SEC. 11.

 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 distributor 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 distributors 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 product.
(c) Any distributor that fails to comply with this section is guilty of a misdemeanor punishable as provided in subdivision (e) of Section 34016.

SEC. 12.

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

34011.53.
 The distributor 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.

SEC. 13.

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

34011.54.
 (a) Any distributor 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 distributor 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.

SEC. 14.

 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.

SEC. 15.

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

34011.56.
 (a) The board may require any distributor 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 distributors 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 distributor that placed the security.

SEC. 16.

 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. 17.

 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 by regulation a 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 distributors.
(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. 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. 18.

 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) of Division 2). 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.

(f)

(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. 19.

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

34014.
 (a) All persons required to be licensed involved in the cultivation and cultivation, retail sale 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 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 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.

 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 or retailer upon receipt of a completed application and any security required by the board, unless any of the following apply:
(1) The cultivator or retailer, or if the cultivator or retailer is not an individual, any person controlling the cultivator or retailer, 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 or retailer’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 or retailer was revoked.
(3) The cultivator or retailer is applying for a permit for a premises or business that is the same as that of a cultivator or retailer 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 or retailer, or if the cultivator or retailer is not an individual, any person controlling the cultivator or retailer, has been convicted of a felony pursuant to Section 34016.1 or 34016.13.
(5) The cultivator or retailer does not possess all required permits or licenses required under this code.
(b) (1) Any cultivator or retailer 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 or retailer 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 or retailer has so requested in the petition, shall grant the cultivator or retailer an oral hearing and shall give the cultivator or retailer 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.

 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 distributor 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 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.

 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)All moneys remitted to the board under this part shall be credited to the California Marijuana Tax Fund.

(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.

 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.

 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.

 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.

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

34016.12.
 If any cultivator or retailer 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.

 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.

 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.

 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.

 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. The Tax Fund shall consist of all All taxes, interest, penalties, and other amounts collected and paid paid, or otherwise remitted, to the board pursuant to this part, less payment of refunds. refunds, shall be credited to the Tax Fund.
(b) Notwithstanding (1) Except as provided in paragraph (2) and 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.
(2) The Marijuana Tax Fines and Penalties Account is hereby established within the Tax Fund. All moneys collected or paid to the board pursuant to subdivision (f) of Section 34016 or Section 34011.54, 34016.05, 34016.1, 34016.11, 34016.13, 34016.14, or 34016.15 shall be deposited into the account and shall be available, upon appropriation by the Legislature, to the Cannabis Criminal Enforcement Team for the purposes described in Section 15919 of the Government Code.
(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.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution for certain costs that may be incurred by a local agency or school district because, in that regard, 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.
However, if the Commission on State Mandates determines that this act contains other costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.

SEC. 32.

 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.