Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2012
 

Cigarette and Tobacco Products Tax Law

CHAPTER 2. IMPOSITION OF TAX.


CHAPTER 2. IMPOSITION OF TAX.

Article 1. Tax on Distributors

30101. Rate of tax. Every distributor shall pay a tax upon his or her distributions of cigarettes at the rate of one and one-half mills ($0.0015) for the distribution after 4:00 a.m. on July 1, 1959, of each cigarette until 12:01 a.m. on August 1, 1967, at the rate of three and one-half mills ($0.0035) for the distribution of each cigarette on and after August 1, 1967, until 12:01 a.m. on October 1, 1967, at the rate of five mills ($0.005) on and after 12:01 a.m. on October 1, 1967, until 12:01 a.m. on January 1, 1994, and at the rate of six mills ($0.006) on and after 12:01 a.m. on January 1, 1994.

History.—Stats. 1967, p. 2515, operative August 1, 1967, added all language following "July 1, 1959, of each cigarette." Stats. 1993, Ch. 660, in effect October 1, 1993, but operative January 1, 1994, added "or her" following "his"; deleted "and" following "on August 1, 1967,"; deleted "and" before "at the rate of five mills"; and added "until 12:01 a.m. on January . . . January 1, 1994" to the end of the section. Stats. 1994, Ch. 146, in effect January 1, 1995, substituted "4:00" for "4 o'clock" before "a.m. on July 1, 1959"; deleted "o'clock" after "until 12:01" before "a.m. on August" and "a.m. on October".

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30101.7. Face-to-face sale. (a) It is the intent of the Legislature in enacting this section to facilitate the collection of all applicable state surtaxes, sales or use taxes, and escrow and other payment obligationson on cigarettes sold to residents of the state and to ensure compliance with the Prevent All Cigarette Trafficking Act of 2009 (PACT Act; Public Law 111-154).

(b) Except as provided in subdivision (d), no person may engage in a retail sale of cigarettes in California unless the sale is a vendor-assisted, face-to-face sale.

(c) For the purposes of this section, the following definitions shall apply:

(1) "Consumer" means a person who purchases cigarettes or tobacco products. "Consumer" does not include any person licensed under this part or under Division 8.6 (commencing with Section 22970) of the Business and Professions Code and lawfully operating as a manufacturer, distributor, wholesaler, or retailer of cigarettes or tobacco products.

(2) "Delivery sale" means sale of cigarettes or tobacco products into and in this state in either of the following cases:

(A) The consumer submits the order for the sale by means of a telephone or other method of voice transmission, the mail, or the Internet or other online service, or the seller is otherwise not in the physical presence of the consumer when the request for purchase or order is made.

(B) The cigarettes or tobacco products are delivered to the consumer by common carrier, private delivery service, or other method of remote delivery, or the seller is not in the physical presence of the consumer when the consumer obtains possession of the cigarettes or tobacco products.

(3) "Delivery seller" means a person who makes a delivery sale.

(4) "Face-to-face sale" means a sale in which the purchaser is in the physical presence of the seller or the seller's employee or agent at the time of the sale. A face-to-face sale does not include a delivery sale.

(5) "Indian country" shall have the same meaning as provided in Section 1151 of Title 18 of the United States Code, and includes any other land held by the United States in trust or restricted status for one or more Indian tribes.

(6) "Interstate commerce" means commerce between a state and any place outside the state, commerce between a state and Indian country in the state, or commerce between points in the same state but through a place outside of the state or through any Indian country.

(7) "Tobacco products" shall have the same meaning as otherwise defined under this part with the exception of cigars.

(d) A person may engage in delivery sale of cigarettes or tobacco products to a person in California provided that all of the following conditions are met:

(1) The delivery seller has fully complied with all of the requirements of Chapter 10A (commencing with Section 375) of Title 15 of the United States Code, otherwise known as the Jenkins Act.

(2) The delivery seller obtains and maintains any applicable license under this part and under Division 8.6 (commencing with Section 22970) of the Business and Professions Code, as if the delivery sales occurred entirely within this state.

(3) The delivery seller complies with any applicable state law that imposes escrow or other payment obligations on tobacco product manufacturers, including, but not limited to, Sections 104555 to 104557, inclusive, of the Health and Safety Code.

(4) The Attorney General may require the delivery seller to report to the Attorney General its delivery sales of cigarettes and tobacco products to California consumers in the form and manner specified by the Attorney General.

(e) Any violation of this section by any person is a misdemeanor. Each offense shall be punishable by a fine not to exceed five thousand dollars ($5,000), or imprisonment not to exceed one year in a county jail, or both the fine and imprisonment. The amount of any fines assessed shall be deposited in the Cigarette and Tobacco Products Compliance Fund.

(f) The State Board of Equalization may provide information relative to a seller's failure or attempt to comply with the PACT Act and the Jenkins Act to the Attorney General.

(g) The Attorney General or a city attorney, county counsel, or district attorney may bring a civil action to enforce this section against a person that violates this section and, in addition to any other remedy provided by law, the court shall assess a civil penalty in accordance with the following schedule:

(1) A civil penalty of not less than one thousand dollars ($1,000) and not more than two thousand dollars ($2,000) for the first violation.

(2) A civil penalty of not less than two thousand five hundred dollars ($2,500) and not more than three thousand five hundred dollars ($3,500) for the second violation within a five-year period.

(3) A civil penalty of not less than four thousand dollars ($4,000) and not more than five thousand dollars ($5,000) for the third violation within a five-year period.

(4) A civil penalty of not less than five thousand five hundred dollars ($5,500) and not more than six thousand five hundred dollars ($6,500) for a fourth violation within a five-year period.

(5) A civil penalty of up to ten thousand dollars ($10,000) for a fifth or subsequent violation within a five-year period.

(h) This section does not prohibit the lawful sale of a tobacco product that occurs by means of a vending machine.

(i) Nothing in this section shall relieve the seller of cigarettes from any other applicable requirement of state law relating to the sale or distribution of cigarettes or tobacco products in this state.

(j) The board shall enforce the licensing and tax provisions of this section. Other provisions of this section shall be enforced by the Attorney General.

(k) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

History.—Added by Stats. 2001, Ch. 686 (SB 1766), in effect January 1, 2003. Stats. 2003, Ch. 603 (SB 1016), in effect January 1, 2004, substituted "both" for "either" after "provided that" and substituted "are" for "is" after "following conditions", added paragraphs (1) and (2), letter former paragraph (1) and (2) as subparagraphs (A) and (B), respectively, in subdivision (d); added subdivisions (e) and (g); and relettered former subdivisions (e), (f), (g), and (h) as subdivisions (f), (h), (i), and (j), respectively. Stats. 2010, Ch. 265 (AB 2496), in effect January 1, 2011, substituted "," for "and" after "applicable state surtaxes", added ", and escrow and other payment obligations" after "sales or use taxes", added "and to ensure compliance with the Prevent All Cigarette Trafficking Act of 2009 (PACT Act; Public Law 111-154)" after "residents of the state" in subdivision (a); substituted "the following definitions shall apply:" after "For the purposes of this section" in, and added paragraphs (1) – (7) to, subdivision (c); substituted "delivery" for "a non-face-to-face" after "may engage in", added "or tobacco products" after "of cigarettes", and substituted "all" for "both" after "provided that" in, added "delivery" after "The" in paragraph (1) of, deleted former paragraph (2) of, and added paragraphs (3) – (4) to, subdivision (d); added subdivision (e) and redesignated former subdivision (e) and (f) as subdivisions (f) and (g), respectively; substituted "may" for "shall" after "Equalization" and added "PACT Act and the" after "comply with the" in redesignated subdivision (f); substituted "a" for "any" after section against" and substituted "remedy" for "remedies" after "any other" in, substituted "five-year" for "five year" after violation within a" in paragraph (3) of, added "up to" after "civil penalty of" in paragraph (5) of, redesignated subdivision (g); deleted former subdivision (g); substituted "the" for "any" after "does not prohibit" in subdivision (h); added "or distribution" after "to the sale" and added "or tobacco products in this state" after "or distribution of cigarettes" in subdivision (i); added subdivision (j); and redesignated former subdivision (j) as subdivision (k).

Note.—SEC. 9. of Stats. 2010. Ch. 265 (AB 2496), in effect January 1, 2011, states, Nothing in this act preempts or supersedes any local tobacco control law or ordinance other than those laws or ordinances that are related to the collection of state taxes. Local licensing laws or ordinances may provide for the suspension or revocation of licenses issued by a local government or agency for a violation of the laws imposed under the Cigarette and Tobacco Products Tax Law (Part 13 (commencing with Section 30001) of Division 2 of the Revenue and Taxation Code).

30102. Sale to certain federal instrumentalities. (a) The taxes imposed by this part shall not apply to the sale of cigarettes or tobacco products to either of the following:

(1) United States Army, Air Force, Navy, Marine Corps or Coast Guard exchanges and commissaries and Navy or Coast Guard ships' stores.

(2) The United States Veterans' Administration.

(b) This section shall remain in effect only until the first day of the first calendar month commencing more than 60 days after existing federal law is amended by Congress to permit state taxation of sales of cigarettes by or through federal military installations.

History.—Added by Stats. 1976, Ch. 206, effective June 7, 1976, through January 1, 1980. Stats. 1979, Ch. 712, effective September 18, 1979, changed January 1, 1980, expiration date to the first day of the first calendar month commencing more than 60 days after the existing federal law is amended by Congress to permit state taxation of sales of cigarettes by or through federal military installations. Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes", added "either of the following" after "tobacco products to", substituted a period for ", or" after "ships' stores" in subdivision (a), and substituted "The" for "the" and "Veterans' " for "Veterans" in subdivision (b). Stats. 1992, Ch. 1336, in effect January 1, 1993, added the subdivision letter (a) to the beginning of the section; and relettered former subdivisions (a) and (b) as (1) and (2), respectively; and added subdivision (b).

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30102.5. Distribution under internal revenue bond or customs control. The taxes imposed by this part shall not apply to the distribution of cigarettes or tobacco products that are non-tax-paid under Chapter 52 of the Internal Revenue Act of 1954 as amended, and the cigarettes or tobacco products are under internal revenue bond or customs control.

History.—Added by Stats. 1961, p. 1183, in effect September 15, 1961. Stats. 1967, p. 2515, operative August 1, 1967, deleted the former language exempting sales to veterans' homes, etc., and added everything following "shall not apply to." Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "distribution of cigarettes" and added "or tobacco products" after "and the cigarettes".

30103. Sale by manufacturer. The taxes imposed by this part shall not apply to the sale of cigarettes or tobacco products by the manufacturer to a licensed distributor.

History.—Stats. 1961, p. 2499, operative July 1, 1961, substituted "the sale" for "distributions". Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes".

30103.5. Sale or transfer to law enforcement. (a) The tax and surcharge imposed by this part shall not apply to the sale or transfer of untaxed cigarettes or tobacco products to a law enforcement agency for use in a criminal investigation when that sale or transfer is authorized by the board.

(b) A law enforcement agency authorized by the board to receive or purchase cigarettes or tobacco products as provided in subdivision (a) shall not be required to apply for, or obtain, a license as a distributor pursuant to Section 30140.

(c) A law enforcement agency making distributions of cigarettes and tobacco products received or purchased under subdivision (a) is not required to collect or remit the tax or surcharge imposed by this part with respect to those authorized distributions.

History.—Added by Stats. 1995, Ch. 555, in effect January 1, 1996. Stats. 1999, Ch. 941 (SB 1231), in effect January 1, 2000, added "or tobacco products" after "of untaxed cigarettes" in subdivision (a), added "or tobacco products" after "or purchase cigarettes" in subdivision (b), and added "and tobacco products" after "distribution of cigarettes" in subdivision (c).

30104. Common carrier of passengers. The taxes imposed by this part shall not apply to the sale of cigarettes or tobacco products by a distributor to a common carrier engaged in interstate or foreign passenger service or to a person authorized to sell cigarettes or tobacco products on the facilities of the carrier. Whenever cigarettes or tobacco products are sold by distributors to common carriers engaged in interstate or foreign passenger service for use or sale on facilities of the carriers, or to persons authorized to sell cigarettes or tobacco products on those facilities, the tax imposed by Section 30101 and 30123, and 30131.2 shall not be levied with respect to the sales of the cigarettes or tobacco products by the distributors, but a tax is hereby levied upon the carriers or upon the persons authorized to sell cigarettes or tobacco products on the facilities of the carriers, as the case may be, for the privilege of making sales in California at the same rate as set forth in Section 30101 and 30123, and 30131.2. Those common carriers and authorized persons shall pay the tax imposed by this section and file reports with the board, as provided in Section 30186.

History.—Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes" and "and 30123" after "Section 30101" throughout the section, and substituted "Those" for "Such" in the last sentence. Stats. 2001, Ch. 251 (AB 1123), in effect January 1, 2002, substituted "the" for "such" after "the facilities of" in the first sentence; and added ", and 30131.2" after "the tax imposed by Section 30101 and 30123", deleted "such" after "the privilege of making", and added ", and 30131.2" after "set forth in Section 30101 and 30123" in the second sentence.

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30105. Sale by original importer. The taxes imposed by this part shall not apply to the sale of cigarettes or tobacco products by the original importer to a licensed distributor if the cigarettes or tobacco products are manufactured outside the United States.

History.—Added by Stats. 1985, Ch. 35, effective May 7, 1985. Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes" throughout the text.

30105.5. Sale or gift to veterans' institutions. The taxes imposed by this part shall not apply to the sale or gift of federally tax-free cigarettes or tobacco products when the cigarettes or tobacco products are delivered directly from the manufacturer under Internal Revenue bond to a veterans' home of the State of California or a hospital or domiciliary facility of the United States Veterans' Administration for gratuitous issue to veterans receiving hospitalization or domiciliary care. The tax shall not be imposed with respect to the use or consumption of such cigarettes or tobacco products by the institution or by the veteran patients or domiciliaries.

History.—Added by Stats. 1961, p. 1484, in effect September 15, 1961. Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes" throughout the text, and substituted "Veterans' " for "Veterans" in the first sentence.

30106. Consumer exemption. The taxes imposed by this part shall not apply to the use or consumption of untaxed cigarettes transported or brought into this state in a single lot or shipment of not more than 400 cigarettes by an individual for his own use or consumption, or of not more than 400 untaxed cigarettes obtained at one time from any of the instrumentalities listed in Section 30102. History.—Stats. 1961, p. 2500, operative July 1, 1961, added the first sentence which was derived in part from former subdivision (d) of Section 30008 and substituted "(b)" for "(d)" in the second sentence. Stats. 1967, p. 2515, operative August 1, 1967, deleted the former last sentence which required the consumer to pay the tax on untaxed cigarettes consumed in this state. Stats. 1968, p. 2121, in effect November 13, 1968, increased from 200 to 400 the number of exempt cigarettes. Stats. 1970, p. 1058, operative November 23, 1970. Adds "or brought" following word "transported", adds "by an individual for his own use or consumption" following "400 cigarettes".

30107. Payment by consumer. The taxes resulting from a distribution of cigarettes or tobacco products within the meaning of subdivision (b) of Section 30008 shall be paid by the user or consumer.

History.—Added by Stats. 1967, p. 2516, operative August 1, 1967, formerly the last sentence of Section 30106. Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes".

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30108. Collection by distributor. (a) Every distributor engaged in business in this state and selling or accepting orders for cigarettes or tobacco products with respect to the sale of which the tax imposed by Section 30101 and 30123, and 30131.2 is inapplicable shall, at the time of making the sale or accepting the order or, if the purchaser is not then obligated to pay the tax with respect to his or her distribution of the cigarettes or tobacco products, at the time the purchaser becomes so obligated, collect the tax from the purchaser, if the purchaser is other than a licensed distributor, and shall give to the purchaser a receipt therefor in the manner and form prescribed by the board.

(b) Every person engaged in business in this state and making gifts of untaxed cigarettes or tobacco products as samples with respect to which the tax imposed by Section 30101 and 30123, and 30131.2 is inapplicable shall, at the time of making the gift or, if the donee is not then obligated to pay the tax with respect to his or her distribution of the cigarettes or tobacco products, at the time the donee becomes so obligated, collect the tax from the donee, if the donee is other than a licensed distributor, and shall give the donee a receipt therefor in the manner and form prescribed by the board. This section shall not apply to those distributions of cigarettes or tobacco products which are exempt from tax under Section 30105.5.

(c) "Engaged in business in the state" means and includes any of the following:

(1) Maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business.

(2) Having any representative, agent, salesperson, canvasser or solicitor operating in this state under the authority of the distributor or its subsidiary for the purpose of selling, delivering, or the taking of orders for cigarettes or tobacco products.

(d) The taxes required to be collected by this section constitute debts owed by the distributor, or other person required to collect the taxes, to the state.

History.—Stats. 1961, p. 2500, operative July 1, 1961, revised the wording of the first paragraph. Stats. 1971, p. 420, in effect March 4, 1972. Reletters the section and imposes the tax on samples in new (b) and adds (c) and (d). Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes", added "and 30123" after "Section 30101", and added "or her" after "his" throughout the text, and added a comma after "storage place" in subdivision (c)(1). Stats. 2001, Ch. 251 (AB 1123), in effect January 1, 2002, added ", and 30131.2" after "Section 30101 and 30123" in subdivisions (a) and (b); and substituted "salesperson" for "salesman" after "Having any representative, agent," in subdivision (c) paragraph (2). Indian tribe must collect tax.—Legal incidence of cigarette tax falls on non-Indian purchasers of cigarettes purchased from Indian tribe, and state may require the tribe to collect the tax. Cal. State Board of Equalization v. Chemehuevi Indian Tribe, (1985) 474 U.S. __, 88 L. Ed. 2d 9.

Indian tribe still must collect tax.—Federal laws related to Indian economic development and financing did not preempt the state cigarette tax. The state's interest in raising revenue did not interfere with tribal government, and the state was not required to share its revenue with the tribe. Chemehuevi Indian Tribe v. California State Board of Equalization, (1986) 800 F.2d 1446.

30109. Presumption of distribution. Unless the contrary is established, it shall be presumed that all cigarettes or tobacco products acquired by a distributor are untaxed cigarettes or tobacco products, and that all cigarettes or tobacco products manufactured in this state or transported to this state, and no longer in the possession of the distributor, have been distributed.

History.—Stats. 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes" and substituted "state" for "State" throughout the text.

30110. Claim for exemption. Any claim for exemption from tax under this part shall be made to the board in such manner as the board shall prescribe.

30111. In lieu tax; subject to sales and use taxes. The taxes imposed by this part are in lieu of all other state, county, municipal, or district taxes on the privilege of distributing cigarettes or tobacco products.

This section does not prohibit the application of Part 1 (commencing with Section 6001), Part 1.5 (commencing with Section 7200), Part 1.6 (commencing with Section 7251) or Article 2 (commencing with Section 37021) of Part 17 to the sale, storage, use or other consumption of cigarettes or tobacco products.

History.—Stats. 1968, p. 1797, in effect November 13, 1968, added "or Article 2 . . . of Part 17". Stats. 1969, p. 123, in effect November 10, 1969, added the reference to Part 1.6 and substituted "this division" for "Division 2 of this code", in the second paragraph. Stats 1989, Ch. 634, in effect September 21, 1989, added "or tobacco products" after "cigarettes" throughout the text and deleted "of this division" after "Part 17" in the second paragraph.

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Article 2. Floor Stocks and Indicia Adjustment Taxes [Repealed.]1

1Article 2 was repealed by Stats. 1982, Ch. 454, in effect January 1, 1983.

Article 2. Cigarette and Tobacco Products Surtax2

2Article 2 adopted by voters, Prop 99 Sec. 4, in effect January 1, 1989.

30121. Definitions. For purposes of this article:

(a) "Cigarettes" has the same meaning as in Section 30003, as it read on January 1, 1988. (b) "Tobacco products" includes, but is not limited to, all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other articles or products made of, or containing at least 50 percent, tobacco, but does not include cigarettes.

(c) "Fund" means the Cigarette and Tobacco Products Surtax Fund created by Section 30122.

Tobacco Tax and Health Protection Act of 1988 (Proposition 99) is Constitutional.—A statutory initiative, approved by a majority of the electorate, that increases taxes on cigarettes and other tobacco related products and allocates the revenue raised to address tobacco related problems does not violate the provisions of the California State Constitution related to changes in State taxes for the purpose of increasing revenue (ART. XIIIA §§3 & 4) or the single subject rule. (ART. II §8(d)) Kennedy Wholesale, Inc. v. State Board of Equalization, (1991) 53 Cal.3d 245.

30122. Cigarette and Tobacco Products Surtax Fund. (a) The Cigarette and Tobacco Products Surtax Fund is hereby created in the State Treasury. The fund shall consist of all revenues deposited therein pursuant to this article. Moneys in the fund may only be appropriated for the following purposes:

(1) Tobacco-related school and community health education programs.

(2) Tobacco-related disease research.

(3) Medical and hospital care and treatment of patients who cannot afford to pay for those services, and for whom payment will not be made through any private coverage or by any program funded in whole by the federal government.

(4) Programs for fire prevention; environmental conservation; protection, restoration, enhancement, and maintenance of fish, waterfowl, and wildlife habitat areas; and enhancement of state and local park and recreation purposes.

(b) The fund consists of six separate accounts, as follows:

(1) The Health Education Account, which shall only be available for appropriation for programs for the prevention and reduction of tobacco use, primarily among children, through school and community health education programs. Revenues from the Health Education Account shall not be used to match federal funds for any purpose.

(2) The Hospital Services Account, which shall only be available for appropriation for payment to public and private hospitals licensed pursuant to subdivision (a) of Section 1250 of the Health and Safety Code for the treatment of hospital patients who cannot afford to pay for that treatment and for whom payment for hospital services will not be made through private coverage or by any program funded in whole by the federal government.

(3) The Physician Services Account, which shall only be available for appropriation for payment to physicians for services to patients who cannot afford to pay for those services, and for whom payment for physician services will not be made through private coverage or by any program funded in whole by the federal government.

(4) The Research Account, which shall only be available for appropriation for tobacco-related disease research. Revenues from the Public Research Account shall not be used to match federal funds for any purpose. (5) The Public Resources Account, which shall only be available for appropriation in equal amounts for both of the following:

(A) Programs to protect, restore, enhance, or maintain fish, waterfowl, and wildlife habitat on an equally funded basis.

(B) Programs to enhance state and local park and recreation resources.

(6) The Unallocated Account, which shall be available for appropriation for any purpose specified in subdivision (a).

History.—Stats. 2005, Ch. 14 (SB 88), in effect June 17, 2005, deleted "or in part" after "funded in whole" in subdivisions (a)(3), (b)(2), and (b)(3); added last sentence to subdivision (b)(1) which provides that "Revenues from the Health Education Account shall not be used to match federal funds for any purpose", and added last sentence to subdivision (b)(4) which provides "Revenues from the Public Research Account shall not be used to match federal funds for any purpose."

Note.—SEC. 4. of Stats. 2005, Ch. 14 (SB 88), in effect June 17, 2005, states, "Section 2 of this act shall be applied with respect to the entire 2004–05 fiscal year and for each fiscal year following that fiscal year."

Note.—SEC. 5. of Stats. 2005, Ch. 14 (SB 88), in effect June 17, 2005, states, "No program or service funded through the Budget Act of 2004 that receives funding from the Physicians Services Account, the Hospital Services Account, or the Unallocated Account of the Cigarette and Tobacco Products Surtax Fund shall be adversely affected by the receipt of federal funding as a result of the implementation of this act."

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30123. Rate of tax; cigarettes; tobacco products. (a) In addition to the tax imposed upon the distribution of cigarettes by this chapter, there shall be imposed upon every distributor a tax upon the distribution of cigarettes at the rate of twelve and one-half mills ($0.0125) for each cigarette distributed.

(b) There shall be imposed upon every distributor a tax upon the distribution of tobacco products, based on the wholesale cost of these products, at a tax rate, as determined annually by the State Board of Equalization, which is equivalent to the combined rate of tax imposed on cigarettes by subdivision (a) and the other provisions of this part.

(c) The wholesale cost used to calculate the amount of tax due under subdivision (b) does not include the wholesale cost of tobacco products that were returned by a customer during the same reporting period in which the tobacco products were distributed, when the distributor refunds the entire amount the customer paid for the tobacco products either in cash or credit. For purposes of this subdivision, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs is refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.

History.— Stats. 2001, Ch. 426 (SB 312), in effect October 2, 2001, added subdivision (c).

Note.—SEC. 7 of Stats. 2001, Ch. 426 (SB 312), effective October 2, 2001, states: The Legislature finds and declares that this act furthers and is consistent with the purposes expressed in Article 2 (commencing with Section 30121) of Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code, as contained within the Tobacco Tax and Health Protection Act of 1988 (Proposition 99 of the November 8, 1988, general election), and Article 3 (commencing with Section 30131) of Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code, as contained in the California Families and Children Act of 1998 (Proposition 10 of the November 3, 1998, general election).

30124. Disposition of fund. (a) With the exception of payments of refunds made pursuant to Article 1 (commencing with Section 30361) of Chapter 6, and reimbursement of the State Board of Equalization for expenses incurred in the administration and collection of the tax imposed by Section 30123, pursuant to its powers vested by this part, all moneys raised pursuant to the taxes imposed by Section 30123 shall be deposited into the fund as provided in subdivision (b).

(b) Moneys shall be deposited in the fund according to the following formula:

(1) Twenty percent shall be deposited in the Health Education Account.

(2) Thirty-five percent shall be deposited in the Hospital Services Account.

(3) Ten percent shall be deposited in the Physician Services Account.

(4) Five percent shall be deposited in the Research Account.

(5) Five percent shall be deposited in the Public Resources Account.

(6) Twenty-five percent shall be deposited in the Unallocated Account.

(c) Any amounts appropriated from any account specified in subdivision (b) which is not encumbered within the period prescribed by law shall revert to the account from which it was appropriated.

(d) This section shall become operative July 1, 1996.

History.—Added by Stats. 1995, Ch. 194, in effect July 27, 1995, but operative July 1, 1996.

Former Section.—Former Section 30124, similar to the present section, was adopted by voters, Proposition 99 Section 4, effective November 9, 1988, operative January 1, 1989, amended Stats. 1995, Ch. 194 (SB 493), in effect July 27, 1995, and repealed, operative July 1, 1996, by its own terms.

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30125. Use of funds. Funds expended pursuant to this article shall be used only for the purposes expressed in this article and shall be used to supplement existing levels of service and not to fund existing levels of service. The fund and accounts in the fund may be used for loans to the General Fund as provided in Sections 16310 and 16381 of the Government Code. The loans shall be repaid with interest from the General Fund at the Pooled Money Investment Account rate.

History.—Stats. 1994, Ch. 136, in effect July 5, 1994, added "The fund and . . . Investment Account rate." as the second and third sentences.

30126. Determination of tobacco products tax rate. The annual determination required of the State Board of Equalization pursuant to subdivision (b) of Section 30123 shall be made based on the wholesale cost of tobacco products as of March 1, and shall be effective during the state's next fiscal year.

30128. Effective date; article. This article shall take effect on January 1, 1989.

30129. Imposition of tax; effective date. The tax imposed by Section 30123 shall be imposed on every cigarette and tobacco product in the possession or under the control of every dealer and distributor on and after 12:01 a.m. on January 1, 1989, pursuant to rules and regulations promulgated by the State Board of Equalization.

30130. Amendments to article. This article may be amended only by vote of four-fifths of the membership of both houses of the Legislature. All amendments to this article must be consistent with its purposes.

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Article 3. California Children and Families First Trust Fund Account1

1Article 3 adopted by voters, Proposition 10, Sec. 6, in effect January 1, 1999.

30131. Purpose. Notwithstanding Section 30122, the California Children and Families Trust Fund is hereby created in the State Treasury for the exclusive purpose of funding those provisions of the California Children and Families Act of 1998 that are set forth in Division 108 (commencing with Section 130100) of the Health and Safety Code.

History.—Stats. 1999, Ch. 126 (AB 1576), in effect January 1, 2000, deleted "First" after "Children and Families."

California Children and Families Act is constitutional and the increased excise tax is valid.—Prop. 10, California Children and Families Act of 1998 (the Act), which increased the tobacco excise tax for the stated purposes of reducing tobacco use, is constitutional. The court also held that the initiative did not violate the single-subject rule, and the funding of the California Children and Families Commission and local county commissions did not violate the constitutional prohibition against state funding of entities outside the state's exclusive management and control. California Assn. of Retail Tobacconists v. State of California (2003) 109 Cal.App.4th 792.

30131.1. Definitions. The following definitions apply for purposes of this article:

(a) "Cigarette" has the same meaning as in Section 30003, as it read on January 1, 1997.

(b) "Tobacco products" includes, but is not limited to, all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other articles or products made of, or containing at least 50 percent, tobacco, but does not include cigarettes.

30131.2. Rate of tax; cigarettes; tobacco products. (a) In addition to the taxes imposed upon the distribution of cigarettes by Article 1 (commencing with Section 30101) and Article 2 (commencing with Section 30121) and any other taxes in this chapter, there shall be imposed an additional surtax upon every distributor of cigarettes at the rate of twenty-five mills ($0.025) for each cigarette distributed.

(b) In addition to the taxes imposed upon the distribution of tobacco products by Article 1 (commencing with Section 30101) and Article 2 (commencing with Section 30121), and any other taxes in this chapter, there shall be imposed an additional tax upon every distributor of tobacco products, based on the wholesale cost of these products, at a tax rate, as determined annually by the State Board of Equalization, which is equivalent to the rate of tax imposed on cigarettes by subdivision (a).

(c) The wholesale cost used to calculate the amount of tax due under subdivision (b) does not include the wholesale cost of tobacco products that were returned by a customer during the same reporting period in which the tobacco products were distributed, when the distributor refunds the entire amount the customer paid for the tobacco products either in cash or credit. For purposes of this subdivision, refund or credit of the entire amount shall be deemed to be given when the purchase price less rehandling and restocking costs is refunded or credited to the customer. The amount withheld for rehandling and restocking costs may be a percentage of the sales price determined by the average cost of rehandling and restocking returned merchandise during the previous accounting cycle.

History.—Stats. 2001, Ch. 426 (SB 312), in effect October 2, 2001, added subdivision (c).

Note.—SEC. 7 of Stats. 2001, Ch. 426 (SB 312), effective October 2, 2001, states: The Legislature finds and declares that this act furthers and is consistent with the purposes expressed in Article 2 (commencing with Section 30121) of Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code, as contained within the Tobacco Tax and Health Protection Act of 1988 (Proposition 99 of the November 8, 1988, general election), and Article 3 (commencing with Section 30131) of Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code, as contained in the California Families and Children Act of 1998 (Proposition 10 of the November 3, 1998, general election).

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30131.3. Disposition of funds. Except for payments of refunds made pursuant to Article 1 (commencing with Section 30361) of Chapter 6, reimbursement of the State Board of Equalization for expenses incurred in the administration and collection of the taxes imposed by Section 30131.2, and transfers of funds in accordance with subdivision (c) of Section 130105 of the Health and Safety Code, all moneys raised pursuant to the taxes imposed by Section 30131.2 shall be deposited in the California Children and Families Trust Fund and are continuously appropriated for the exclusive purpose of the California Children and Families Program established by Division 108 (commencing with Section 130100) of the Health and Safety Code.

History.—Stats. 1999, Ch. 126 (AB 1576), in effect January 1, 2000, deleted "First" after "Children and Families."

30131.4. Use of funds. (a) All moneys raised pursuant to taxes imposed by Section 30131.2 shall be appropriated and expended only for the purposes expressed in the California Children and Families Act, and shall be used only to supplement existing levels of service and not to fund existing levels of service. No moneys in the California Children and Families Trust Fund shall be used to supplant state or local General Fund money for any purpose.

(b) Notwithstanding any other provision of law and the designation of the California Children and Families Trust Fund as a trust fund, the Controller may use the money raised pursuant to Section 30131.2 for the California Children and Families Trust Fund and all accounts created pursuant to subdivision (d) of Section 130105 of the Health and Safety Code for loans to the General Fund as provided in Sections 16310 and 16381 of the Government Code. Any such loan shall be repaid from the General Fund with interest computed at 110 percent of the Pooled Money Investment Account rate, with the interest commencing to accrue on the date the loan is made from the fund or account. This subdivision does not authorize any transfer that will interfere with the carrying out of the object for which this fund or those accounts were created.

History.—Stats. 1999, Ch. 126 (AB 1576), in effect January 1, 2000, deleted "First" after "Children and Families." Stats. 2008, Ch. 751 (AB 1389), in effect September 30, 2008, redesignated former sole paragraph to be subdivision (a) and added subdivision (b).

Note.—SEC. 78 of Stats. 2008, Ch. 751 (AB 1389), in effect September 30, 2008, states, "The Legislature hereby finds and declares that the amendments made by Section 72 of this act to Section 30131.4 of the Revenue and Taxation Code furthers the California Children and Families First Act of 1998 enacted by the approval of Proposition 10 at the November 3, 1998, general election, and is consistent with its purposes."

30131.5. Determination of tobacco products tax rate. The annual determination required of the State Board of Equalization pursuant to subdivision (b) of Section 30131.2 shall be made based on the wholesale cost of tobacco products as of March 1, and shall be effective during the state's next fiscal year.

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30131.6. Imposition of tax; effective date. The taxes imposed by Section 30131.2 shall be imposed on every cigarette and on tobacco products in the possession or under the control of every dealer and distributor on and after 12:01 a.m. on January 1, 1999, pursuant to rules and regulations promulgated by the State Board of Equalization.