Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2017
 

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 deletionunder this part shall not be levied with respect to the sales of the cigarettes or tobacco products by the distributors, but a tax is hereby levied upon the carriers or upon the persons authorized to sell cigarettes or tobacco products on the facilities of the carriers, as the case may be, for the privilege of making sales in California at the same rate as set deletionunder this part. Those common carriers and authorized persons shall pay the tax imposed by this section and file reports with the board, as provided in Section 30186.

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. Proposition 56, Section 5.2, approved by voters at the November 8, 2016 election, in effect November 9, 2016, substituted "under this part" for "by Section 30101 and 30123, and 30131" after "facilities, the tax imposed" and substituted "under this part" for "forth in Section 30101 and 30123, and 30131.2" after "at the same rate as set" 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 deletionunder this part is inapplicable shall, at the time of making the sale or accepting the order or, if the purchaser is not then obligated to pay the tax with respect to his or her distribution of the cigarettes or tobacco products, at the time the purchaser becomes so obligated, collect the tax from the purchaser, if the purchaser is other than a licensed distributor, and shall give to the purchaser a receipt therefor in the manner and form prescribed by the board.

(b) Every person engaged in business in this state and making gifts of untaxed cigarettes or tobacco products as samples with respect to which the tax imposed deletionunder this part is inapplicable shall, at the time of making the gift or, if the donee is not then obligated to pay the tax with respect to his or her distribution of the cigarettes or tobacco products, at the time the donee becomes so obligated, collect the tax from the donee, if the donee is other than a licensed distributor, and shall give the donee a receipt therefor in the manner and form prescribed by the board. This section shall not apply to those distributions of cigarettes or tobacco products deletionthat 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. Proposition 56, Section 5.3, approved by voters at the November 8, 2016 election, in effect November 9, 2016, substituted "under this part" for "by Sections 30101, 30123, and 30131.2" after "of which the tax imposed" in subdivisions (a) and (b); and substituted "that" for "which" after "distributions of cigarettes and tobacco products" in the last sentence of subdivision (b).

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,deletiona product containing, made, or derived from tobacco or nicotine that is intended for human consumption, whether smoked, heated, chewed, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, including, but not limited to, cigars, little cigars, chewing tobacco, pipe tobacco, or snuff, but does not include cigarettes. Tobacco products shall also include electronic cigarettes. Tobacco products shall not include any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes where that product is marketed and sold solely for such approved use. Tobacco products does not include any food products as that term is defined pursuant to Section 6359.

(c) "Electronic cigarettes" means any device or delivery system sold in combination with nicotine which can be used to deliver to a person nicotine in aerosolized or vaporized form, including, but not limited to, an e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah. Electronic cigarettes include any component, part, or accessory of such a device that is used during the operation of the device when sold in combination with any liquid or substance containing nicotine. Electronic cigarettes also include any liquid or substance containing nicotine, whether sold separately or sold in combination with any device that could be used to deliver to a person nicotine in aerosolized or vaporized form. Electronic cigarettes do not include any device not sold in combination with any liquid or substance containing nicotine, or any battery, battery charger, carrying case, or other accessory not used in the operation of the device if sold separately. Electronic cigarettes shall not include any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes where that product is marketed and sold solely for such approved use. As used in this subdivision, nicotine does not include any food products as that term is defined pursuant to Section 6359.

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

History.—Proposition 56, Section 3.1, approved by voters at the November 8, 2016 election, operative April 1, 2017, substituted "a product containing, made, or derived from tobacco or nicotine . . . pipe tobacco, or snuff" for "all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other articles or products made of, or containing at least 50 percent, tobacco" after ""Tobacco Products" includes, but is not limited to" and added the second, third, and fourth sentences, to subdivision (b); added subdivision (c); and relettered former subdivision (c) as (d).

Note.—Proposition 56, Section 10, approved by voters at the November 8, 2016 election, in effect November 9, 2016, states "This act shall become effective as provided in subdivision (a) of Section 10 of Article II of the California Constitution; provided, however, the amendment to Section 30121 of the Revenue and Taxation Code shall become effective April 1, 2017."

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.

Article 2.5 The California Healthcare, Research and Prevention Tobacco Tax Act of 2016

30130.50. Definitions. For the purposes of this article:

(a) "Cigarette" has the same meaning as that in Section 30003 as it read on January 1, 2015.

(b) "Tobacco products" has the same meaning as that in subdivision (b) of Section 30121, as amended by this act.

30130.51. California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Cigarette Distribution Tax. (a) In addition to any other taxes imposed upon the distribution of cigarettes under this part, there shall be imposed an additional tax upon every distributor of cigarettes at the rate of one hundred mills ($0.100) for each cigarette distributed on or after the first day of the first calendar quarter commencing more than 90 days after the effective date of this act.

(b) The board shall adopt regulations providing for the implementation of an equivalent tax on electronic cigarettes as that term is defined in subdivision (c) of Section 30121, and the methods for collection of the tax. Such regulations shall include imposition of an equivalent tax on any device intended to be used to deliver aerosolized or vaporized nicotine to the person inhaling from the device when sold separately or as a package; any component, part, or accessory of such a device that is used during the operation of the device, whether sold separately or as a package with such device; and any liquid or substance containing nicotine, whether sold separately or as a package with any device that would allow it to be inhaled. Such regulations may include, but are not limited to, defining who is a distributor of electronic cigarettes pursuant to Section 30011 and the licensing requirements of any such person.

(c) Notwithstanding any other provision of this part, all revenues resulting from the tax imposed by subdivision (a) and all revenues resulting from the equivalent increase in the tax on tobacco products, including electronic cigarettes, imposed by subdivision (b) of Section 30123, shall be deposited into the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund created by Section 30130.53.

30130.52. California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Cigarette Floor Taxes. (a) (1) In addition to any other tax, every dealer and wholesaler, for the privilege of holding or storing cigarettes for sale, use, or consumption, shall pay a floor stock tax for each cigarette in its possession or under its control in this state at 12:01 a.m. on the first day of the first calendar quarter commencing more than 90 days after the effective date of this act at the rate of one hundred mills ($0.100) for each cigarette.

(2) Every dealer and wholesaler shall file a return with the board on or before the first day of the first calendar quarter commencing more than 180 days after the effective date of this act on a form prescribed by the board, showing the number of cigarettes in its possession or under its control in this state at 12:01 a.m. on the first day of the first calendar quarter commencing more than 90 days after the effective date of this act. The amount of tax shall be computed and shown on the return.

(b) (1) Every licensed cigarette distributor, for the privilege of distributing cigarettes and for holding or storing cigarettes for sale, use, or consumption, shall pay a cigarette indicia adjustment tax for each California cigarette tax stamp that is affixed to any package of cigarettes and for each unaffixed California cigarette tax stamp in its possession or under its control at 12:01 a.m. on the first day of the first calendar quarter commencing more than 90 days after the effective date of this act at the following rates:

(A) Two dollars and fifty cents ($2.50) for each stamp bearing the designation "25."

(B) Two dollars ($2) for each stamp bearing the designation "20."

(C) One dollar ($1) for each stamp bearing the designation "10."

(2) Every licensed cigarette distributor shall file a return with the board on or before the first day of the first calendar quarter commencing 180 days after the effective date of this act on a form prescribed by the board, showing the number of stamps described in subparagraphs (A), (B), and (C) of paragraph (1). The amount of tax shall be computed and shown on the return.

(c) The taxes required to be paid by this section are due and payable on or before the first day of the first calendar quarter commencing 180 days after the effective date of this act. Payments shall be made by remittances payable to the board and the payments shall accompany the return and forms required to be filed by this section.

(d) Any amount required to be paid by this section that is not timely paid shall bear interest at the rate and by the method established pursuant to Section 30202 from the first day of the first calendar quarter commencing 180 days after the effective date of this act, until paid, and shall be subject to determination, and redetermination, and any penalties provided with respect to determinations and redeterminations.

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30130.53. The California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund. (a) The California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund is hereby established in the State Treasury.

(b) All revenues raised pursuant to the taxes imposed by this article, less refunds made pursuant to Article 1 (commencing with Section 30361) of Chapter 6, shall be deposited into the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund.

(c) Notwithstanding any other law, the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund is a trust fund established solely to carry out the purposes of this act and all revenues deposited into the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund, together with interest earned by the fund, are hereby continuously appropriated for the purposes of this act without regard to fiscal year and shall be expended only in accordance with the provisions of this act and its purposes.

(d) Notwithstanding any other law, revenues deposited into the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund, including any interest earned by the fund, shall only be used for the specific purposes set forth in this act, and shall be appropriated and expended only for the purposes expressed in this act and shall not be subject to appropriation, reversion, or transfer by the Legislature, the Governor, the Director of Finance, or the Controller for any purpose other than those specified in this act, nor shall such revenues be loaned to the General Fund or any other fund of the state or any local government fund.

30130.54. California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Effect on Tobacco Consumption and Tax Revenue. (a) The board shall determine within one year of the effective date of this act, and annually thereafter, the effect that the additional taxes imposed on cigarettes by this article, and the resulting increase in the tax on tobacco products required by subdivision (b) of Section 30123, have on the consumption of cigarettes and tobacco products in this state. To the extent that a decrease in consumption is determined by the board to be a direct result of the additional tax imposed on cigarettes by this article, and the resulting increase in the tax on tobacco products required by subdivision (b) of Section 30123, the board shall determine the fiscal effect the decrease in consumption has on the Cigarette and Tobacco Products Surtax Fund created by Section 30122 (Proposition 99 as approved by the voters at the November 8, 1988, statewide general election), the Breast Cancer Fund created by Section 30461.6, and the California Children and Families Trust Fund created by Section 30131 (Proposition 10 as approved by the voters at the November 3, 1998, statewide general election), and the revenues derived from Section 30101.

(b) The Controller shall transfer from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund to those affected funds described in subdivision (a) the amount necessary to offset the revenue decrease directly resulting from the imposition of additional taxes by this article.

(c) The board shall determine within one year of the effective date of this act, and annually thereafter, the effect, if any, that the additional taxes imposed on cigarettes by this article, and the resulting increase in the tax on tobacco products required by subdivision (b) of Section 30123, have on the consumption of cigarettes and tobacco products in this state, including from the illegal sale of cigarettes and tobacco products. To the extent that there is a loss of state or local government sales and use tax revenues and such loss is determined by the board to be a direct result of the additional tax imposed on cigarettes by this article, and the resulting increase in the tax on tobacco products required by subdivision (b) of Section 30123, including from the illegal sale of cigarettes and tobacco products, the board shall determine the fiscal effect on state and local government sales and use tax revenues.

(d) The Controller shall transfer from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund to the general fund of the state and those affected local governments described in subdivision (c) the amount necessary to offset the state and local sales and use tax revenue decrease directly resulting from the imposition of additional taxes by this article, including from the illegal sale of cigarettes and tobacco products.

(e) Transfers under this section shall be made by the Controller at such times as the Controller determines necessary to further the intent of this section.

30130.55. California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Distribution of Revenue. After deducting and transferring the necessary funds pursuant to Section 30130.54 and subdivisions (a), (b), (c), (d), and (e) of Section 30130.57, the Controller shall annually allocate and transfer the remaining funds in the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund as follows:

(a) Eighty-two percent shall be transferred to the Healthcare Treatment Fund, which is hereby created, and shall be used by the State Department of Health Care Services to increase funding for the existing healthcare programs and services described in Chapter 7 (commencing with Section 14000) to Chapter 8.9 (commencing with Section 14700), inclusive, of Part 3 of Division 9 of the Welfare and Institutions Code, including those that provide healthcare, treatment, and services for Californians with tobacco-related diseases and conditions, by providing improved payments, for all healthcare, treatment, and services described in Chapter 7 (commencing with Section 14000) to Chapter 8.9 (commencing with Section 14700), inclusive, of Part 3 of Division 9 of the Welfare and Institutions Code. To the extent possible given the limits of funding under this article, payments and support for the nonfederal share of payments for healthcare, services, and treatment shall be increased based on criteria developed and periodically updated as part of the annual state budget process, provided that these funds shall not be used to supplant existing state general funds for these same purposes. These criteria shall include, but not be limited to, ensuring timely access, limiting specific geographic shortages of services, or ensuring quality care. Consistent with federal law, the funding shall be used to draw down federal funds. The funding shall be used only for care provided by health care professionals, clinics, health facilities that are licensed pursuant to Section 1250 of the Health and Safety Code, and to health plans contracting with the State Department of Health Care Services to provide health benefits pursuant to this section. The funding can be used for the nonfederal share of payments from governmental entities where applicable. The department shall, if required, seek any necessary federal approval for the implementation of this section.

(b) Thirteen percent shall be used for the purpose of funding comprehensive tobacco prevention and control programs, provided that these funds are not to be used to supplant existing state or local funds for these same purposes. These funds shall be apportioned in the following manner:

(1) Eighty-five percent to the State Department of Public Health Tobacco Control Program to be used for the tobacco control programs described beginning at Section 104375 of the Health and Safety Code. The State Department of Public Health shall award funds to state and local governmental agencies, tribes, universities and colleges, community-based organizations, and other qualified agencies for the implementation, evaluation, and dissemination of evidence-based health promotion and health communication activities in order to monitor, evaluate, and reduce tobacco and nicotine use, tobacco-related disease rates, and tobacco-related health disparities, and develop a stronger evidence base of effective prevention programming with not less than 15 percent of health promotion, health communication activities, and evaluation and tobacco use surveillance funds being awarded to accelerate and monitor the rate of decline in tobacco-related disparities with the goal of eliminating tobacco-related disparities.

(2) Fifteen percent to the State Department of Education to be used for school programs to prevent and reduce the use of tobacco and nicotine products by young people as described in Section 104420 of the Health and Safety Code with not less than 15 percent of these funds being awarded to accelerate and monitor the rate of decline in tobacco-related disparities for the purpose of eliminating tobacco-related disparities.

(c) Five percent to the University of California for medical research of cancer, heart and lung tobacco-related diseases pursuant to Article 2 (commencing with Section 104500) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code to supplement the Cigarette and Tobacco Products Surtax Medical Research Program, provided that these funds be used under the following conditions:

(1) The funds shall be used for grants and contracts for basic, applied, and translational medical research in California into the prevention of, early detection of, treatments for, complementary treatments for, and potential cures for all types of cancer, cardiovascular and lung disease, oral disease, and tobacco-related diseases. Notwithstanding any other provision of law, the University of California, through the Tobacco Related Disease Research Program, shall have authority to expend funds received under this act for the purposes set forth in this subdivision.

(2) Any grants and contracts awarded shall be awarded using existing medical research program infrastructure and on the basis of scientific merit as determined by an open, competitive peer review process that assures objectivity, consistency, and high quality.

(3) Individuals or entities that receive the grants and contracts pursuant to this subdivision must reside or be located entirely within California.

(4) The research must be performed entirely within California.

(5) The funds shall not be used to supplant existing state or local funds for these same purposes.

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30130.56. Independent Audit and Disclosure. To provide full public accountability concerning the uses to which funds from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 are put, and to ensure full compliance with the California Healthcare, Research and Prevention Tobacco Tax Act of 2016:

(a) The nonpartisan California State Auditor shall conduct at least biennially an independent financial audit of the state and local agencies receiving funds pursuant to the California Healthcare, Research and Prevention Tobacco Tax Act of 2016. An audit conducted pursuant to this section shall include, but not be limited to, a review of the administrative costs expended by the state agencies that administer the fund.

(b) Based on the independent audit, the nonpartisan California State Auditor shall prepare a report detailing its review and include any recommendations for improvements. The report shall be made available to the public.

(c) Each state agency and department receiving funds pursuant to this act shall, on an annual basis, publish on its respective Internet Web site an accounting of how much money was received from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund and how that money was spent. The annual accounting shall also be posted on any social media outlets the state agency or department deems appropriate.

(d) The use of the funds received by the State Department of Health Care Services pursuant to subdivision (a) of Section 30130.55 shall be subject to the same restrictions, including, but not limited to, audits and prevention of fraud, imposed by existing law.

(e) The use of the funds received by the State Department of Public Health, the State Department of Education, and the University of California pursuant to subdivisions (b) and (c) of Section 30130.55 shall be subject to oversight by the Tobacco Education and Research Oversight Committee pursuant to Sections 104365 and 104370 of the Health and Safety Code.

30130.57. Implementation and Administrative Costs. (a) Moneys from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund shall be used to reimburse the board for expenses incurred in the administration, calculation, and collection of the tax imposed by this article and for expenses incurred in the calculation and distribution of funds and in the promulgation of regulations as required by this act, provided, however, that after deducting the necessary funds pursuant to subdivision (b) of Section 30130.54, not more than 5 percent annually of the funds remaining in the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund shall be used for such administrative costs.

(b) Moneys from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund shall be used to reimburse the independent nonpartisan California State Auditor up to four hundred thousand dollars ($400,000) annually for actual costs incurred to conduct each of the audits required by Section 30130.56 for the purpose of providing public transparency and ensuring that the revenues generated by this article are used for healthcare, tobacco use prevention and research.

(c) Moneys from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund in the amount of forty million dollars ($40,000,000) annually shall be used to provide funding to the University of California for the purpose and goal of increasing the number of primary care and emergency physicians trained in California. This goal shall be achieved by providing this funding to the University of California to sustain, retain, and expand graduate medical education programs to achieve the goal of increasing the number of primary care and emergency physicians in the State of California based on demonstrated workforce needs and priorities.

(1) For the purposes of this subdivision, “primary care” means internal medicine, family medicine, obstetrics/gynecology, and pediatrics.

(2) Funding shall be prioritized for direct graduate medical education costs for programs serving medically underserved areas and populations.

(3) For the purposes of this subdivision, all allopathic and osteopathic residency programs accredited by federally recognized accrediting organizations and located in California shall be eligible to apply to receive funding to support resident education in California.

(4) The University of California shall annually review physician shortages by specialty across the state and by region. Based on this review, to the extent that there are demonstrated state or regional shortages of nonprimary care physicians, funds may be used to expand graduate medical education programs that are intended to address such shortages.

(d) Moneys from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund in the amount of thirty million dollars ($30,000,000) annually shall be used to provide funding to the State Department of Public Health state dental program for the purpose and goal of educating about, preventing and treating dental disease, including dental disease caused by use of cigarettes and other tobacco products. This goal shall be achieved by the program providing this funding to activities that support the state dental plan based on demonstrated oral health needs, prioritizing serving underserved areas and populations. Funded program activities shall include, but not be limited to, the following: education, disease prevention, disease treatment, surveillance, and case management.

The department shall have broad authority to fully implement and effectuate the purposes of this subdivision, including the determination of underserved communities, the development of program protocols, the authority to reimburse state-sponsored services related to the program, and the authority to contract with one or more individuals or public or private entities to provide program activities.

(e) Moneys from the California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund in the amount of forty-eight million dollars ($48,000,000) annually shall be used for the purpose of funding law enforcement efforts to reduce illegal sales of tobacco products, particularly illegal sales to minors; to reduce cigarette smuggling, tobacco tax evasion, the sale of tobacco products without a license and the sale of counterfeit tobacco products; to enforce tobacco-related laws, court judgments, and legal settlements; and to conduct law enforcement training and technical assistance activities for tobacco-related statutes; provided that these funds are not to be used to supplant existing state or local funds for these same purposes. These funds shall be apportioned in the following manner:

(1) Thirty million dollars ($30,000,000) annually to the California Department of Justice/Office of the Attorney General to be distributed to local law enforcement agencies to support and hire front-line law enforcement peace officers for programs, including, but not limited to, enforcement of state and local laws related to the illegal sales and marketing of tobacco to minors, and increasing investigative activities and compliance checks to reduce illegal sales of cigarettes and tobacco products to minors and youth.

(2) Six million dollars ($6,000,000) annually to the board to be used to enforce laws that regulate the distribution and retail sale of cigarettes and other tobacco products, such as laws that prohibit cigarette and tobacco product smuggling, counterfeiting, selling untaxed cigarettes and other tobacco products, and selling cigarettes and other tobacco products without a proper license.

(3) Six million dollars ($6,000,000) annually to the California Department of Public Health to be used to support programs, including, but not limited to, providing grants and contracts to local law enforcement agencies to provide training and funding for the enforcement of state and local laws related to the illegal sales of tobacco to minors, increasing investigative activities, and compliance checks, and other appropriate activities to reduce illegal sales of tobacco products to minors, including, but not limited to, the Stop Tobacco Access to Kids Enforcement (STAKE) Act, pursuant to Section 22952 of the Business and Professions Code.

(4) Six million dollars ($6,000,000) annually to the California Attorney General to be used for activities, including, but not limited to, enforcing laws that regulate the distribution and sale of cigarettes and other tobacco products, such as laws that prohibit cigarette smuggling, counterfeiting, selling untaxed tobacco, selling tobacco without a proper license and selling tobacco to minors, and enforcing tobacco-related laws, court judgments, and settlements.

(f) Not more than 5 percent of the funds received pursuant to this article shall be used by any state or local agency or department receiving such funds for administrative costs.

(g) The California State Auditor shall promulgate regulations pursuant to the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) to define administrative costs for purposes of this article. Such regulations shall take into account the differing nature of the agencies or departments receiving funds.

(h) The board shall determine beginning two years following the effective date of this act, and annually thereafter, any reduction in revenues, following the first year after the effective date of this act, resulting from a reduction in the consumption of cigarettes and tobacco products due to the additional taxes imposed on cigarettes by this article, and the increase in the tax on tobacco products required by subdivision (b) of Section 30123. If the board determines there has been a reduction in revenues, the amount of funds allocated pursuant to subdivisions (c), (d) and (e) shall be reduced proportionately.

30130.58. Statutory References. Unless otherwise stated, all references in this act refer to statutes as they existed on January 1, 2016.

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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" deletionshall have the same meaning as in subdivision (b) of Section 30121, as amended by the California Healthcare, Research and Prevention Tobacco Tax Act of 2016.

History.—Proposition 56, Section 3.2, approved by voters at the November 8, 2016 election, operative April 1, 2017, substituted "shall have the same meaning….and Prevention Tobacco Tax Act of 2016" for "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" after ""Tobacco products"" in subdivision (b).

Note.—Proposition 56, Section 10, approved by voters at the November 8, 2016 election, in effect November 9, 2016, states "This act shall become effective as provided in subdivision (a) of Section 10 of Article II of the California Constitution; provided, however, the amendment to Section 30121 of the Revenue and Taxation Code shall become effective April 1, 2017."

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.