1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JUNE 20, 2017 10 11 12 13 14 15 CHIEF COUNSEL MATTERS 16 ITEM J 17 RULEMAKING 18 J1 SECTION 100 CHANGES 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board of Equalization: Diane L. Harkey 4 Chairwoman 5 Sen. George Runner (Ret.) Vice Chair 6 Fiona Ma, CPA 7 Member 8 Jerome E. Horton Member 9 Yvette Stowers 10 Appearing for Betty T. Yee, State Controller 11 (per Government Code Section 7.9) 12 Joann Richmond 13 Chief Board Proceedings 14 Division 15 For Board of Equalization Staff: Bradley Heller 16 Tax Counsel IV Legal Department 17 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JUNE 20, 2017 4 ---oOo--- 5 MS. RICHMOND: Our next item are Chief 6 Counsel Matters, Item J, Rulemaking. We have a 7 Section 100 Change for J1, Sales and Use Tax 8 Regulation 1707, Electric Funds Transfer. 9 MS. HARKEY: Thank you. 10 Mr. Heller. 11 MR. HELLER: Good afternoon -- or good 12 morning, Chairwoman Harkey, Members of the Board. 13 I'm Bradley Heller from the Board's Legal 14 Department. 15 I'm here to request that the Board vote to 16 authorize staff to complete Rule 100 Changes to 17 Sales and Use Tax Regulation 1707, Electronic Funds 18 Transfer. The changes incorporate and make the 19 regulation consistent with amendments made to 20 Revenue and Taxation Code Section 6479.3 which 21 permit a person issued a seller's permit for a 22 medical marijuana dispensary to remit amounts due 23 for retail sales at the dispensary by a means other 24 than electronic funds transfer before January 1, 25 2022. 26 MS. HARKEY: Members? 27 MR. HORTON: Discussion, Member -- Madam 28 Chair. 3 1 MS. HARKEY: Yes, Member Horton. 2 MR. HORTON: Question. Given the -- and I 3 haven't read this, so I could be off, Mr. Heller. 4 The budget change as it relates to 5 Proposition 64, I thought it shifted the excise tax 6 to -- to the distributor. Is that the case? 7 MR. HELLER: I believe -- well, let me just 8 say that I'm not totally up to speed on the current 9 amendments. But they don't apply to this particular 10 scenario. That has to do with the specific 11 excise -- the excise tax on marijuana, and this 12 actually just has to do with payments and 13 prepayments of sales and use tax on sales by a 14 medical marijuana dispensary. 15 So that wouldn't impact these changes. And 16 I'm really not a hundred percent sure whether those 17 have been enacted, but I believe the idea was to 18 have distributors collect from a cultivator, I 19 believe is what you're thinking of. 20 MR. HORTON: Mm-hmm, mm-hmm. Okay. 21 Well, the reason I ask is because -- I mean 22 I'm supportive of the -- of the -- of the measure 23 before us, but somewhat believable that distributors 24 should have the same opportunity if in fact they are 25 now required to collect the excise tax on the 26 cultivators pursuant to the change going forward. 27 Just would like maybe the staff get back to us and 28 just share with us where we are in that regard as 4 1 well. 2 The -- the -- but one of the concerns as we 3 sort of move through this process, and I do 4 appreciate the parallel movement of making a -- an 5 assessment as to what the potential exposure may be 6 to our employees in accepting cash. So as we sort 7 of move in the direction of authorizing the 8 acceptance of cash in excessive amounts, that we -- 9 get rid of our little friend flying around here -- 10 that we continue to -- my apologies -- continue to 11 move in the direction of trying to determine the 12 security measures and how we can implement those 13 simultaneously that we provide this opportunity to 14 this industry. 15 MS. MA: I have a question. 16 MS. HARKEY: Yes, Member Ma. 17 MS. MA: I have a question. So this is 18 relating to Assemblymember Gipson's bill, right? 19 MR. HELLER: I believe so. 20 MS. MA: Where if a dispensary makes their 21 payment by the cash, they are not going to be 22 assessed a 10 percent penalty. 23 MR. HELLER: That's correct, for failing to 24 remit by electronic funds transfer. 25 MS. MA: Okay. So is it clear in the 26 proposed amendments that they are not going to be 27 subject to the ten percent penalty? Because I don't 28 see that. 5 1 MR. HELLER: I believe it's clear in the 2 fact that they're not subject to the requirement to 3 even remit by electronic funds transfer for the 4 statutory period. And so if you're not required to 5 remit by electronic funds transfer, you can't get a 6 penalty for failing to remit. 7 MS. MA: Okay. I just want to put it on 8 the record -- 9 MR. HELLER: Okay. 10 MS. MA: -- that that is the understanding, 11 because that was the purpose of the bill. 12 And then, number two, it says "a person 13 issued a seller's permit for a place of business 14 that is a dispensary," and you said it was a 15 "medical dispensary." What about under Prop 64 now 16 that's gonna just be any dispensary? So is this 17 just any dispensary retailer, so there's no 18 delineation between a medical or adult use? 19 MR. HELLER: Right now, this -- this change 20 is just a Rule 100 change to make the regulation 21 consistent with the statute. And I'm not aware that 22 the Legal Department has interpreted the statute or 23 tried to apply it to recreational marijuana or a 24 facility that sells recreational marijuana at 25 retail. 26 MS. MA: So is that going to require 27 another -- 28 MR. HELLER: I'm not saying it does. I'm 6 1 just saying I don't think we've -- pardon me, I 2 don't mean to speak over you. 3 MS. MA: That's okay. 4 MR. HELLER: I don't believe we've actually 5 looked at that issue specifically yet, but it might 6 be the case. I just don't want to say we've looked 7 at it. 8 MR. HORTON: I can share, Member Ma, if you 9 will, in drafting it -- you know, I was the original 10 sponsor of the bill. But in drafting it at the 11 time, we didn't really know that Proposition 64 was 12 going to pass and what the language was going to say 13 and so forth. 14 So there may need to be a revisit of the 15 legislation as it relates to non medical. Because 16 at the time the intent in drafting the language was 17 for it to apply to medical because there was 18 concerns about how the Legislature was going to 19 interpret Proposition 64, and when it would -- when 20 it would go into effect. And the thought was to 21 have this measure go into effect expeditiously in 22 order to provide some relief to the individuals who 23 are currently actively involved in the medical 24 marijuana industry. 25 MS. HARKEY: Okay. Does this need a 26 motion? 27 No. 28 Yes, needs a motion. 7 1 MR. HORTON: Move to adopt staff 2 recommendation. 3 MS. MA: Second. 4 MS. HARKEY: There's a motion by Member 5 Horton. Second by Member Ma. 6 No objection. 7 Such will be the order. Thank you. 8 MR. HELLER: Thank you. 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Kathleen Skidgel, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on June 20, 2017 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 8 constitute a complete 14 and accurate transcription of the shorthand writing. 15 16 Dated: June 26, 2017 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 9