Bill Text: CA SB626 | 2011-2012 | Regular Session | Amended

California Senate Bill 626 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: State Board of Equalization: cannabis and cannabis

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2012-01-31 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB626 Detail]

Download: California-2011-SB626-Amended.html

BILL NUMBER: SB 626 AMENDED
BILL TEXT

AMENDED IN SENATE APRIL 25, 2011

INTRODUCED BY Senator Calderon

FEBRUARY 18, 2011

An act to add Division 8.9 (commencing with Section 22992) to the
Business and Professions Code, and to amend Sections 6592
and 6901 of, to add Section 6471.5 to, and to add Article 1.7
(commencing with Section 6480.50) to Chapter 5 of Part 1 of Division
2 of, the Revenue add Section 7059 to the Revenue
and Taxation Code, relating to cannabis.

LEGISLATIVE COUNSEL'S DIGEST

F SB 626, as amended, Calderon. Cannabis
State Board of Equalization: cannabis and cannabis
product: certificate: taxation. products: study.
F Existing law provides for the licensure by the State Board of
Equalization of manufacturers, distributors, wholesalers, importers,
and retailers of cigarettes or tobacco products that are engaged in
business in California, and prohibits retailers, manufacturers,
distributors, and wholesalers from distributing or selling those
cigarette and tobacco products unless they are licensed. Existing law
also imposes a tax on the gross receipts from the sale in this state
of, or the storage, use, or other consumption in this state of,
tangible personal property purchased from a retailer for storage,
use, or other consumption in this state.
This bill would create the Cannabis Certification and
Regulation Act of 2011 and provide for the certification by the State
Board of Equalization of growers, wholesalers, retailers, and
transporters of cannabis or cannabis products that are engaged in
business in California. The bill would require these certificated
growers, wholesalers, retailers, and transporters to keep records of
every sale, transfer, or delivery of cannabis or cannabis products,
as specified. The bill would authorize any peace officer and
specified employees of the board to conduct inspections, as provided.
It would prohibit growers, wholesalers, retailers, and transporters
from selling or purchasing cannabis or cannabis products without a
certificate require the State Board of Equalization to
conduct a study, and submit the results of that study to the
Legislature by a specified date, to determine, among other things,
the most efficient means to obtain compliance under the Sales and Use
Tax Law by sellers of cannabis and cannabis products sellers engaged
Fin business in this state, as provided . The bill would provide for the seizure of cannabis or cannabis
products that are sold or purchased in violation of specified
provisions and impose specified penalties therefor, including
certificate revocation or suspension, civil penalties, and criminal
penalties. By imposing criminal penalties, the bill would create a
state-mandated local program.
The bill would require each wholesaler to prepay the retail sales
tax on its gross receipts derived from the sale of cannabis and
cannabis products, as specified. This bill would create the Cannabis
and Cannabis Products Compliance Fund, as specified.

This bill would require the Bureau of State Audits to conduct a
performance audit and report its findings to the board and
Legislature, as specified.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
This bill would specify that its provisions become operative on
July 1, 2012.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes no .

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
F SECTION 1. Division 8.9 (commencing with Section 22992) is added
to the Business and Professions Code, to read:

DIVISION 8.9. Cannabis Certification and Regulation Act of
2011

F CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS

F 22992. This division shall be known, and may be cited, as the
Cannabis Certification and Regulation Act of 2011.
22992.2. The Legislature finds and declares all of the following:
F (a) The current controversies surrounding California's medical
marijuana dispensaries authorized to sell medical marijuana under the
Compassionate Use Act, enacted by the voters in 1996, have created
problems for the patients, dispensaries, law enforcement, and local
governments. Many issues about the legal sale and distribution of
medical marijuana remain unaddressed.
(b) Although many dispensaries operate within the law, there is
clear evidence that some are intentionally evading taxes and may be
laundering illegally acquired money and illegally distributing
marijuana for other than medical purposes.
(c) The State Board of Equalization, under its sales tax
authority, has formally registered nearly 300 medical marijuana
dispensaries and issued seller's permits. It has also identified over
F500 unregistered dispensaries. (d) Local governments, in allocating the number and location of
dispensaries, are rightly unwilling to authorize distribution centers
when current state laws are not clear on how to prevent unlawful
activities.
(e) Law enforcement authorities have legitimate concerns about
misuse of these dispensaries as sources of illegal distribution and
consumption.
(f) Dispensaries with the best intentions do not have a clearly
defined legal framework for acquiring and distributing medical
marijuana, and are put unnecessarily at risk in the act of acquiring
an illegal product for legal resale.
(g) In 2003 the Legislature enacted the California Cigarette and
Tobacco Products Licensing Act of 2003 (Division 8.6 (commencing with
Section 22970) of the Business and Professions Code) to provide for
the licensure by the State Board of Equalization of manufacturers,
distributors, and retailers of cigarette and other tobacco products
in California. For the first time in California, the distribution and
sale of cigarette and tobacco products were prohibited pursuant to
Division 8.6 (commencing with Section 22970) of the Business and
Professions Code unless those involved in every aspect of the trade
were licensed.
(h) That act authorized the state, through the State Board of
Equalization, to suspend or revoke the license of any licensee in
violation of the strict regulations governing the legal distribution
of tobacco products. The act established criminal penalties for
selling counterfeit cigarette and tobacco products, and imposed fines
or imprisonment for possessing, selling, or buying fraudulent
cigarette tax stamps.
(i) The primary purpose of the act was to prevent the unlawful
distribution of cigarettes and the loss of state tax revenue, which
had been declining by hundreds of millions of dollars due, in part,
to unlawful distributions and untaxed sales by well-organized
criminals.
(j) The act has been a success. According to a June 2006 report by
the State Auditor, cigarette tax compliance has improved, and there
was a positive effect on tax revenues from cigarettes and tobacco
products.
(k) It is the intention of the Legislature in enacting similar
legislation to license and control the distribution of medical
marijuana to do all of the following:
(1) Enable state and local governments to control sales and
distribution of marijuana in the same way the tobacco licensing act
has stemmed the flow of illegal tobacco products into the market
place.
(2) Increase revenue for the state and local governments.
(3) Provide assurances to the dispensaries that are now paying
sales tax that the state has an effective mechanism to collect tax
from their illegal competitors and shut them down if necessary.
(4) Enable the state to control the current legal distribution of
medical marijuana from the cultivator to the consumer and help law
enforcement authorities stop illegal sales in medical marijuana
dispensaries and elsewhere to minors and other individuals.
(5) Allow the state to prescribe secure packaging requirements to
carry out the intent of the division.
SEC. 2. Section 7059 is added to the
Revenue and Taxation Code , to read:
7059. (a) The board shall conduct a study to determine the most
efficient means to obtain compliance under this part by sellers of
cannabis and cannabis products that are engaged in business in this
state in order to enhance collection of applicable state and local
sales and use tax on retail sales of cannabis or cannabis products.
In conducting the study, the board shall consider all of the
following:
(1) The current strategies of the board that encourage compliance
with the Sales and Use Tax Law from cannabis or cannabis products
sellers engaged in business in this state.
(2) The advantages or disadvantages of implementing a stamp system
for cannabis or cannabis products similar to that used for
cigarettes under the California Cigarette and Tobacco Products Tax
Law (Part 13 (commencing with Section 30001)).
(3) Strategies that would assist the board in identifying sellers
of cannabis or cannabis products, including the use of federal,
state, or local law enforcement agencies.
(4) Strategies that would provide incentives for cannabis or
cannabis product sellers to register and pay the tax imposed by this
part without the possibility of self-incrimination.
(5) The potential administrative costs to the board for
implementing and administering any system that the board identifies
that would enhance collection of applicable state and local sales and
use tax on the sale and use of cannabis or cannabis products in this
Fstate. (b) The board shall submit a report to the Legislature with the
results of the study no later than January 1, 2013. In the event the
report includes a strategy that is feasible and would benefit the
state and local sales and use tax revenue stream and minimize
noncompliance by cannabis or cannabis products sellers engaged in
business in this state, the report shall also recommend a strategy
for implementation.
(c) (1) The requirement for submitting a report imposed under
subdivision (b) is inoperative on January 1, 2017, pursuant to
Section 10231.5 of the Government Code.
(2) A report to be submitted pursuant to subdivision (b) shall be
submitted in compliance with Section 9795 of the Government Code.
All matter omitted in this version of the bill appears in the
bill as introduced in the Senate, February 18, 2011. (JR11)