TOBACCO BOONDOGLE
Now You’ll Need a License to Sell a Cigarette
By Ralph Saltsman with Stephen Warren Solomon
and Stephen Jamieson
Did you think you have enough laws regulating your business? As an
ABC licensee, there’s little you can do without running into an
ABC statute or an ABC rule. But just when you thought you had a
sufficient load of laws to follow, there’s a whole new set
coming. Can you guess the next area of blanket regulation? Just
take a look around your business and speculate where the next
bureaucratic boondoggle will take form.
Effective this June 30 all retail sales of cigarettes and tobacco
products will require the retailer to be licensed. Selling tobacco
products without that license will be a misdemeanor. The Cigarette
and Tobacco Products Tax Law already requires distributors and
wholesalers of tobacco products to be licensed by the State Board
of Equalization. Now, the new legislative scheme, the California
Cigarette and Tobacco Products Licensing Act of 2003 beginning at
Business and Professions Code Section 22970, will require
licensure for all levels of tobacco sales from manufacturers to
distributors to retailers. Under its own terms, the legislation
scheme is repealed effective January 1, 2010. Maybe no one will be
buying tobacco by then, and perhaps tobacco products won’t be
sold anymore. But until then: sell a cigarette (without a
license), go to jail.
More good news: you don’t have to wait for June for the law to
affect you and your business. An application for such license must
be filed on or before April 15, 2004. The application will include
the applicant’s name, address and phone number; the business
name, address and phone number of each retail location. For
multiple outlet retailers, an address for receipt of
correspondence must be included, such as a headquarters or
corporate office. Felony convictions must be disclosed, and the
application will include a statement that the applicant has not
and will not violate any provision of the new law. Knowingly
submitting false information on this application will be a
misdemeanor with a maximum sentence of one year in the county jail
and a fine.
Since the middle of February, the board has been sending
applications to retailers based upon the board’s inventory of
businesses whose tax identification numbers indicate retail sales
of tobacco products. If you as a retailer haven’t received this
application by now, call the BOE at 1-800-400-7115 and ask that an
application be mailed to you. Be prepared to state your tax ID
number.
After the application has been submitted, the BOE will investigate
to determine the truthfulness of the information. “The board may
issue a license without further investigation to an applicant for
a retail location if the applicant holds a valid license from the
Department of Alcoholic Beverage Control for that same
location.”
Assuming that the retailer qualifies and has not been previously
issued a license that was revoked or suspended, the BOE will issue
a license. If an application is denied, the applicant may
“petition for a redetermination of the board’s denial.” A
hearing may ultimately be held on the issue of denial.
Once licensed the retailer has to adhere to statutes rules and
regulations in order to keep that license and not get fined by the
board. For example, “any person who possesses, stores, owns or
has made a retail sale of an unstamped package of cigarettes” is
subject to misdemeanor prosecution with a maximum jail sentence of
one year and fines from $1000 to $50,000. Of course the board is
also authorized to revoke that license and may seize tobacco
products under a number of circumstances. Even a simple failure to
display the license carries a penalty of $500.
Section 22974.8 of the Act (all set forth in the Business and
Professions Code) references the STAKE Act (Stop Tobacco Access to
Kids Enforcement). Both the Penal Code and the STAKE Act already
provide criminal or civil penalties for sales of tobacco products
to minors. Similar to use of decoys in law enforcement
investigations for sales of alcohol to minors, local police and
sheriffs have already been authorized to engage tobacco sales to
minors decoy programs.
In addition to the penalties addressed in the STAKE Act and Penal
Code, the board can discipline a retail licensee. A first
violation results in a warning letter. A second violation within
12 months of the first violation subjects the retailer to a fine
of $500; a third violation: $1000 fine. “Upon the fourth to the
seventh conviction of a violation…within 12 months, the board
shall suspend the retailer’s license to sell cigarette and
tobacco products for 90 days.”
The eighth violation within 24 months requires to the board to
revoke the license. “The decision of the board to suspend or
revoke the retailer’s license may be appealed to the board
within 30 days after the notice of suspension or revocation.”
Any peace officer is authorized to conduct reasonable inspections
of premises selling tobacco products retail. On and after June 1,
2004, any person caught selling cigarettes or tobacco products
without a license, or with a suspended license or after the
license has been revoked will be subject to misdemeanor
prosecution.
This comprehensive legislation was signed by Governor Gray Davis
last October. Excerpts from the Governor’s letter to the
legislature explain the underlying intent of the bill: “I am
signing Assembly Bill 71 which would require the establishment of
a program to license tobacco retailers, wholesalers/distributors,
importers and cigarette manufacturers, administered by the State
Board of Equalization (BOE). The bill also includes additional
fines and penalties for sales of tobacco to minors, including
license suspension, with such suspension or revocation for tobacco
sales to minors in effect only after repeated violations.”
The former Governor concluded: “I am strongly opposed to the
provisions of this measure that allow a vendor to remain licensed
by the State to sell tobacco after they have been sanctioned
numerous times for selling cigarettes to minors. I urge the
Legislature to enact tougher legislation next year that enables
the state to aggressively monitor and enforce laws prohibiting
tobacco sales to minors and specifies stronger penalties on those
who violate the law.”
All of this gives rise to the following scene which will
undoubtedly take place and repeat itself throughout the state:
Your local police department, laden with grant money it received
from the state which got part of it from the Feds, organizes a
comprehensive operation into all the licensed premises within its
jurisdiction. No licensee is aware of the planning or timing of
the impending investigation.
When you least expect it, a kid walks confidently into your
business. He (or she) looks young, but certainly acts in a very
mature and self assured manner. That may be because this is the
tenth location visited that evening and all under the watchful
supervision of a vice officer. The kid gets a Bud Light and asks
for and receives a pack of whatever cigarettes teens prefer to
smoke that week. Your clerk gets not one but two violations: sale
of cigarettes to a person under 18 and sale of alcohol to a minor.
Not only are you now concerned with loss of your ABC license, you
are legitimately worried about a new and untested process that
could lead to the loss of your retail tobacco license. Needless to
say, you better have both your ABC license and tobacco sales
license prominently displayed, or those are additional violations.
Certainly it has long been the intent of the state to reduce and
then eliminate sales of tobacco products to minors. But it is also
the obvious and explicitly stated goal of the government to reduce
sales of tobacco products across the board. In the October 12th
Davis letter to the legislature, the former Governor noted that in
the preceding five years, his administration had: “Reduced the
rate of youth smoking to one of the lowest in the nation and
reduced the adult smoking rate faster than any other state….”
Effective from June 30, 2004 to January 1, 2010, the sweeping
scope of the California Cigarette and Tobacco Products Licensing
Act of 2003, is poised to cut deep and wide. The BOE already
believes it knows who all the retailers are. This law will fill in
any blanks in that bank of information. This new comprehensive law
has criminal prosecutorial teeth, and it just doesn’t sound like
California is going to coddle violators, does it.
Solomon, Saltsman & Jamieson are
attorneys practicing in the areas of ABC law, ABC Appeals Board
cases, and all related Land Use Matters such as City and County
Conditional Use Permits, Variances, Police and Fire permits,
Entertainment law, and Gambling Law; as well as Business and
Personal Injury litigation. Solomon, Saltsman & Jamieson can
be reached at 800 405 4222."
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