New California E Cig & E Liquid Laws
SUMMARY: Several new Assembly and Senate Bills have been passed affecting sale, use, advertising and licensing of electronic cigarettes in California.
Briefly, under the new California laws, the definition of “tobacco product” is amended to include all vapor products. The legal age to purchase and use tobacco products was raised from 18 to 21. Vaping is now prohibited in 100 percent of enclosed places of employment, except for “retail or wholesale tobacco shops and private smokers’ lounges.” Moreover, “child resistant packaging” is now required on all products in California.
Further, in January 2017, licensing will be required for retailers, distributors and wholesalers. Distributors and wholesalers will be required to apply for the appropriate license, pay a fee of $1,200 per calendar year per location and comply with the record keeping requirements.
1. Definition of Tobacco Product
Starting on June 9, 2016, a “tobacco product” under California law is defined as follows:
“A ‘tobacco product’ means any of the following: A) A 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 cigarettes, cigars, little cigars, chewing tobacco, pipe tobacco, and snuff. B) An electronic device that delivers nicotine or other vaporized liquids to the person inhaling from the device, including, but not limited to, electronic cigarette, cigar, pipe, or hookah. C) Any component, part, or accessory of a tobacco product, whether or not sold separately.” (Bus. and Prof. Code, § 22950.5.)
2. Minimum Sale Age for Tobacco Products
Effective June 9, 2016, California state law prohibits the sale of tobacco products (including electronic smoking devices and e-liquids whether or not they contain nicotine or tobacco) to individuals younger than 21 years of age. (Pen. Code, § 308 (a).) Note that many of the new laws are directed at retailers as they relate to enforcement of the new minimum sale age and related violations. However, if manufacturers reference the legal age being 18 on its products sold in California, those would need to be revised to reflect that the new legal age is 21.
3. Vaping in the Workplace
Also effective on June 9, 2016, is a prohibition of smoking or vaping in 100 percent of enclosed places of employment, subject to certain exceptions. (Lab. Code, § 6404.5.) This requires appropriate signage to be posted.
However, there are limited exceptions, which include: “Retail or wholesale tobacco shops and private smokers’ lounges, which are defined as: (A) “Private smokers’ lounge” means any enclosed area in or attached to a retail or wholesale tobacco shop that is dedicated to the use of tobacco products, including, but not limited to, cigars and pipes. (B) “Retail or wholesale tobacco shop” means any business establishment, the main purpose of which is the sale of tobacco products, including, but not limited to, cigars, pipe tobacco, and smoking accessories.” (Id. at subd. (e)(2).)
4. Child Resistant Packaging
Beginning on October 1, 2016, all cartridges for electronic cigarettes and solutions for filling or refilling an electronic cigarette shall be in child-resistant packaging, which means packaging that meets the specifications in Section 1700.15(b) of, and is tested by the method described in Section 1700.20 of, Title 16 of the Code of Federal Regulations.
The Federal Child Nicotine Poisoning Prevention Act of 2015 requires child resistant packaging under the same sections of the Code of Federal Regulations by July 1, 2016.
The Cigarette and Tobacco Product Licensing Act (Act) was mandated by Assembly Bill (AB) 71 (Chapter 890, Statutes of 2003) and AB 1749 (Chapter 501, Statutes of 2006). The Act imposes statewide licensing requirements on all retailers, wholesalers, distributors, manufacturers and importers of cigarettes and tobacco products within the State of California. These licensing requirements are in addition to other permits and licenses that may be required depending on your business operations. The Act also included provisions for recordkeeping requirements, inspection and seizure of any untaxed cigarettes or tobacco products, and imposed civil and criminal penalties for violations.
The California Board of Equalization (BOE) administers the statewide licensing program under the Act. Every wholesaler, distributor, manufacturer and importer is required to obtain and maintain a license to sell tobacco products.
b) New Laws
Prior to the amendment to the definition of “tobacco product,” electronic cigarettes and components were not “tobacco products” and thus, no cigarette or tobacco product license was required under California law. Now, with the definition being expanded to include all vapor products, appropriate licensing is required.
The new laws amended the sections of the Act governing retailers (Bus. & Prof. Code, § 22973) and distributors and wholesalers (Bus. & Prof. Code, § 22973) only. Under these new laws, retailers, distributors, and wholesalers must apply to the BOE and pay the appropriate licensing fee, depending on the type of business.
Under Business and Professions Code section 22971(p), a “Retailer” means a person who engages in this state in the sale of cigarettes or tobacco products directly to the public from a retail location. Retailer includes a person who operates vending machines from which cigarettes or tobacco products are sold in this state. A “Retail location” means both of the following: (1) Any building from which cigarettes or tobacco products are sold at retail. (2) A vending machine. (Id. at (r).)
d) Distributor and/or Wholesaler
Business and Professions Code section 22977.1 was amended and governs licensing of distributors and wholesalers. It provides as follows:
(a) Every distributor and every wholesaler shall file an application, as prescribed in Section 22977, on or before April 15, 2004. Each application shall be accompanied by a fee of one thousand dollars ($1,000) for each location. The fee shall be for a calendar year and may not be prorated. Subject to meeting the requirements of this section and Section 22977.2, the board shall issue a license.
(b) Every distributor and every wholesaler who commences business after the last day of May 2004, or who commences selling or distributing cigarettes or tobacco products at a new or different place of business in this state after the last day of May 2004, shall file with the board an application as prescribed in Section 22977 at least 30 days prior to commencing such business or commencing such sales or distributions; and all distributors and all wholesalers that fail to timely file an application for a license under subdivision (a) shall file with the board an application as prescribed in Section 22977. Each application shall be accompanied by a fee of one thousand two hundred dollars ($1,200) for each location. The fee shall be for a calendar year and may not be prorated. Subject to Section 22977.2, the board, within 30 days after receipt of an application and payment of the proper fee shall issue a license.
(c) For calendar years beginning on and after January 1, 2005, and before January 1, 2017, every distributor and every wholesaler shall file an application for renewal of the license prescribed in Section 22977, accompanied with a fee of one thousand dollars ($1,000) for each location where cigarettes and tobacco products are sold, in the form and manner as prescribed by the board. For calendar years beginning on and after January 1, 2017, the fee accompanying an application for renewal of the license prescribed in Section 22977 shall be one thousand two hundred dollars ($1,200) for each location where cigarettes and tobacco products are sold.
(d)(1) The board shall report back to the Legislature no later than January 1, 2019, regarding the adequacy of funding for the Cigarette and Tobacco Products Licensing Act of 2003. The report shall include data and recommendations about whether the annual licensing fee funding levels are set at an appropriate level to maintain an effective enforcement program. (2) The report required by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.]
Under Business and Professions Code section 22971(f), a “Distributor” means a distributor as defined in Section 30011 of the Revenue and Taxation Code. Section 30011 states “Distributor” includes: … (b) Every person who, on or after 12:01 a.m. on January 1, 1989, and within the meaning of the term “distribution” as defined in this chapter, distributes tobacco products. (Rev. & Tax. Code § 30011(b).)
“Distribution” includes: The sale of untaxed cigarettes or tobacco products in this state. (Rev & Tax. Code § 30008.)
Under Business and Professions Code section 22971(u), a “Wholesaler” means a wholesaler as defined in Section 30016 of the Revenue and Taxation Code. Section 30016 states a “‘Wholesaler’ includes: … (b) Any person, other than a licensed distributor, who engages in this state in making sales for resale of tobacco products on which the tax imposed in Sections 30123 [distributor tax] and 30131.2 [additional tax] has been paid.” (Rev & Tax. Code § 30016.)
It is important to note that the new laws did not amend the section of the Act governing licensing of tobacco product “manufacturers.” (Bus. & Prof. Code, § 22979.21.) Under the Act, a “manufacturer” is defined as “a manufacturer of cigarettes or tobacco products sold in this state.” (Bus. & Prof. Code, § 22971(l).)
f) New Licensing Requirements
Currently, distributors and wholesalers currently pay $1,000 per calendar year per location. Effective June 9, 2016, all new licenses require payment of a fee of $1,200 per calendar year per location. Beginning January 1, 2017, the new law also imposes an annual renewal fee of $1,200 for wholesaler and distributor license. The online application is available at: https://efile.boe.ca.gov/ereg/index.boe
g) Responsibilities as a holder of a distributor’s or wholesaler’s license
Distributors and wholesalers of cigarettes or tobacco products must:
- Maintain complete and legible cigarette and tobacco product purchase records for four (4) years and keep records (such as invoices and receipts) on file at the location listed on license for a least one year after the date of purchase.
- Allow BOE or law enforcement agency personnel to review your sales and purchase records upon request.
- Make sure that sales invoices meet all legal requirements. Each sales invoice must be legible, readable, and include the following:
- Your name, address, telephone number, and your distributor or wholesaler license number.
- The name, address, and license number of the business purchasing the cigarettes or tobacco products. You may not legally sell cigarettes or tobacco products to an unlicensed buyer or purchase them from an unlicensed seller.
- The date the cigarette or tobacco products are sold.
- An itemized list of the cigarettes or tobacco products sold. Cigarettes must be listed by the brand and style names, flavor, filter, and/or packaging when applicable, number of cartons or packs sold, and the sales price. Tobacco products must be listed by brand, type (such as pipe, cigars, or roll-your-own), flavor, packaging (such as pouches, tins, or boxes), quantity sold, and sales price.
- The amount of excise taxes due to the BOE by the distributor on the sale of cigarettes and tobacco products.
- However, a distributor that is also a retailer or manufacturer must include either one of the following on each invoice for the sale of cigarettes or tobacco products:
- A statement that reads: “All California cigarette and tobacco product taxes are included in the total amount of this invoice.”
- The amount of excise taxes due to the BOE by the distributor on the distribution of cigarettes and tobacco products.
- A statement that identifies any cigarettes or tobacco products sold without tax under Revenue and Taxation Code section 30105 (only if you are a distributor that is an original importer of the tobacco products you are selling).
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