AB573 - Cigarette and tobacco products: licensing and enforcement.

Assembly Bill No. 573 CHAPTER 269 An act to amend Sections 22971, 22971.7, 22973, 22973.3, 22978.3, and 22980.2 of, to add and repeal Section 22973.4 of, and to repeal Section 22974.1 of, the Business and Professions Code, relating to tobacco. [ Approved by Governor October 03, 2025. Filed with Secretary of State October 03, 2025. ] LEGISLATIVE COUNSEL'S DIGEST AB 573, Rogers. Cigarette and tobacco products: licensing and enforcement. The Cigarette and Tobacco Products Licensing Act of 2003 requires the California Department of Tax and Fee Administration to administer a statewide program to license manufacturers, distributers, and retailers of cigarettes and tobacco products. The act requires a retailer to have in place and maintain a license to engage in the sale of cigarettes or tobacco products. The act requires a $265 fee to be submitted with the application for the license. Existing law requires every retailer to file an application for renewal of the license accompanied by a $265 fee per retail location. This bill would make conforming changes to the provisions describing the application process for the license described above and recast that license as a retailer license. The bill would require each application for a retailer license filed on or after July 1, 2026, to be accompanied by a fee of $450 per retail location. The bill would increase the fee for renewal of a retailer license to $450 for renewal applications filed on or after July 1, 2026. The bill would authorize the department to adjust application and renewal fees applicable after July 1, 2026, to an amount not exceeding $600 per retail location to maintain the Cigarette and Tobacco Products Compliance Fund at a level that is no more than necessary to cover the reasonable costs of the department to administer the act. The act requires a retailer who sells tobacco products that are exempt from taxation under the Cigarette and Tobacco Products Tax Law to pay a fee of $265 for the issuance or renewal of a license. This bill would recast that license as a retailer license and make other conforming changes. The bill would require each application for a retailer license filed on or after July 1, 2026, to be accompanied by a fee of $450 per retail location. The bill would increase the fee for renewal of a retailer license to $450 for renewal applications filed on or after July 1, 2026. The bill would authorize the department to adjust application and renewal fees applicable after July 1, 2026, to an amount not exceeding $600 per retail location to maintain the Cigarette and Tobacco Products Compliance Fund at a level that is no more than necessary to cover the reasonable costs of the department to administer the act. This bill would require the Legislative Analyst, on or before December 1, 2027, and again on or before December 1, 2029, to prepare and submit reports to the Legislature on the tobacco retailer enforcement landscape, including enforcement of California’s flavor, youth access, taxation, and licensing laws. The bill would require specified state agencies to cooperate with the Legislative Analyst in the preparation and production of the report. The bill would repeal those reporting requirements on January 1, 2034. Chapter 849 of the Statutes of 2024 (AB 3218) revised the Cigarette and Tobacco Products Licensing Act of 2003 by, among other things, authorizing the department or a law enforcement agency to seize illegal flavored tobacco products or tobacco product flavor enhancers that a wholesaler or retailer possesses, stores, owns, or sold, as specified. Existing law further requires the department to impose on the wholesaler or retailer a specified civil penalty per individual package of flavored tobacco product or tobacco product flavor enhancer. Existing law defines “package” for purposes of the penalty provision applicable to retailers. This bill would define “flavored tobacco product” and “tobacco product flavor enhancer” for these purposes and would add the same definition of “package” for purposes of the penalty provision applicable to wholesalers. Chapter 462 of the Statutes of 2024 (SB 1230), among other things, added a provision to the Cigarette and Tobacco Products Licensing Act of 2003 similar to the above-described provision relating to the seizure of a retailer’s products added by AB 3218. Specifically, SB 1230 authorizes the department to seize illegal flavored tobacco products or tobacco product flavor enhancers if the department discovers that a retailer sells, offers for sale, or possesses with the intent to sell or offer for sale, those products, and deems the seized products as forfeited. This bill would repeal the above-described provision added by SB 1230. Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. This bill would make legislative findings to that effect. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. The Legislature finds and declares all of the following: (a) As state agencies ramp up efforts to enforce California’s flavored tobacco laws, the scale and frequency of enforcement activities is critical. As of September 2024, prohibited flavored e-cigarettes comprised 39.8 percent of total e-cigarette sales in California. (b) While the proportion of California youth and young adult tobacco users who report that it is easy to access flavored tobacco products in retail stores has declined since implementation of the ban, over 70 percent still believe it is easy to access these products. Nearly 90 percent of California high school e-cigarette users report using flavored e-cigarettes. (c) In 2024, California tobacco retailers still sold tobacco to underage buyers at a rate of 18.9 percent. Regular compliance inspections are proven to reduce youth access to tobacco products. (d) The California Department of Tax and Fee Administration (CDTFA) issues, administers, and enforces the state’s tobacco retailer license program. There are about 30,000 licensed tobacco retailers in California. (e) The fee for the tobacco retailer license is $265 per year. This fee is unchanged since 2016. The passage of California’s law banning the sale of most flavored tobacco products resulted in a significant increase in seizure costs that have drastically affected the total number of inspections the CDTFA is able to complete. (f) Currently, the CDTFA inspects fewer than 15 percent of the retailers annually and violations have risen, since passage of the ban on sale of flavored tobacco products, from 2 percent of retailers inspected to 14 percent. This means that retailers are only likely to be inspected once every eight years, while violations are on the rise. (g) Increasing the tobacco retailer fee would ensure that more retailers are inspected annually by the CDTFA and would bolster compliance with the state flavored tobacco licensing and tax laws, and the Stop Tobacco Access to Kids Enforcement Act. SEC. 2. Section 22971 of the Business and Professions Code is amended to read: 22971. For purposes of this division, the following terms shall have the following meanings: (a) “Brand family” has the same meaning as that term is defined in paragraph (2) of subdivision (a) of Section 30165.1 of the Revenue and Taxation Code. (b) “Cigarette” means a cigarette as defined in Section 30003 of the Revenue and Taxation Code. (c) (1) “Control” or “controlling” means possession, direct or indirect, of the power: (A) To vote 25 percent or more of any class of the voting securities issued by a person. (B) To direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, other than a commercial contract for goods or nonmanagement services, or as otherwise provided; however, no individual shall be deemed to control a person solely on account of being a director, officer, or employee of that person. (2) For purposes of subparagraph (B) of paragraph (1), a person who, directly or indirectly, owns, controls, holds, with the power to vote, or holds proxies representing 10 percent or more of the then outstanding voting securities issued by another person, is presumed to control that other person. (3) For purposes of this division, the department may determine whether a person in fact controls another person. (d) “Department” means the California Department of Tax and Fee Administration. (e) “Display for sale” means the placement of cigarettes or tobacco products in a vending machine or in retail stock for the purpose of selling or gifting the cigarettes or tobacco products. For purposes of this definition, the clear and easily visible display of cigarettes or tobacco products shall create a rebuttable presumption that either were displayed for sale. (f) “Distributor” means a distributor as defined in Section 30011 of the Revenue and Taxation Code. (g) “Flavored tobacco product” has the same meaning as that term is defined in Section 104559.5 of the Health and Safety Code. (h) “Gifting” means any transfer of title or possession without consideration, exchange, or barter, in any manner or by any means, of cigarettes or tobacco products that have been purchased for resale under a license issued pursuant to this division if the transfer occurs while the license is suspended or after the effective date of its revocation. (i) “Importer” means an importer as defined in Section 30019 of the Revenue and Taxation Code. (j) “Law enforcement agency” means a sheriff, a police department, or a city, county, or city and county agency or department designated by the governing body of that agency to enforce this chapter or to enforce local smoking and tobacco ordinances and regulations. (k) “License” means a license issued by the department pursuant to this division. (l) “Licensee” means a person holding a license issued by the department pursuant to this division. (m) “Local lead agency” means an agency designated as a local lead agency pursuant to Section 104400 of the Health and Safety Code. (n) “Manufacturer” means a manufacturer of cigarettes or tobacco products sold in this state. (o) “Notice” or “notification” means, unless as otherwise provided, the written notice or notification provided to a licensee by the department by either actual delivery to the licensee or by first-class mail addressed to the licensee at the address on the license. (p) “Package of cigarettes” means a package as defined in Section 30015 of the Revenue and Taxation Code. (q) “Person” means a person as defined in Section 30010 of the Revenue and Taxation Code. (r) “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. (s) “Retail location” means both of the following: (1) Any building from which cigarettes or tobacco products are sold at retail. (2) A vending machine. (t) “Sale” or “sold” means a sale as defined in Section 30006 of the Revenue and Taxation Code. (u) “Tobacco product flavor enhancer” has the same meaning as that term is defined in Section 104559.5 of the Health and Safety Code. (v) “Tobacco products” means tobacco products as defined in subdivision (b) of Section 30121 and subdivision (b) of Section 30131.1 of the Revenue and Taxation Code. (w) “Unstamped package of cigarettes” means a package of cigarettes that does not bear a tax stamp as required under Part 13 (commencing with Section 30001) of Division 2 of the Revenue and Taxation Code, including a package of cigarettes that bears a tax stamp of another state or taxing jurisdiction, a package of cigarettes that bears a counterfeit tax stamp, or a stamped or unstamped package of cigarettes that is marked “Not for sale in the United States.” (x) “Wholesaler” means a wholesaler as defined in Section 30016 of the Revenue and Taxation Code. SEC. 3. Section 22971.7 of the Business and Professions Code is amended to read: 22971.7. (a) For the purposes of this chapter, except as provided in subdivision (b), and notwithstanding subdivision (v) of Section 22971, a “tobacco product” includes a product or device as defined in subdivision (d) of Section 22950.5. (b) This section does not apply to subdivision (b) of Section 22974.3. (c) This section shall be operative on January 1, 2017. SEC. 4. Section 22973 of the Business and Professions Code is amended to read: 22973. (a) An application for a retailer license, as defined in Section 22972, shall be filed in a form and manner prescribed by the department and shall include the following: (1) The name, address, and telephone number of the applicant. (2) The business name, address, and telephone number of each retail location. For applicants who control more than one retail location, an address for receipt of correspondence or notices from the department, such as a headquarters or corporate office of the retailer, shall also be included on the application and listed on the license. Citations issued to licensees shall be forwarded to all addressees on the license. (3) A statement by the applicant affirming that the applicant has not been convicted of a felony and has not violated and will not violate or cause or permit to be violated any of the provisions of this division or any rule of the department applicable to the applicant or pertaining to the manufacture, sale, or distribution of cigarettes or tobacco products. If the applicant is unable to affirm this statement, the application shall contain a statement by the applicant of the nature of any violation or the reasons that will prevent the applicant from complying with the requirements with respect to the statement. (4) If any other licenses or permits have been issued by the department or the Department of Alcoholic Beverage Control to the applicant, the license or permit number of those licenses or permits then in effect. (5) A statement by the applicant that the contents of the application are complete, true, and correct. Any person who signs a statement pursuant to this subdivision that asserts the truth of any material matter that they know to be false is guilty of a misdemeanor punishable by imprisonment of up to one year in the county jail, or a fine of not more than one thousand dollars ($1,000), or both the imprisonment and the fine. (6) The signature of the applicant. (7) Any other information the department may require. (b) The department may investigate to determine the truthfulness and completeness of the information provided in the application. The department may issue a retailer licens [Text truncated for display. Full text available on Congress.gov.]