California Proposition 29

[DC2]

I am not great at reading legal mumbo jumbo, which is why I am posting this...

But it looks like it might tax electronic cigarettes when they become official tobacco products...
Text of California Proposition 29 (June 2012) - Ballotpedia

Can anyone either corroborate, or tell me I'm just being stupid?

 

[Myk]

30130.51. Definitions

For the purposes of this article:

(a) “Cigarette” has the same meaning as that in Section 30003, as it read on January 1, 2009.

(b) “tobacco products” includes, but is not limited to, all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other articles or products made of, or containing at least 50 percent, tobacco, but does not include cigarettes.

I don't know what "cigarette" means in section 30003 as of 1-1-09 but e-cigs don't include 50% tobacco.

 

[Thompson]

I hope they aren't planning anything. I'm quite fond of the fact I don't have to pay sales tax on orders. Been too lazy to look for a California based store and see no point so far, tax free and all haha

 

[Bill Godshall]

Please note that e-cigarettes are already tobacco products according to the federal FSPTCA.

But I'm not aware of any California law that includes e-cigarettes in the definition of tobacco product. Although Prop 29 includes the previously posted definition for "tobacco products" that only applies to "this article", Article 2.5 in Prop 29 imposes only a $1/pack cigarette tax hike (i.e. no tax increase for any Other Tobacco Products).

 

[Bill Godshall]

Please note that California currently taxes chewing tobacco, moist snuff, smoking tobacco and cigars at 31.73% of wholesale price.

Prop 29 would not change the tax rates for any of those tobacco products.

 

[DC2]

Please note that e-cigarettes are already tobacco products according to the federal FSPTCA.

Oh dang, I just got confused now!


So they ARE tobacco products according to Federal law...
But they are not yet subject to the provisions of Chapter IX of the FSPTCA?

Am I understanding correctly?
Or do I still need a good deal of correction?

 

[Placebo Effect]

Please note that California currently taxes chewing tobacco, moist snuff, smoking tobacco and cigars at 31.73% of wholesale price.

Prop 29 would not change the tax rates for any of those tobacco products.

believe Prop 29 does raise the OTP tax to approx 55%.

California Proposes Higher Tax on Cigars | News & Features | Cigar Aficionado

I didn't realize it either until my friend sent a photo of a sign in San Francisco asking people to vote no on tax raises on cigars and pipe tobacco.

 

[Bill Godshall]

After rereading Prop 29 a half dozen more times, I found what appears to be the clause that would increase the tax rate on Other Tobacco Products, although Prop 29 still doesn't appear to apply to e-cigarettes.

30130.52. Effect on Tobacco Consumption and Tax Revenue

(a) The State Board of Equalization shall determine within one year of the operative date of this article, and annually thereafter, the effect that the additional tax imposed on cigarettes by this article, and the resulting increase in the tax on tobacco products required by subdivision (b) of Section 30123, have on the consumption of cigarettes and tobacco products in this state.

It would be helpful if someone could obtain/post Section 30123 of Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code (as it appears to contain a provision that automatically increases the OTP tax if/when the cigarette tax in increased).

From the article in Cigar Afficianado

The proposal would greatly increase the excise tax on cigars and other products that fall into the OTP category in California from 31.73 percent of the wholesale cost to 54.89 percent.

Per inquiry by DC2, the FSPTCA's definition of a "tobacco product" (or anything else) does not apply to any state laws (unless a state law specifically states that its definition of a "tobacco product" shall be the same as the one in the FSPTCA). Although e-cigarettes are considered a "tobacco product" according to the FSPTCA (as per Judge Leon's ruling), the FSPTCA's Chapter IX regulatory provisions currently only apply to cigarettes, cigarette tobacco, RYO and smokeless tobacco products (i.e. they don't apply to e-cigarettes, cigars, pipe tobacco, shisha/hookah tobacco, at least two dissolvables, skin cream, etc.).

 

[Bill Godshall]

As a followup, I don't believe that any sincere or objective court in CA could interpret the Prop 29's definition of "tobacco products" to apply to e-cigarette products.

(b) “Tobacco products” includes, but is not limited to, all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other articles or products made of, or containing at least 50 percent, tobacco, but does not include cigarettes.

Had the drafters of Prop 29 used the words "derived from" instead of "made of", then Prop 29 would likely apply to e-cigarettes.

But since e-cigarettes are made of "nicotine" and many other things, but not "tobacco", I don't see how a CA court could retroactively rule that e-cigarettes are included in Prop 29's definition of "tobacco products". And even though Gov. Brown doesn't like e-cigarettes (as he sued SE and NJOY when he was AG), I'd be surprised if he would order the State Board of Equalization (which is tantamount to Revenue Departments in other states) to collect tobacco taxes on e-cigarettes, which would likely prompt a lawsuit by at least one e-cigarette company, which would bring the matter before a CA court.

Finally, even if the Board of Equilization applied Prop 29's tax to e-cigarettes, and even the CA courts ruled that Prop 29 applies to e-cigarettes, it would only apply to e-liquid, cartridges containing e-liquid, and disposable e-cigarettes. But it wouldn't apply to e-cigarette hardware, electronics, batteries, etc., especially if they were sold/packaged separately.

 

[DC2]

Thanks Bill!

 

[DC2]

It would be helpful if someone could obtain/post Section 30123 of Chapter 2 of Part 13 of Division 2 of the Revenue and Taxation Code (as it appears to contain a provision that automatically increases the OTP tax if/when the cigarette tax in increased).

30123. (a) In addition to the tax imposed upon the distribution of
cigarettes by this chapter, there shall be imposed upon every
distributor a tax upon the distribution of cigarettes at the rate of
twelve and one-half mills ($0.0125) for each cigarette distributed.
(b) There shall be imposed upon every distributor a tax upon the
distribution of tobacco products, based on the wholesale cost of
these products, at a tax rate, as determined annually by the State
Board of Equalization, which is equivalent to the combined rate of
tax imposed on cigarettes by subdivision (a) and the other provisions
of this part.
(c) The wholesale cost used to calculate the amount of tax due
under subdivision (b) does not include the wholesale cost of tobacco
products that were returned by a customer during the same reporting
period in which the tobacco products were distributed, when the
distributor refunds the entire amount the customer paid for the
tobacco products either in cash or credit. For purposes of this
subdivision, refund or credit of the entire amount shall be deemed to
be given when the purchase price less rehandling and restocking
costs is refunded or credited to the customer. The amount withheld
for rehandling and restocking costs may be a percentage of the sales
price determined by the average cost of rehandling and restocking
returned merchandise during the previous accounting cycle.

EDITED TO ADD:

[SIZE=+2]REVENUE AND TAXATION CODE [/SIZE]
[SIZE=+2]SECTION 30121-30130 [/SIZE]

30121. For purposes of this article: (a) "Cigarettes" has the same meaning as in Section 30003, as itread on January 1, 1988. (b) "Tobacco products" includes, but is not limited to, all formsof cigars, smoking tobacco, chewing tobacco, snuff, and any otherarticles or products made of, or containing at least 50 percent,tobacco, but does not include cigarettes.

 

[Bill Godshall]

Thanks to DC2 for posting several current California tobacco tax statutes.

Section 30123 confirms that the OTP tax automatically increases when the cigarette tax rate increases.

But most importantly for our concerns, the definition of "tobacco products" in Section 30121 of the current CA tobacco tax law is the same as the definition of "tobacco products" in Prop 29. That means e-cigarettes almost certainly won't be taxed by Prop 29 (since they aren't currently taxed by Section 30121).

 

[Thompson]

Thats relieving.

I had forgotten about this until I went to get gas and the station had a "NO PROP 29" card near the cash register.

As long as they don't come after e-cigs and juice, I really don't mind. Makes me even happier to be off the analogues.

That would mean American Spirit Blues would be about $8.10 a pack (RYO will be above $12). Money I'm saving will just go through the roof...