Cigarette and Tobacco Products Licensing Act of 2003

The Investigations Division of the Board of Equalization (Board) will be issuing citations in accordance with the California Cigarette and Tobacco Products Licensing Act of 2003 (AB 71). Two types of citations will be issued: Civil Citations and Criminal Citations. The Criminal Citation is a Notice to Appear in court. Both types of citations are subject to civil penalties.

If a criminal citation is issued, it must first be processed through the court system. Depending on the violation(s) cited, the court may impose fines, jail time or both. Once the criminal process is complete, the Board will receive any citation that is upheld by the court. The Board may impose additional civil penalties. For additional information about Board imposed civil penalties, see Publication 161, Criminal Citations Include a Civil Administrative Process. A civil appeal process is available to the licensee if additional penalties are imposed.

If a civil citation is issued, a copy of the citation will come to the Board for processing. The Board may impose civil penalties. An appeal process is available to the licensee.

Civil Appeal Process for Warning Notices, Suspensions, and Civil Fines

Once the Board receives a citation, the Board’s Excise Taxes and Fees Division (ETFD) will enter the violation(s) on the license record. Depending on the type of violation(s), a Warning Notice or a Notice of Violation will be sent to the licensee. A Warning Notice notifies the licensee that the listed violation(s) will be entered on the license record, but there will be no civil fine, suspension, or revocation. A Notice of Violation notifies the licensee of the violation(s) that will be entered on the license record, and the specific penalty. The Warning Notice and the Notice of Violation advise licensees of their appeal rights.

The licensee may appeal the violation(s) and/or penalties outlined in the Warning Notice or Notice of Violation. The procedures for requesting an appeal are outlined in the notices. The request must be mailed within 10 days from the date of the notice, and must include the licensee’s contentions and any supporting documentation. If no appeal is requested, the violation(s) are added to the licensee’s permanent license record and applicable penalties are assessed.

If ETFD receives a timely request for appeal, a Notice of Hearing will be sent to the licensee. This notice will provide a hearing date, time and place. The licensee may choose to attend the hearing by telephone or in person. The Response to Notice of Hearing on the back of the Hearing Notice must be completed and returned to ETFD within 10 days from the date of the notice.

Designated Board staff will preside over the appeal. A member of the Investigations Division staff will be present to represent the department.

Within approximately 5 days after the hearing, the ETFD will issue a Notice of Decision to the licensee. A licensee who wishes to appeal the Notice of Decision must complete the Request for Appeal Conference on the back of the notice and return that notice with contentions and any supporting documentation. The licensee may choose to attend the hearing by telephone or in person. The Request for Appeal Conference must be mailed to the ETFD within 10 days from the date of the Notice of Decision.

The Board’s Case Management Division will notify the licensee of the date, time and place of the scheduled appeals conference. The appeals conference will be conducted by a Board Appeals Division attorney. A member of the Investigations Division staff will be present to represent the department.

After the appeals conference, the Appeals Division will notify the licensee of the outcome of the appeal. If the violation(s) and penalties are dismissed, the ETFD will notify the licensee that the violation(s) will be removed from the license record. If the violation(s) and/or penalties are upheld, and do not include a fine in excess of $2,500, the ETFD will issue a Notice of Suspension and/or a demand billing to the licensee for civil penalties.

If the Appeals Division upholds the violation(s) and the penalties include a fine in excess of $2,500, the licensee will have one additional level of appeal available; the licensee may request an appeal before the elected Board members. The instructions for filing an appeal before the Board members will be outlined in the Notice of Decision sent to the licensee.

After a hearing before the Board members, the Board Proceedings Division will notify ETFD of the outcome of the appeal. If the violation(s) and/or penalties are upheld, the ETFD will issue a demand billing and/or a Notice of Suspension in accordance with the Board members’ decision. If the violation(s) and penalties are dismissed, the ETFD will notify the taxpayer that the violation(s) will be removed from the license record.

Civil Appeal Process for Revoking a License

The appeal process is abbreviated when the penalty for a violation(s) is a license revocation. Appeals of this nature will go directly before the Board members for a hearing. The licensee will receive a Notice of Violation outlining the applicable penalties. A licensee who chooses to appeal the violation(s) and/or penalty must complete the Request for Hearing on the back of the Notice of Violation. This must be mailed to the ETFD with contentions and any supporting documentation within 10 days of the notice.

The Board Proceedings Division will schedule a hearing before the Board members. After the hearing, the Board Proceedings Division will notify the ETFD of the outcome of the appeal. If the violation(s) and/or penalties are upheld, the ETFD will issue a Notice of Revocation and/or a demand billing for civil penalties. If the violation(s) and penalties are dismissed, the ETFD will notify the licensee that the violation(s) will be removed from the license record.

Civil Fines and Penalties

The Board of Equalization will issue fines and penalties pursuant to its authority under Business and Professions Code Section 22974.7 (1). This section provides:

In addition to any other civil or criminal penalty provided by law, upon a finding that a retailer has violated any provision of this division [AB 71], the board may take the following actions:

1. In the case of the first offense, the board may revoke or suspend the license or licenses of the retailer pursuant to the procedures applicable to the revocation of a license set forth in Section 30148 of the Revenue and Taxation Code.
2. In the case of a second or any subsequent offense, in addition to the action authorized under subdivision (a), the board may impose a civil penalty in an amount not to exceed the greater of either of the following:
   1. Five times the retail value of the [seized] cigarettes or tobacco products.
   2. Five thousand dollars ($5,000).

The Board will reduce civil fines by the amount of any criminal fine imposed by the court for the specific violation. The criminal fine is the statutory penalty imposed for the specific violation, and does not include any other court-imposed fees or costs.

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1. Business and Professions Code § 22974.7 applies to retailers. Similar sections apply to distributors, wholesalers, manufacturers and importers (See Business and Professions Code §§ 22978.7 and 22797.7).