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Business Taxes Law Guide—Revision 2024

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California Healthy Outcomes and Prevention Education Act

Revenue and Taxation Code

Division 2. Other Taxes
Part 13.6. California Healthy Outcomes and Prevention Education Act


31000. Title. This article shall be known, and may be cited, as the "Healthy Outcomes and Prevention Education (HOPE) Act."

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022.

31001. Definitions. For purposes of this article:

(a) "California Electronic Cigarette Excise Tax" means the tax imposed by Section 31002.

(b) "Department" means the California Department of Tax and Fee Administration.

(c) (1) "Electronic cigarette" means any of the following:

(A) A device or delivery system sold in combination with any liquid substance containing nicotine that can be used to deliver to a person nicotine in aerosolized or vaporized form, including, but not limited to, an e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah.

(B) A component, part, or accessory of a device described in subparagraph (A) that is used during the operation of the device if sold in combination with a liquid substance containing nicotine.

(C) A liquid or substance containing nicotine, whether sold separately or sold in combination with any device, that could be used to deliver to a person nicotine in aerosolized or vaporized form.

(2) "Electronic cigarette" does not include a product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes if that product is marketed and sold solely for that approved use.

(d) "In this state" means within the exterior limits of California and includes all territory within these limits owned by or ceded to the United States of America.

(e) "Purchase" has the same meaning as defined in Section 6010.

(f) "Purchaser" means a person who purchases electronic cigarettes in a retail sale.

(g) (1) "Retailer" has the same meaning as defined in Section 6015.

(2) "Retailer" includes a person that operates vending machines from which electronic cigarettes are sold in this state or a person conducting a sale regulated by Section 22963 of the Business and Professions Code.

(h) "Retail sale" has the same meaning as defined in Section 6007.

(i) "Sales price" has the same meaning as defined in Section 6011.

(j) "Use" has the same meaning as defined in Section 6009.

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022.

31002. Excise Tax. (a) (1) (A) Beginning July 1, 2022, a purchaser shall pay a tax on the purchase for use in this state of an electronic cigarette from a retailer at the rate of 12.5 percent of the sales price of the electronic cigarette.

(B) There is a rebuttable presumption that an electronic cigarette is purchased for use in this state if either of the following is true:

(i) The electronic cigarette is purchased from a retailer physically located in this state.

(ii) The address to which the retailer ships the purchased electronic cigarette is located in this state.

(2) A retailer shall collect the tax imposed by this part from the purchaser at the time of the retail sale of an electronic cigarette.

(b) A retailer shall include the amount of the tax imposed by this part in any price marketing on any sign or display inside or outside a licensed brick and mortar establishment.

(c) (1) The department shall collect the tax imposed by this part pursuant to the Fee Collection Procedures Law (Part 30 (commencing with Section 55001)).

(2) For purposes of this part, the references in the Fee Collection Procedures Law to “fee” shall include the tax imposed by this part, and references to “feepayer” shall include any retailer liable for the payment, pursuant to subdivision (d), of the tax imposed by this part.

(3) A retailer may retain 1 percent of the tax imposed by this part as reimbursement for all costs associated with collection of the tax and shall transmit the remainder of the tax to the department pursuant to subdivision (d).

(d) (1) Except as provided in paragraph (3), the tax imposed by this part shall be due and payable quarterly on or before the last day of the month following each calendar quarter.

(2) (A) The payments shall be accompanied by a return filed by the retailer using electronic media on or before the last day of the month following each quarterly period for the preceding quarterly period.

(B) Returns shall be authenticated in a form or pursuant to methods as may be prescribed by the department.

(3) The department may require the payment of the tax imposed by this part and the filing of returns for other than quarterly periods.

(e) The tax that is required to be collected by the retailer and any amount unreturned to the purchaser which is not tax but was collected from the purchaser under the representation by the retailer that it was tax constitutes debts owed by the retailer to the state.

(f) A retailer subject to the provisions of this part shall register for a permit with the department using electronic media and shall set forth the name under which it transacts or intends to transact business and any other information as the department may require.

(g) (1) The department may prescribe, adopt, and enforce regulations relating to the administration and enforcement of this part, including, but not limited to, collections, reporting, refunds, and appeals.

(2) (A) The department may prescribe, adopt, and enforce emergency regulations as necessary to implement this part.

(B) An emergency regulation prescribed, adopted, or enforced pursuant to this paragraph shall be adopted in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, and, for purposes of that chapter, including Section 11349.6 of the Government Code, the adoption of the regulation is an emergency and shall be considered by the Office of Administrative Law as necessary for the immediate preservation of the public peace, health and safety, and general welfare.

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022.

31003. Receipt. For each retail sale of an electronic cigarette, a retailer shall provide a purchaser with a receipt or other document that sets out and separately identifies the "California Electronic Cigarette Excise Tax" and the amount paid by the purchaser.

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022.

31004. Revocation or suspension of permit. (a) (1) The department may, upon a hearing, revoke or suspend one or more of the permits held by a person pursuant to this part after giving the person 10 days’ notice in writing specifying the time and place of the hearing and requiring the person to show cause why the person’s permit or permits should not be revoked if any of the following is true:

(A) A person fails to comply with a provision of this part or any rule or regulation of the department prescribed and adopted under this part.

(B) A person’s seller’s permit has been suspended or revoked under Part 1 (commencing with Section 6001).

(C) A person’s license has been suspended or revoked under Division 8.6 (commencing with Section 22970) of the Business and Professions Code.

(2) The department shall give to the person written notice of the suspension or revocation of any of the person’s permits held pursuant to this part.

(b) The notice required by subdivision (a) shall be served personally or by mail in the manner prescribed for service of notice of a deficiency determination under Section 55061.

(c) The department shall not issue a new permit after the revocation of a permit pursuant to this section unless it is satisfied that the former holder of the permit will comply with the provisions of this part and any rule or regulation of the department adopted pursuant to this part.

(d) A person whose permit held pursuant to this part has been previously suspended or revoked shall pay the department a fee of one hundred dollars ($100) for the issuance of a permit.

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022.

31005. Disposition of fund. (a) All revenues, interest, and penalties derived from the California Electronic Cigarette Excise Tax shall be deposited into the California Electronic Cigarette Excise Tax Fund, which is hereby created in the State Treasury, less payments for refunds and reimbursement to the department for expenses incurred in the administration and collection of the tax.

(b) Notwithstanding Section 13340 of the Government Code and subject to subdivision (d), all amounts in the California Electronic Cigarette Excise Tax Fund are continuously appropriated without regard to fiscal year as follows:

(1) Eighteen percent of the moneys to the Health Education Account, established in paragraph (1) of subdivision (b) of Section 30122, for tobacco control programs described in Article 1 (commencing with Section 104350) of Chapter 1 of Part 3 of Division 103 of the Health and Safety Code.

(2) Twelve percent of the moneys into the California Children and Families Trust Fund created by Section 30131.

(3) (A) Forty-eight percent of the moneys to fund the Medi-Cal Physicians and Dentists Loan Repayment Program (Section 14114 of the Welfare and Institutions Code).

(B) Of the moneys described by subparagraph (A), 70 percent shall be allocated to the physician payment pool and 30 percent to the dentist payment pool.

(4) Five percent of the moneys to the Department of Health Care Access and Information to fund the Health Professions Career Opportunity Program described by Section 127885 of the Health and Safety Code.

(5) Seven percent of the moneys to the University of California to support the joint program in medical education between the University of California San Francisco (UCSF) School of Medicine, UCSF Fresno, and the University of California, Merced, including, but not limited to, using funds to establish new residency and clinical rotation positions for program participants and graduates in the San Joaquin Valley.

(6) Ten percent of the moneys to the Small and Rural Hospital Relief Fund established in Section 130077 of the Health and Safety Code.

(c) (1) The department shall transmit the funds, pursuant to subdivision (b), periodically as promptly as feasible but shall transmit funds at least once in each calendar quarter.

(2) The department shall furnish a quarterly statement indicating the amounts paid and withheld for expenses of the department.

(d) (1) The amount of three million dollars ($3,000,000) shall be loaned from the General Fund to the department during the 2021–22 fiscal year and deposited into the California Electronic Cigarette Excise Tax Fund for the purpose of implementing the tax imposed by this part and shall be repaid on or before June 30, 2023, from the taxes collected pursuant to this part.

(2) The loan made pursuant to this subdivision shall be repaid to the General Fund before any appropriations of funds pursuant to subdivisions (b) and (c) are made.

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022. Stats. 2022, Ch. 46 (AB 186), in effect June 30, 2022, deleted "Proposition 56" after "to fund the" and substituted "Program" for "Act" after "Dentists Loan Repayment" in paragraph (3) of subdivision (b).

31008. Report. (a) On or before July 1, 2024, the department shall provide a report to the Assembly Committee on Revenue and Taxation, the Assembly Committee on Health, the Senate Committee on Health, and the Senate Governance and Finance Committee regarding the effect of collecting the California Electronic Cigarette Excise Tax on the purchase of electronic cigarettes at retail in the state.

(b) The report required by this section shall include an estimate of retail electronic cigarette purchases to compare to the total purchase price reported under this part for calendar years 2022 and 2023. The estimated retail electronic cigarette purchases shall be calculated using any information available to the department, including, but not limited to, the reported wholesale cost of electronic cigarettes as reported under Part 13 (commencing with Section 30001) of Division 2.

History—Added by Stats. 2021, Ch. 489 (SB 395), in effect January 1, 2022.