The California Taxpayers Association recently released Understanding Proposition 26, a guide to the new tax structure in California. I was interested to see what this organization had to say about Prop. 26 since they were one of the sponsors of the ballot initiative.
As most of you know, in November 2010, California voters approved Prop. 26, which reclassified many local fees as taxes, subjecting them to a two-thirds vote requirement. Throughout the campaign and after the initiative was adopted, many tobacco control advocates were wondering how this would impact their local tobacco control work, specifically related to tobacco retailer license fees.
The analysis from the Technical Assistance Legal Center was that tobacco retailer licensing fees fit into the third exception in the language of Prop. 26 and that cities and counties would still be able to adopt them with a majority vote of the elected body (see the Center’s Policy Wonk document for the full explanation).
This new guide from the California Taxpayers Association seems to confirm that without specifically mentioning tobacco retailer license fees. On page 7, the guide explains the third exception and provides examples of fees that fit this exception including “permits for regulated businesses (such as taxicabs, massage businesses, card rooms, etc.).” A tobacco retailer license fee should fit into the category of permits for regulated businesses and is consistent with the examples given.
The guide also poses a three question test on page 5, with a “no” answer on any of the three questions meaning that the charge is a tax. For a tobacco retailer license fee, there are three “yes” answers: (1) Yes, a license fee is one of the exceptions; (2) Yes, the charge benefits the retailers who are paying for the privilege to sell tobacco products; and (3) Yes, the charge is reasonable, fee revenues are only used for enforcement and administration of the license.
And as further evidence, several cities and counties have adopted tobacco retailer licensing fees since the passage of Prop. 26, including Santa Barbara County, Union City and Santa Cruz County.
Is anybody at the local level running into questions about Prop. 26 when working on tobacco retailer licensing ordinances?