June 2016

Legal Roundup: California Law Means Big Changes Industry Wide

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By J. Jackson Waste

The heat is on in California.

Two related bills, SB-5 and SB-7, were signed into law by Governor Jerry Brown on May 4, the eve of the FDA’s deeming regulation. These bills will dramatically change the way that the vapor industry is regulated in the Golden State.

The headline is that these bills (i.) treat vapor products like tobacco products for regulatory purposes, and (ii.) raise the purchasing age for tobacco products (now including vapor products) to 21. This article digs into the actual text of these bills and explains what it means to treat vapor products, legally speaking, like tobacco products.

Overview of SB-5:

SB-5 was introduced by California State Senator Mark Leno (D – San Francisco) on July 16, 2015. Its primary function is amending the statute that defines “smoking” and “tobacco product.” The official state definition of “smoking” would be as follows:

“‘Smoking’ means inhaling, exhaling, burning, or carrying any lighted or heated cigar, cigarette, or pipe, or any other lighted or heated tobacco or plant product intended for inhalation, whether natural or synthetic, in any manner or form. ‘Smoking’ includes the use of an electronic smoking device that creates an aerosol or vapor, in any manner or in any form, or the use of any oral smoking device for the purpose of circumventing the prohibition of smoking.”

The definition of “tobacco product” will be amended to include “an electronic device that delivers nicotine or other vaporized liquids to the person inhaling from the device, including, but not limited to, an electronic cigarette, cigar, pipe, or hookah.”

This bill brings vape shops within the California Business & Professions Code’s definition of a “tobacco store,” which is any store that primarily sells or generates more than 60 percent of its annual revenue from the sale of “tobacco products.” This means that, when SB-5 becomes effective, vape shop owners will need to comply with the requirement that tobacco store proprietors apply for and obtain a license. As proposed in the bill, the fee for this would be $265 annually.[1]

Compliance with the licensure requirements, is now an absolute must for shop owners. Section 22980.2 of the Business & Professions Code provides that (a) any person who engages in the sale of tobacco products without a license is guilty of a misdemeanor (including the officers of any corporation that engages in unlicensed sales), and (b) each day of sales after notification that a person must be licensed constitutes a separate violation.

SB-5 also amends section 1947.5 of the Civil Code to allow landlords to prohibit vaping when they lease apartments. (How any landlord would ever know that his tenants are vaping in the privacy of their own apartments is anyone’s guess.) Additionally, section 7597 of the Government Code will be amended to prohibit vaping within 20 feet from the entrance of a government building. So, if you were planning to organize a cloud competition outside the entrance to a DMV office, it’s probably best to put that on hold for now.
There are a few other minor changes in the bill. For instance, it amends section 1596.795 of the Health and Safety Code to prohibit anyone from vaping in a “family day care home” where children are present. Section 104495(b) will be amended to

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prohibit vaping within 25 feet of a playground or “tot lot sandbox area.” Section 114371(f) of the Health and Safety Code will be amended to prohibit vaping at farmer’s markets, which is something that anyone who sells their e-liquid at swap meets may wish to keep in mind.

Overview of SB-7:

This bill amends the Business & Professions Code to raise the purchasing age for tobacco products (which, thanks to SB-5, now means vapor products) from 18 to 21 for everyone except active duty military members. The bill explicitly directs the California Department of Public Health to conduct “random onsite sting operations” at retail stores, and owners of vape shops can bet that they’ll be hit.

This bill will also require “retailers of tobacco products” (meaning, per SB-5, vape shops) to “post conspicuously, at each point of purchase, a notice stating that selling tobacco products to anyone under 21 years of age is illegal and subject to penalties.” These mandatory warning signs must also, per Business & Professions Code § 22952(b), reference a toll-free number where customers can call the Department of Public Health to report shop owners if they suspect sales of tobacco products to underage persons. (Because nothing says “we live in a free society” quite like mandating that vape shop owners post a 1-800 number where concerned citizens can report the oh-so-grievous crime of selling vape juice to a 20-year-old.)

Under SB-7, shops that sell to under-21 customers can be hit with civil penalties ranging from $400 to $6,000, as well as potential sales license revocation and additional fines from the State Board of Equalization. Additionally, SB-7 prohibits by-mail sales of “tobacco products” to customers under 21, meaning that companies that sell e-liquid to California customers are suddenly taking a bigger risk.

Analysis of Both Bills:

California’s Legislature decided to regulate vaping like smoking because (to the extent there was any rationale whatsoever) it looks a bit like smoking. But regulating vapor products like tobacco products because vaping looks like smoking makes about as much sense as requiring a driver’s license to play with Hot Wheels. But the Legislature’s motives become a bit more clear when one considers the fact that the phrase “tobacco product” appears 127 times in the California Revenue and Taxation Code. These bills are hollow moralist grandstanding combined with a good old fashioned money grab.

California voters, whether or not they vape, should be outraged. In a free society, the burden of proof should always be on the proponent of a law that seeks to restrict the behavior of adults. If the Legislature wants to regulate vaping like smoking, then it should be the Legislature’s burden to prove that vaping is, medically speaking, anything like smoking. Not only has the Legislature failed to meet its burden here, it hasn’t even tried. The rights of Californians are being chipped away, and the government isn’t even pretending to offer a reason why. But however ill-conceived these bills may be, vapor industry companies that do business in California would do well to learn the new rules of the road.


[1] B&P Code § 22973.3(d) as set forth in SB-5