California boasts the largest state economy in the nation. A result of diverse, successful industries that include agricultural, tech and film, it’s easy to overlook the economic impact of our state’s small businesses.
But driven by unrelenting special interests, legislators have done just that, introducing Senate Bill 793 — an unconstitutional ban on the selling of all flavored tobacco products that neglects middle-class, small business owners.
The sale ban of all flavored tobacco products, and the consequential revenue loss of almost one out of every three dollars, would devastate convenience stores.
California is home to nearly four million small businesses that account for 99.8 percent of the state’s businesses and employ roughly half of the California workforce. Nearly 12,000 of those businesses are conveniences stores, all of which play a vital role in our communities, ranging from being the only grocer to a quick stop for customers looking to fill up their tank and grab a coffee.
Despite the wide array of products offered, these stores rely heavily on tobacco sales. Roughly 33 percent of their in-store revenue comes from the sale of tobacco products, including traditional cigarettes, smokeless and vape.
That’s why SB 793 presents a legitimate threat to otherwise compliant store owners.
The sale ban of all flavored tobacco products, and the consequential revenue loss of almost one out of every three dollars, would devastate convenience stores. Many of these owners would have to consider, at least, cutting staff to keep their business operating.
It would be an especially hard pill to swallow during the COVID-19 pandemic since Gov. Newsom has once again “dimmed” the state’s reopening, urging Californians to limit travel and outings to all but essential activities and mandating some store closures, all of which decreases the flow of traffic into our businesses.
This bill, perhaps by design, is written to allow regulators and law enforcement broad authority on its application. If implemented, store owners wishing to incorporate new products that weren’t just tobacco flavored would need a chemist.
Furthermore, a 2017 U.S. 7th Circuit Court of Appeals found a 2015 Indiana law restricting e-liquids was unconstitutional because the law, as written, had an “extraterritorial reach that is unprecedented, imposing detailed requirements of Indiana law on out-of-state manufacturing operations.”
Wholesalers, distributors and retailers could potentially recoup almost twice the amount on tobacco sales if legislators cracked down on this illegal market.
What’s worse, the bill does nothing to address the problem at which it is aimed — youth vaping. A recent Sacramento Bee editorial sharply chided vapor manufacturers, and claimed SB 793 would “[protect] our children from [their] greedy clutches.” This hasty analysis misses the mark. By failing to address the growing black-market plaguing California while penalizing law-abiding convenience store owners, the bill will only make matters worse.
According to the latest data from Mackinac Center, 48 percent of cigarettes smoked is from an illegal source. Not regulating nearly half of the cigarettes consumed in our state puts more children in danger than stores that regularly ID-check customers at the checkout to enforce existing legal protections to prevent underage use.
And not only does this pose an issue with our children, this illicit trade takes money away from private business and the government. Wholesalers, distributors and retailers could potentially recoup almost twice the amount on tobacco sales if legislators cracked down on this illegal market.
What’s more, this unrealized government revenue — a whopping $1.7 billion according the Mackinac Center — could be put towards more funding elsewhere, especially at a time when the coronavirus has drained our state surplus.
Curbing the rise of youth vaping continues to be a challenge. I commend the legislature for taking aggressive action, but SB 793 grossly misses the mark and fails to balance its purpose with the harmful economic consequences. Instead of basking in the praise from special interests exploiting the youth vaping epidemic to enact their anti-tobacco agenda, policymakers should seek a less-restrictive solution that considers all stakeholders.
Editor’s Note: Beilal Chatila is the founding partner of Chatila Law LLP, a business law firm with offices in Berkeley and Oakland