Gilroy Municipal Code Art. IV Cigarette Tax

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**State law references—**Cigarette tax, Revenue and Taxation Code, § 30001 et seq.

(a) Title. This article shall be known as the “cigarette tax ordinance of the City of Gilroy.”

(b) Purpose and Intent. It is the purpose and intent of the council that there be a tax imposed on the privilege of distributing cigarettes in the city for the purpose of raising revenue. The net revenue shall be used to fund the operating expenses of the parks and recreation department, the library department and a fund for the development of cultural and civic activities.

(Ord. No. 778, § 1)

For the purposes of this article, the following words and phrases shall have the meanings respectively ascribed to them by this section:

“Cigarette”

means any roll for smoking, made wholly or in part of tobacco, irrespective of size or shape and irrespective of whether the tobacco is flavored, adulterated or mixed with any other ingredient, where such roll has a wrapper or cover made of paper or any other material, except where such wrapper is wholly or in the greater part made of tobacco and such roll weighs over three pounds per thousand.

“Director of finance”

means the director of finance of the City of Gilroy.

“Distribute” or “distributing”

means the act, by a distributor, of transporting cigarettes to which he has title, or causing or allowing such cigarettes to be transported to a retail outlet in the city.

“Distributor”

means a person who, having title to cigarettes, transports them or causes or allows them to be transported to a retail outlet in the city.

“Retail outlet”

means any place or premises in the city (including, without limiting the generality of the foregoing, every kind of store, business establishment and club in the city) where cigarettes are transferred to the possession of the ultimate consumer thereof, irrespective of how such transfer is consummated, whether through a natural person, by means of a vending machine or other mechanical device or otherwise.

“Ultimate consumer”

means any person who acquires possession of cigarettes for his own use or consumption.

“Untaxed cigarette”

means any cigarette which has not yet been distributed in such manner as to result in a tax liability under this article.

“Use” or “consumption”

means the exercise of any right or power over cigarettes incident to the ownership thereof, other than the sale of cigarettes or the receiving, handling or holding thereof for the purpose of sale.

(Ord. No. 778, § 1)

An excise tax, at the rate of one mill per cigarette, is hereby imposed upon the privilege of distributing cigarettes to retail outlets in the city. Any cigarette with respect to which a tax has once been imposed under this article shall not be subject upon a subsequent distribution to the tax imposed by this article. Unless the contrary is established, it shall be presumed that all cigarettes distributed in the city are untaxed cigarettes. It shall be unlawful knowingly, to sell, transfer, distribute or give away untaxed cigarettes in the city.

(Ord. No. 778, § 1)

Within thirty days after the operative date[1] of this article, within thirty days after commencing business or within thirty days after a change in ownership of a business registered under this article, whichever is later, each distributor of cigarettes shall register with the director of finance on a form provided by him.

(Ord. No. 778, § 1)

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Ordinance No. 778 was passed August 15, 1966, to become effective thirty days thereafter and to become operative on the first day of the calendar month immediately following the effective date.

Every distributor shall keep a complete and accurate record of all cigarettes distributed by him in the city. Such records shall, with respect to each separate distribution, include a written statement containing the name and address of the retail outlet to which distribution is made, the name of the persons who own or operate such retail outlet and to whom title or possession of the distributed cigarettes is transferred, the date of delivery, the quantity of cigarettes, the sales price, the amount of tax imposed under this article and such other information as the director of finance may reasonably require. All statements and records required by this section shall be in a form satisfactory to the director of finance. They shall be preserved for a period of three years and shall be offered for inspection at any time upon oral or written demand by the director of finance or his authorized agent.

The director of finance is hereby authorized and directed to offset and deduct from the total amount of tax monies which may become owing and payable by a distributor to the city under the provisions of this article for any calendar month an amount of money equal to two per cent of such total amount of tax monies owing and payable by such distributor to the city for such month, if such distributor has complied with and done all things required of him by the provisions of this section to the satisfaction of the finance director. Such offset and deduction shall be deemed reimbursement to the distributor for costs and expenses incurred by him in complying with and doing all things required of him by this section.

(Ord. No. 778, § 1)

The tax imposed under this article shall be due and payable monthly on or before the last day of the calendar month following the calendar month in which the distribution of cigarettes occurs.

Each distributor shall make a return to the director of finance on forms provided by such director, of the total number of cigarettes distributed to retail outlets in the city by the distributor during each calendar month and the amount of tax due thereon. Each such return shall be filed with the director of finance on or before the last day of the calendar month following the close of the calendar month for which the return is made.

At the time the return is filed, the full amount of the tax imposed by this article shall be remitted to the director of finance. The director of finance may establish a shorter reporting period for any distributor if he deems it necessary in order to insure collection of the tax. Returns and payments are due immediately upon cessation of business for any reason. All returns and payments submitted by each distributor shall be treated as confidential by the director of finance and shall not be released by him except by order of a court of competent jurisdiction or to an official or agent of the United States, the state, the county or the city for official use only.

(Ord. No. 778, § 1)

(a) Original Delinquency Period. Any distributor who fails to remit any tax imposed by this article within the time required shall pay a penalty of ten per cent of the amount of the tax in addition to the amount of the tax.

(b) Continued Delinquency. Any distributor who fails to remit any delinquent remittance within one month following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten per cent of the amount of the tax in addition to the amount of the tax and the ten per cent penalty first imposed.

(c) Fraud. If the director of finance determines that the nonpayment of any remittance due under this article is due to fraud, a payment of twenty-five per cent of the amount of the tax shall be added thereto in addition to the penalties stated in subparagraphs (a) and (b) of this section.

(d) Interest. In addition to the penalties imposed, any distributor who fails to remit any tax imposed by this article shall pay interest at the rate of eighteen (18) percent per annum. The interest shall be calculated per month or fraction thereof on the amount of the tax and penalties, from the date on which the remittance first became delinquent until paid.

(e) Penalties Merged with Tax. Every penalty imposed with such interest as accrues under the provisions of this section shall become a part of the tax herein required to be paid.

(f) Penalties During Pendency of Hearing or Appeal. No penalty provided under the terms of this article shall be imposed during the pendency of any hearing which is provided for in section 22.28 of this article nor during the pendency of any appeal to the city council which is provided for in section 22.28 of this article.

(Ord. No. 778, § 1; Ord. No. 2004-06, § II, 5-3-2004)

If any distributor shall fail or refuse, within the time provided for in this article, to make any report and remittance of such tax or any portion thereof required by this article, the director of finance shall proceed to obtain facts and information on which to base his estimate of the tax due. As soon as the director of finance shall procure such facts and information as he is able to obtain upon which to base the assessment of any tax imposed by this article and payable by any distributor who has failed or refused to make such report and remittance, he shall proceed to determine and assess against such distributor the tax, interest and penalties provided for by this article. In case such determination is made, the director of finance shall give a notice of the amount so assessed by serving it personally or by depositing it in the United States mail, postage prepaid, addressed to the distributor so assessed at his last-known place of address. Such distributor may within ten days after the service of mailing of such notice make application in writing to the director of finance for a hearing on such amount assessed. If application by the distributor for a hearing is not made within the time prescribed, the tax, interest and penalties, if any, determined by the director of finance shall become final and conclusive and immediately due and payable. If such application is made, the director of finance shall give not less than five days written notice in the manner prescribed herein to the distributor to show cause at a time and place fixed in such notice why such amount specified therein should not be fixed for such tax, interest and penalties. At such hearing, the distributor may appear and offer evidence why such specified tax, interest and penalties should not be so fixed. After such hearing, the director of finance shall determine the proper tax to be remitted and shall thereafter give written notice to the distributor in the manner prescribed herein of such determination and the amount of such tax, interest and penalties. The amount determined to be due shall be payable after fifteen days, unless an appeal is taken as provided in section 22.29.

(Ord. No. 778, § 1)

Any distributor aggrieved by any decision of the director of finance with respect to the amount of such tax, interest and penalties, if any, may appeal to the council by filing a notice of appeal with the city clerk within fifteen days of the serving or mailing of the determination of tax due. The council shall fix a time and place for hearing such appeal and the city clerk shall give notice in writing to such distributor at his last-known place of address. The findings of the council shall be final and conclusive and shall be served upon the appellant in the manner prescribed above in the service of notice of hearing. Any amount found to be due shall be immediately due and payable upon the service of notice.

(Ord. No. 778, § 1)

(a) Whenever the amount of any tax, interest or penalty has been overpaid or paid more than once or has been erroneously or illegally collected or received by the city under this article, it may be refunded as provided in subparagraph (b) of this section; provided, a claim in writing thereof, stating under penalty of perjury the specific ground upon which the claim is founded, is filed with the director of finance within three years of the date of payment. The claim shall be on forms furnished by the director of finance.

(b) A distributor may claim a refund or take as credit against taxes due but never remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when it is established in a manner prescribed by the director of finance that the amount claimed has been overpaid or paid more than once or has been erroneously or illegally collected or received by the city.

(c) No refund shall be paid under the provisions of this section unless the claimant establishes by written records entitlement thereto.

(Ord. No. 778, § 1)

Any tax required to be paid by a distributor under the provisions of this article shall be deemed a debt owed to the city. Any person owing taxes under the provisions of this article shall be liable to an action brought in the name of the city for the recovery of such amount.

(Ord. No. 778, § 1)

Any person violating any provision of this article, or any distributor who fails or refuses to register as required herein, or to furnish any return required to be made, or who fails to furnish other data required by the director of finance, or who renders a false or fraudulent return of claim, or any person required to make, render, sign or verify any report or claim who makes a false or fraudulent report or claim with intent to defeat or evade the determination of any amount due under this article is guilty of an infraction.

(Ord. No. 778, § 1; Ord. No. 77-15, § 19, 4-18-1977)