Report 2019-046 Recommendation 9 Responses

Report 2019-046: Proposition 56 Tobacco Tax: State Agencies' Weak Administration Reduced Revenue by Millions of Dollars and Led to the Improper Use and Inadequate Disclosure of Funds (Release Date: January 2021)

Recommendation #9 To: Tax and Fee Administration, California Department of

To ensure that the other tobacco products tax rate accurately reflects changes in the wholesale price of cigarettes, CDTFA should enact a policy to obtain the current wholesale markup rate for cigarettes no less than every three years and to incorporate this number in its calculation of the tax rate.

60-Day Agency Response

The CDTFA has instituted a policy to review and adjust, as appropriate, the wholesale markup rate for cigarettes no less than every three years and incorporate the appropriate markup rate in its calculation of the tobacco products tax rate. The policy is attached.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

CDTFA circulated a memorandum requiring its staff to obtain the current wholesale markup rate for cigarettes every three years and incorporate the number into its calculation of the tax rate.

All Recommendations in 2019-046

Agency responses received are posted verbatim.