Report Suspected Violations

We identify violations, tax evasion fraud schemes, and actively investigate and assist in prosecuting those who violate the laws we administer. Tax fraud and noncompliance hurts everyone, so help us help you.

Cannabis Tax Evasion

In general, cannabis retailers are responsible for collecting the cannabis excise tax from their customers based on gross receipts from the retail sale of cannabis or cannabis products, along with reporting and paying the cannabis excise tax due to us. See our Tax Rates – Special Taxes and Fees page for cannabis tax rates.

Under the California Revenue and Taxation Code, any person who willfully evades or attempts to evade the reporting, assessment, or payment of cannabis excise tax may be guilty of cannabis tax evasion. Violators are subject to fines and jail time.

Examples of tax evasion include, but are not limited to:

• Illegally growing cannabis for sale.
• Possessing, owning, storing, or selling cannabis or cannabis products without a proper Department of Cannabis Control commercial cannabis license.
• Possessing, owning, storing, or selling cannabis or cannabis products which are not in secure packaging.
• Intentionally not collecting the cannabis excise tax as cannabis retailer.
• Not reporting cannabis or cannabis products in the cannabis track and trace system.

Cannabis tax evasion hurts honest businesses in the regulated cannabis industry. Cannabis and cannabis products can be sold at a lower price when the taxes are not paid, which allows the seller to gain more customers and illegally earn increased profits. Additionally, when cannabis excise taxes are not paid, less funding is available for important programs like public health research, medical treatment studies, and youth education.

Cigarette and Tobacco Products Violations

Tax Evasion

Any person who intentionally evades the reporting, assessment or payment of cigarette or tobacco products taxes is guilty of cigarette or tobacco products tax evasion. Violators are subject to fines, jail time, or both. See our Tax Rates – Special Taxes and Fees page for cigarette and tobacco products tax rates.

Examples of cigarette or tobacco products tax evasion include, but are not limited to:

• A retailer or wholesaler possessing, owning, storing or selling untaxed cigarettes (not affixed with California tax stamps) or tobacco products.
• Intentionally purchasing tobacco products from outside the state without remitting the appropriate California State tobacco products taxes.
• Selling cigarettes affixed with counterfeit or reused California tax stamps.
• Selling cigarettes or roll-your-own (RYO) tobacco in California that are not listed in the California Tobacco Directory.

Tax evasion hurts all of us by reducing the amount of revenue available for essential state and local services. Nearly 90% of the taxes collected on cigarettes and tobacco products are earmarked to fund programs such as breast cancer research, health education, hospital and physician services, research, public resources, and county-run projects for child health and development.

Cigarette and tobacco products tax evasion also hurts the honest business owner. Unscrupulous sellers of untaxed cigarettes and tobacco products can undercut the prices charged by the legitimate businessperson. Evasion is accompanied by an increase in thefts, hijackings, cross-border smuggling, and other organized crimes.

Licensing Act

As of 2004, any person who does not comply with the Cigarette and Tobacco Products Licensing Act may receive fines up to $5,000 per offense, imprisonment up to one year in county jail, or both fines and imprisonment.

Examples of violations include, but are not limited to:

• Selling or distributing cigarettes or tobacco products without a license. See our Tax Rates – Special Taxes and Fees page for license fees.
• Not having a valid license for each location selling cigarettes or tobacco products.
• Not displaying your license in public view.
• Not properly maintaining purchase or sales records.
• Refusing access of purchase or sales records to our inspectors.

Stop Tobacco Access to Kids Enforcement (STAKE) Act

Selling cigarettes or tobacco products to individuals under 21 years of age is a violation of the STAKE Act. Under the STAKE Act, we are authorized to issue civil penalties, suspensions, and revocations for repeat offenders.

To report suspected STAKE Act violations, call 1-800-5-ASK-4-ID (1-800-527-5443) or email the California Department of Public Health, Office of Youth Tobacco Enforcement (OYTE), at OYTE@cdph.ca.gov.

For more information, visit the California Department of Public Health's Tobacco Retailer Resources webpage.

Flavor Ban

Retailers are prohibited from possessing, storing, or selling flavored cigarettes, most flavored products, and tobacco product flavor enhancers.

Wholesalers are prohibited from possessing, storing, or selling flavored cigarettes, flavored tobacco products, and tobacco product flavor enhancers unless the product is listed on California Attorney General's Unflavored Tobacco List (UTL).

Distributors, wholesalers, delivery sellers, or any other person may not sell cigarettes or tobacco products not listed on the UTL or tobacco product flavor enhancers to any person in California. Please visit the California Attorney General's page on Flavor Ban for additional information on the UTL.

CDTFA and law enforcement agencies may seize flavored cigarettes, flavored tobacco products, and tobacco product flavor enhancers from retailers or wholesalers who possess, store, own, or sell these products.

Violators are subject to a civil penalty of $50 per individual package of seized product and repeat offenders are subject to a suspension or revocation of their Cigarette and Tobacco Products License.

Examples of the types of products that violate the flavor ban include, but are not limited to:

• E-cigarettes or vape devices that contain or are sold with a flavored liquid or element
• Flavored e-liquids, e-juices, or pods
• Components, parts, or accessories of a tobacco product that contains or is sold with a flavored constituent
• Menthol cigarettes and products that produce a cooling sensation
• Flavored little cigars and cigarillos
• Flavored smokeless tobacco products
• Flavored blunt wraps
• Flavored loose-leaf roll-your-own tobacco
• Flavored tobacco rolling papers
• Tobacco product flavor enhancers
• Flavored synthetic nicotine products
• Flavored nicotine analogs and alkaloids

Fuel Tax Evasion

Under the California Revenue and Taxation Code, any person who intentionally evades the reporting, assessment or payment of fuel taxes is guilty of fuel tax evasion. Violators are subject to fines and jail time. See our Tax Rates – Special Taxes and Fees page for fuel tax rates.

Examples of fuel tax evasion include, but are not limited to:

• Using dyed (untaxed) diesel fuel in a vehicle operated on California highways without being licensed to remit the tax.
• Intentionally importing fuel from outside California without remitting the appropriate California State fuel taxes.
• Blending taxable fuel with an untaxed product to increase volume without paying tax on the increase.

Fuel tax evasion is bad for the environment. Illegally blended fuels can cause increased soil and air pollution. These result from poor combustion and contamination from toxic or waste chemicals used as blending agents. In addition, illegally blended fuels often cause increased engine wear and can lead to vehicle breakdowns.

Fuel tax evasion hurts honest businesses by giving sellers an unfair advantage. When fuel taxes are not paid, less funding is available for transportation projects, construction, and maintenance of our roads and highways.

Sales Tax Evasion

In general, retail sales of tangible personal property in California are subject to sales tax. While sales tax rates vary, the statewide tax rate base is 7.25 percent. Sales taxes are higher in locations with additional "district taxes." See the Sales and Use Tax Rates page to find current sales tax rates by location. Under the California Revenue and Taxation Code, any person who intentionally evades sales tax is guilty of sales tax evasion. Violators are subject to fines and jail time.

Examples of tax evasion include, but are not limited to:

• Collecting sales tax from customers but intentionally failing to report and pay the tax collected.
• Knowingly hiding or reducing retail sales and sales tax.

Sales tax supports a broad range of state services, from parks to prisons. In addition, sales tax is a major source of revenue for many cities and counties that funds police and fire services, courts, roads, health care, and more. Tax evasion hurts all of us by reducing the amount of money available for these essential services, and honest businesses are at a competitive disadvantage by deceitful sellers who do not pay the tax they owe.

Beware of Tax Collection Scams

We have received reports of threatening scam attempts to fraudulently collect alleged tax debts. All reported scam attempts are investigated. For more information or to report a scam, view our Beware of Telephone Scammers Impersonating Police and Tax Collectors! page.