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A BILL TO BE ENTITLED
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AN ACT
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relating to an excise tax on, and storage, reporting, and |
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recordkeeping requirements for, certain nontobacco nicotine |
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products; providing a civil penalty; imposing a tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle E, Title 2, Tax Code, is amended by |
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adding Chapter 164 to read as follows: |
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CHAPTER 164. EXCISE TAX ON NONTOBACCO NICOTINE PRODUCTS |
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Sec. 164.0001. DEFINITIONS. In this chapter: |
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(1) "Alternative nicotine product" means any |
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noncombustible product containing nicotine that is intended for |
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human consumption, whether chewed, absorbed, dissolved, ingested, |
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inhaled, or consumed by any other means. The term does not include: |
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(A) an e-cigarette; |
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(B) a cigarette, as defined by Section 154.001; |
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(C) a tobacco product, as defined by Section |
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155.001; or |
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(D) a product regulated as a drug or device by the |
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United States Food and Drug Administration. |
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(2) "Closed-system e-cigarette" means an e-cigarette |
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that utilizes a nicotine solution in a sealed and prefilled |
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container that makes the nicotine solution inaccessible to the |
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consumer through customary or reasonably foreseeable handling or |
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use, other than use by inhaling vapor or aerosol produced from the |
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nicotine solution. The term includes a disposable e-cigarette and a |
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sealed, prefilled, and disposable container of nicotine solution |
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for use in an e-cigarette. |
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(3) "Commercial business location" means the entire |
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premises occupied by a retailer. |
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(4) "E-cigarette" means a noncombustible product |
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that: |
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(A) produces vapor or aerosol for inhalation from |
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the application of a heating element to a solution that contains |
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nicotine; and |
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(B) includes a solution that contains nicotine |
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intended for use in an e-cigarette, whether sold with the |
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e-cigarette or separately. |
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(5) "First sale" means, except as otherwise provided |
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by this chapter: |
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(A) the first transfer of possession in |
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connection with a purchase, sale, or any exchange for value of an |
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e-cigarette or an alternative nicotine product in or into this |
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state, which: |
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(i) includes the sale of an e-cigarette or |
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an alternative nicotine product by: |
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(a) a distributor in or outside this |
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state to a distributor, wholesaler, or retailer in this state; and |
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(b) a manufacturer in this state who |
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transfers the e-cigarette or alternative nicotine product in this |
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state; and |
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(ii) does not include: |
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(a) the sale of an e-cigarette or an |
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alternative nicotine product by a manufacturer outside this state |
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to a distributor in this state; |
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(b) the transfer of an e-cigarette or |
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an alternative nicotine product from a manufacturer outside this |
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state to a bonded agent in this state; or |
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(c) the sale of an e-cigarette or an |
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alternative nicotine product by a manufacturer, bonded agent, |
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distributor, or importer to an interstate warehouse in this state; |
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(B) the first use or consumption of an |
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e-cigarette or an alternative nicotine product in this state; or |
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(C) the loss of an e-cigarette or an alternative |
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nicotine product in this state whether through negligence, theft, |
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or other unaccountable loss. |
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(6) "Manufacturer's representative" means a person |
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employed by a manufacturer to sell or distribute the manufacturer's |
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e-cigarettes or alternative nicotine products for which the tax |
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imposed under this chapter has been paid. |
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(7) "Open-system e-cigarette" means an e-cigarette |
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that utilizes a nicotine solution in a container that is refillable |
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or otherwise makes the nicotine solution accessible to the consumer |
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through customary or reasonably foreseeable handling or use. |
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(8) "Retailer" means a person: |
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(A) required to hold a permit under Chapter 147, |
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Health and Safety Code; or |
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(B) who sells alternative nicotine products to |
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consumers. |
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Sec. 164.0002. DESIGNATION OF COMMERCIAL BUSINESS LOCATION |
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AS PRINCIPAL PLACE OF BUSINESS; STORAGE. (a) A retailer shall |
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designate one commercial business location as the retailer's |
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principal place of business. |
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(b) Except as provided by Subsection (c), a commercial |
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business location where e-cigarettes or alternative nicotine |
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products are stored cannot be a residence or a unit in a public |
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storage facility. |
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(c) A manufacturer's representative may use a residence or |
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storage facility as a commercial business location. |
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Sec. 164.0003. TAX IMPOSED ON FIRST SALE. (a) A tax is |
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imposed and becomes due and payable when a person receives an |
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e-cigarette or alternative nicotine product for the purpose of |
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making a first sale in this state. |
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(b) The tax rate: |
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(1) for a closed-system e-cigarette is seven cents for |
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each milliliter of nicotine solution and a proportionate rate on |
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all fractional parts of a milliliter of nicotine solution; |
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(2) for an open-system e-cigarette is three percent of |
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the wholesale cost price of the open-system e-cigarette; and |
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(3) for an alternative nicotine product is $1.22 per |
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ounce of net weight of the alternative nicotine product, as listed |
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by the manufacturer. |
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Sec. 164.0004. FINAL POINT OF IMPOSITION OF TAX. The |
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ultimate consumer of an e-cigarette or alternative nicotine product |
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in this state shall pay the tax imposed by this chapter. If another |
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person pays the tax, the amount of the tax is added to the price |
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charged to the ultimate consumer. |
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Sec. 164.0005. PAYMENT OF TAX. (a) A person shall pay the |
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tax on an e-cigarette or alternative nicotine product received for |
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the purpose of making a first sale at the time the person files the |
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report under Section 164.0010 in the manner prescribed by the |
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comptroller. |
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(b) The person in possession of an e-cigarette or |
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alternative nicotine product has the burden to prove payment of the |
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tax on that product. |
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Sec. 164.0006. PENALTY FOR FAILURE TO PAY TAX. (a) Subject |
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to Subsection (c), a person who fails to pay the tax when due under |
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Section 164.0005 shall pay an additional five percent of the amount |
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of the tax due as a penalty. |
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(b) A person who fails to pay the tax imposed under this |
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chapter and penalty imposed under Subsection (a), as applicable, |
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before the 31st day after the date that the tax is due shall pay, in |
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addition to the amount required under Subsection (a), an additional |
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five percent of the amount of the tax due as a penalty. |
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(c) The minimum penalty imposed by this section is $50. |
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(d) The dishonor of a check delivered to the treasury or |
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other form of payment for payment of taxes constitutes a failure to |
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pay the tax when due. |
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(e) The attorney general shall bring a suit to collect a |
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penalty for late payment of a tax imposed under this section. A |
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suit to collect a penalty under this section may be brought in a |
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court of competent jurisdiction in Travis County. |
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Sec. 164.0007. RECORDS OF PURCHASES AND RECEIPTS. (a) A |
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person who receives an e-cigarette or an alternative nicotine |
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product for the purpose of making a first sale shall maintain at |
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each place of business the records of all e-cigarettes or |
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alternative nicotine products purchased or received. |
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(b) A retailer shall maintain all records described by |
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Subsection (a) at the commercial business location designated by |
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the retailer under Section 164.0002. |
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(c) The records maintained under this section must include: |
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(1) the name and address of the shipper or carrier and |
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the mode of transportation; |
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(2) all shipping records or copies of records, |
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including invoices, bills of lading, waybills, freight bills, and |
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express receipts; |
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(3) the date and the name of the place of origin of the |
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e-cigarette or alternative nicotine product shipment; |
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(4) the date and the name of the place of arrival of |
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the e-cigarette or alternative nicotine product shipment; |
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(5) a statement of the number, kind, and price paid for |
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the e-cigarettes or alternative nicotine products; |
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(6) the number of milliliters of nicotine solution for |
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use in a closed-system e-cigarette; |
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(7) the name, address, and tax identification number |
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of the seller; |
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(8) the manufacturer's wholesale price for the |
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e-cigarette or alternative nicotine product; |
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(9) the net weight as listed by the manufacturer of |
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each unit of alternative nicotine product, measured in ounces; and |
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(10) any other information required by the |
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comptroller. |
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Sec. 164.0008. RECORDS OF SALE AND USE. (a) A person who |
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receives an e-cigarette or alternative nicotine product for the |
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purpose of making a first sale shall maintain at each place of |
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business in this state records of each sale, distribution, |
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exchange, or use of an e-cigarette or an alternative nicotine |
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product, regardless of whether subject to a tax imposed by this |
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chapter. |
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(b) The records maintained under this section must include: |
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(1) the purchaser's name and address, permit number, |
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or tax identification number; |
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(2) the method of delivery and the name of the common |
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carrier or other person delivering the e-cigarettes or alternative |
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nicotine products; |
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(3) the date, amount, and kind of e-cigarettes or |
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alternative nicotine products sold, distributed, exchanged, or |
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used; |
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(4) the number of milliliters of nicotine solution for |
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use in a closed-system e-cigarette sold, distributed, exchanged, or |
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used; |
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(5) the wholesale price of all open-system |
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e-cigarettes sold, distributed, exchanged, or used; |
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(6) the price received for the e-cigarettes or |
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alternative nicotine products; |
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(7) the number and kind of e-cigarettes or alternative |
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nicotine products on which the tax has been paid; |
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(8) the net weight as listed by the manufacturer for |
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each unit of alternative nicotine product, measured in ounces; and |
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(9) any other information required by the comptroller. |
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(c) In addition to the records maintained under Subsection |
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(a), a person required to maintain records under that subsection |
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shall prepare and retain: |
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(1) an original invoice for each transaction involving |
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an e-cigarette or an alternative nicotine product; and |
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(2) any supporting documentation relevant to each |
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transaction showing shipment and receipt used in preparing the |
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invoices at the place of business, including all bills of lading. |
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(d) A person required to prepare and retain an invoice under |
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Subsection (c) shall deliver a duplicate invoice to the purchaser. |
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(e) A person required to maintain, prepare, or retain any |
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record described by this section shall maintain all records, as |
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applicable, for at least four years after the date of the |
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transaction. |
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(f) On request of the comptroller, the person shall provide |
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the records to the comptroller in a manner prescribed by the |
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comptroller. |
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Sec. 164.0009. FAILURE TO PRODUCE RECORDS. (a) Except as |
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provided by Subsection (b), a person's failure to produce a record |
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on request of the comptroller under Section 164.0007 or 164.0008 is |
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prima facie evidence that e-cigarettes and alternative nicotine |
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products not accounted for in a requested report were received for |
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the purpose of making a first sale without payment of a tax required |
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under this chapter. |
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(b) This section does not apply to a person's failure to |
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produce a record that results from an occurrence beyond the |
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person's reasonable control. |
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Sec. 164.0010. MONTHLY REPORT. (a) A person who receives |
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an e-cigarette or alternative nicotine product for the purpose of |
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making a first sale shall file a report for the preceding month on |
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or before the 25th day of each month. |
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(b) Except as provided by Subsection (c), the report filed |
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under Subsection (a) must include: |
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(1) the date the person submitted the report; |
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(2) the name and address of the person submitting the |
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report; |
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(3) the applicable month covered by the report; |
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(4) the number of units or amount, as applicable, of |
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e-cigarettes and alternative nicotine products the person |
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purchased, received, and acquired during the month covered by the |
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report, with separately stated amounts for: |
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(A) milliliters of nicotine solution for use in a |
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closed-system e-cigarette; |
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(B) the wholesale price of all open-system |
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e-cigarettes; and |
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(C) the net weight as listed by the manufacturer |
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of all alternative nicotine products, measured in ounces; |
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(5) the number of units or amount, as applicable, of |
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e-cigarettes and alternative nicotine products the person sold, |
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distributed, used, lost, or otherwise disposed of during the month |
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covered by the report, with separately stated amounts for: |
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(A) milliliters of nicotine solution for use in a |
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closed-system e-cigarette; |
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(B) the wholesale price of all open-system |
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e-cigarettes; and |
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(C) the net weight as listed by the manufacturer |
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of all alternative nicotine products, measured in ounces; |
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(6) the amount of e-cigarettes and alternative |
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nicotine products the person had in stock at the beginning and at |
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the end of the month covered by the report; and |
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(7) any other information required by the comptroller. |
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(c) If more than 50 percent of all untaxed e-cigarettes or |
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alternative nicotine products received by the person in this state |
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are actually sold outside of this state, the person may include in |
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the report only the e-cigarettes or alternative nicotine products, |
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as applicable, that are sold in this state. |
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(d) The comptroller shall prescribe the form and method for |
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submitting the report under this section. |
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Sec. 164.0011. INSPECTION. (a) To determine the tax |
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liability of a person under, or compliance by a person with, this |
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chapter, the comptroller may: |
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(1) inspect any premises where e-cigarettes or |
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alternative nicotine products are manufactured, produced, stored, |
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transported, sold, or offered for sale or exchange; |
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(2) remain on the premises as long as necessary to |
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determine the tax liability under or compliance with this chapter; |
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(3) examine the records required by this chapter or |
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other records, books, documents, papers, accounts, and objects that |
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the comptroller determines are necessary for conducting a complete |
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examination; and |
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(4) examine stocks of e-cigarettes or alternative |
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nicotine products. |
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(b) A person: |
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(1) must, on request of the comptroller, produce |
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records required by this chapter; and |
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(2) may not hinder or prevent the comptroller's |
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inspection of records or the examination of the premises under this |
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section. |
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Sec. 164.0012. SEIZURE. (a) The comptroller with or |
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without process may seize: |
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(1) e-cigarettes and alternative nicotine products |
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that are possessed or controlled by a person for the purpose of |
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selling or removing the e-cigarettes or alternative nicotine |
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products in violation of this chapter; |
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(2) e-cigarettes and alternative nicotine products |
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that are removed, deposited, or concealed by a person intending to |
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avoid payment of taxes imposed by this chapter; |
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(3) an automobile, truck, boat, conveyance, or other |
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type of vehicle used to remove or transport e-cigarettes or |
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alternative nicotine products by a person intending to avoid |
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payment of taxes imposed by this chapter; and |
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(4) equipment, paraphernalia, or other tangible |
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personal property used by a person intending to avoid payment of |
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taxes imposed by this chapter found in the place where the |
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e-cigarettes or alternative nicotine products are found. |
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(b) An item seized under this section is forfeited to the |
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state and remains in the custody of the comptroller for disposition |
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as provided by this chapter. The seized item is not subject to |
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replevin. |
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Sec. 164.0013. PENALTIES. (a) A person violates this |
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chapter if the person does not: |
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(1) keep records required by this chapter; |
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(2) make a report required by this chapter to the |
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comptroller or the person makes a false or incomplete report |
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required by this chapter to the comptroller; or |
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(3) abide by, or the person violates, any other |
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provision of this chapter or a rule adopted by the comptroller under |
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this chapter. |
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(b) A person who violates this chapter shall pay the state a |
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penalty of not more than $2,000 for each violation. |
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(c) A person is liable for a separate penalty for each day on |
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which a violation occurs. |
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(d) The attorney general shall bring suit to recover |
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penalties under this section. |
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(e) A suit under this section may be brought in a court of |
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competent jurisdiction in Travis County. |
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Sec. 164.0014. RULES. The comptroller shall adopt rules as |
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necessary to implement, administer, and enforce this chapter. |
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Sec. 164.0015. DISPOSITION AND USE OF PROCEEDS. The |
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comptroller shall deposit the proceeds from taxes imposed under |
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this chapter as follows: |
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(1) 50 percent to the credit of an account in the |
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general revenue fund administered by the Department of State Health |
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Services, which may be appropriated to the department only for the |
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purpose of administering youth vaping prevention and awareness |
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programs; |
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(2) 20 percent to the credit of an account in the |
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general revenue fund administered by the comptroller, which may be |
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appropriated to the comptroller only for the purpose of |
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administering and enforcing this chapter; and |
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(3) the remainder to the credit of the general revenue |
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fund. |
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SECTION 2. The change in law made by this Act does not |
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affect tax liability accruing before the effective date of this |
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Act. |
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SECTION 3. This Act takes effect September 1, 2023. |