By Davis of Dallas                                    H.B. No. 3256
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to state taxes.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. Section 155.001, Tax Code, is amended to read as
 1-5     follows:
 1-6           Sec. 155.001.  DEFINITIONS. In this chapter:
 1-7                 (1)  "Bonded agent" means a person in this state who is
 1-8     an agent of a person outside this state and receives cigars and
 1-9     tobacco products in interstate commerce and stores the cigars and
1-10     tobacco products for distribution or delivery to distributors under
1-11     orders from the person outside this state.
1-12                 (2)  "Chewing tobacco" means any leaf tobacco that is
1-13     intended to be placed in the mouth, including Cavendish, Twist,
1-14     plug, and scrap.
1-15                 (3)  "Cigar" means a roll of fermented tobacco that is
1-16     wrapped in tobacco and the main stream of smoke from which produces
1-17     an alkaline reaction to litmus paper.
1-18                 (4) [(3)]  "Common carrier" means a motor carrier
1-19     registered under Chapter 643, Transportation Code, or a motor
1-20     carrier operating under a certificate issued by the Interstate
1-21     Commerce Commission or a successor agency to the Interstate
1-22     Commerce Commission.
1-23                 (5) [(4)]  "Consumer" means a person who possesses
 2-1     tobacco products for personal consumption.
 2-2                 (6) [(5)]  "Distributor" means a person who:
 2-3                       (A)  receives tobacco products for the purpose of
 2-4     making a first sale in this state from a manufacturer outside the
 2-5     state or within the state or otherwise brings or causes to be
 2-6     brought into this state tobacco products for sale, use, or
 2-7     consumption;
 2-8                       (B)  manufactures or produces tobacco products;
 2-9     or
2-10                       (C)  is an importer or import broker.
2-11                 (7)  "Dry snuff" means any snuff commonly known within
2-12     the tobacco industry as dry snuff.
2-13                 (8) [(6)]  "Export warehouse" means a person in this
2-14     state who receives tobacco products from manufacturers and stores
2-15     the tobacco products for the purpose of making sales to authorized
2-16     persons for resale, use, or consumption outside the United States.
2-17                 (9) [(7)]  "First sale" means, except as otherwise
2-18     provided by this chapter:
2-19                       (A)  the first transfer of possession in
2-20     connection with a purchase, sale, or any exchange for value of
2-21     tobacco products in intrastate commerce;
2-22                       (B)  the first use or consumption of tobacco
2-23     products in this state; or
2-24                       (C)  the loss of tobacco products in this state
2-25     whether through negligence, theft, or other unaccountable loss.
2-26                 (10) [(8)]  "Importer" or "import broker" means a
 3-1     person who ships, transports, or imports into this state tobacco
 3-2     products manufactured or produced outside the United States for the
 3-3     purpose of making a first sale in this state.
 3-4                 (11) [(9)]  "Manufacturer" means a person who
 3-5     manufactures or produces tobacco products and sells tobacco
 3-6     products to a distributor.
 3-7                 (12) [(10)]  "Manufacturer's representative" means a
 3-8     person employed by a manufacturer to sell or distribute the
 3-9     manufacturer's tobacco products.
3-10                 (13)  "Moist snuff" means any snuff commonly known
3-11     within the tobacco industry as moist snuff.
3-12                 (14) [(11)]  "Permit holder" means a bonded agent,
3-13     distributor, wholesaler, or retailer required to obtain a permit
3-14     under Section 155.041.
3-15                 (15)  "Pipe tobacco" means any tobacco that, because of
3-16     its appearance, type, packaging, or labeling, is suitable for use
3-17     and likely to be offered to or purchased by a consumer as tobacco
3-18     to be smoked in a pipe.
3-19                 (16) [(12)]  "Place of business" means:
3-20                       (A)  a commercial business location where tobacco
3-21     products are sold;
3-22                       (B)  a commercial business location where tobacco
3-23     products are kept for sale or consumption or otherwise stored; or
3-24                       (C)  a vehicle from which tobacco products are
3-25     sold.
3-26                 (17) [(13)]  "Retailer" means a person who engages in
 4-1     the practice of selling tobacco products to consumers and includes
 4-2     the owner of a coin-operated vending machine.
 4-3                 (18)  "Roll-your-own tobacco" means any tobacco that,
 4-4     because of its appearance, type, packaging, or labeling, is
 4-5     suitable for use and likely to be offered to or purchased by a
 4-6     consumer as tobacco for making cigarettes.
 4-7                 (19)  "Snuff" means any finely cut, ground, or powdered
 4-8     tobacco that is intended to be placed in the mouth.
 4-9                 (20) [(14)]  "Tobacco product" means:
4-10                       (A)  a cigar;
4-11                       (B)  smoking tobacco, including pipe tobacco,
4-12     roll-your-own tobacco, granulated, plug-cut, crimp-cut,
4-13     ready-rubbed, and any form of tobacco suitable for smoking in a
4-14     pipe or as a cigarette;
4-15                       (C)  chewing tobacco[, including Cavendish,
4-16     Twist, plug, scrap, and any kind of tobacco suitable for chewing];
4-17                       (D)  snuff or other preparations of pulverized
4-18     tobacco; or
4-19                       (E)  an article or product that is made of
4-20     tobacco or a tobacco substitute and that is not a cigarette.
4-21                 (21) [(15)]  "Wholesaler" means a person, including a
4-22     manufacturer's representative, who sells or distributes tobacco
4-23     products in this state for resale but who is not a distributor.
4-24           SECTION 2. Section 155.0211, Tax Code, is amended by amending
4-25     Subsection (b) and adding Subsections (c), (d), and (e) to read as
4-26     follows:
 5-1           (b)  The tax rate for tobacco products other than cigars,
 5-2     moist snuff, dry snuff, chewing tobacco, pipe tobacco, and
 5-3     roll-your-own tobacco is 35.213 percent of the manufacturer's list
 5-4     price, exclusive of any trade discount, special discount, or deal.
 5-5           (c)  The tax rate for each can or package of the following
 5-6     tobacco products is:
 5-7                 (1)  moist snuff, 58 cents per ounce and a
 5-8     proportionate tax rate on all fractional parts of an ounce;
 5-9                 (2)  dry snuff, 33 cents per ounce and a proportionate
5-10     tax rate on all fractional parts of an ounce;
5-11                 (3)  chewing tobacco, 16 cents per ounce and a
5-12     proportionate tax rate on all fractional parts of an ounce;
5-13                 (4)  pipe tobacco, 42 cents per ounce and a
5-14     proportionate tax rate on all fractional parts of an ounce; and
5-15                 (5)  roll-your-own tobacco, 39 cents per ounce and a
5-16     proportionate tax on all fractional parts of an ounce.
5-17           (d)  For purposes of Subsection (c), the tax on moist snuff,
5-18     dry snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco
5-19     shall be computed based on the net weight as listed by the
5-20     manufacturer.  The total tax to be imposed on a multi-unit package
5-21     is the sum of the taxes imposed by Subsection (c) on each
5-22     individual package intended for sale or distribution at retail.
5-23           (e)  An ambiguity regarding the proper classification of a
5-24     tobacco product for purposes of taxation under this section shall
5-25     be resolved by reference to the classification of the tobacco
5-26     product for federal tobacco tax purposes.
 6-1           SECTION 3. Section 155.101, Tax Code, is amended to read as
 6-2     follows:
 6-3           Sec. 155.101.  RECORD OF PURCHASE OR RECEIPT. Each
 6-4     distributor, wholesaler, bonded agent, and export warehouse shall
 6-5     keep records at each place of business of all tobacco products
 6-6     purchased or received.  Each retailer shall keep records at a
 6-7     single location, which the retailer shall designate as its
 6-8     principal place of business in the state, of all tobacco products
 6-9     purchased and received.  These records must include the following,
6-10     except that Subdivision (7) applies to distributors only and
6-11     Subdivisions (8) and (9) apply to the purchase or receipt of moist
6-12     snuff, dry snuff, chewing tobacco, pipe tobacco, and roll-your-own
6-13     tobacco only:
6-14                 (1)  the name and address of the shipper or carrier and
6-15     the mode of transportation;
6-16                 (2)  all shipping records or copies of records,
6-17     including invoices, bills of lading, waybills, freight bills, and
6-18     express receipts;
6-19                 (3)  the date and the name of the place of origin of
6-20     the tobacco product shipment;
6-21                 (4)  the date and the name of the place of arrival of
6-22     the tobacco product shipment;
6-23                 (5)  a statement of the number, kind, and price paid
6-24     for the tobacco products;
6-25                 (6)  the name, address, permit number, and tax
6-26     identification number of the seller;
 7-1                 (7)  the manufacturer's list price for the tobacco
 7-2     products; [and]
 7-3                 (8)  the net weight as listed by the manufacturer for
 7-4     each unit;
 7-5                 (9)  the aggregate net weight of moist snuff, dry
 7-6     snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco,
 7-7     respectively, listed on each invoice; and
 7-8                 (10)  any other information required by rules of the
 7-9     comptroller.
7-10           SECTION 4. Section 155.102, Tax Code, is amended by adding
7-11     Subsection (c) to read as follows:
7-12           (c)  In addition to the information required under Subsection
7-13     (b), the records for each sale, distribution, exchange, or use of
7-14     moist snuff, dry snuff, chewing tobacco, pipe tobacco, and
7-15     roll-your-own tobacco must show:
7-16                 (1)  the net weight as listed by the manufacturer for
7-17     each unit; and
7-18                 (2)  the aggregate net weight of moist snuff, dry
7-19     snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco,
7-20     respectively, listed on each invoice.
7-21           SECTION 5. Section 155.103, Tax Code, is amended by amending
7-22     Subsection (b) and adding Subsection (c) to read as follows:
7-23           (b)  In addition to the information required under Subsection
7-24     (a), the records for each sale of moist snuff, dry snuff, chewing
7-25     tobacco, pipe tobacco, and roll-your-own tobacco must show:
7-26                 (1)  the net weight as listed by the manufacturer for
 8-1     each unit; and
 8-2                 (2)  the aggregate net weight of moist snuff, dry
 8-3     snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco,
 8-4     respectively, listed on each invoice.
 8-5           (c)  A manufacturer who sells tobacco products to a permit
 8-6     holder in this state shall file with the comptroller, on or before
 8-7     the last day of each month, a report showing the information
 8-8     required to be listed by Subsections [in Subsection] (a) and (b),
 8-9     if applicable, for the previous month.
8-10           SECTION 6. Section 155.111, Tax Code, is amended by amending
8-11     Subsection (c) and adding Subsection (d) to read as follows:
8-12           (c)  In addition to the information required under Subsection
8-13     (b), for moist snuff, dry snuff, chewing tobacco, pipe tobacco, and
8-14     roll-your-own tobacco purchased, received, or acquired, the report
8-15     must show:
8-16                 (1)  the net weight as listed by the manufacturer for
8-17     each unit; and
8-18                 (2)  the aggregate net weight of moist snuff, dry
8-19     snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco,
8-20     respectively, listed on each invoice.
8-21           (d)  The comptroller shall prescribe the form and content of
8-22     the report.
8-23           SECTION 7. Section 171.052, Tax Code, is amended to read as
8-24     follows:
8-25           Sec. 171.052.  CERTAIN CORPORATIONS. An [A corporation that
8-26     is an] insurance organization, title insurance company, or title
 9-1     insurance agent authorized to engage in insurance business in this
 9-2     state [company, surety, guaranty, or fidelity company] now required
 9-3     to pay [or who pays] an annual tax under Chapter 4 or 9, Insurance
 9-4     Code, measured by its [their] gross premium receipts is exempted
 9-5     from the franchise tax.  An insurance organization performing
 9-6     management or accounting activities in this state on behalf of a
 9-7     nonadmitted captive insurance company under Chapter 101, Insurance
 9-8     Code, that is required to pay a gross premium receipts tax during a
 9-9     tax year is exempted from the franchise tax for that same tax year.
9-10           SECTION 8. Section 171.110(e), Tax Code, is amended to read
9-11     as follows:
9-12           (e)  For purposes of this section, a business loss is any
9-13     negative amount after apportionment and allocation.  The business
9-14     loss shall be carried forward to the year succeeding the loss year
9-15     as a deduction to net taxable earned surplus, then successively to
9-16     the succeeding four taxable years after the loss year or until the
9-17     loss is exhausted, whichever occurs first, but for not more than
9-18     five taxable years after the loss year.  Notwithstanding the
9-19     preceding sentence, a business loss from a tax year that ends
9-20     before January 1, 1991, may not be used to reduce net taxable
9-21     earned surplus.  A business loss can be carried forward only by the
9-22     corporation that incurred the loss and cannot be transferred to or
9-23     claimed by any other entity, including the survivor of a merger if
9-24     the loss was incurred by the corporation that did not survive the
9-25     merger.
9-26           SECTION 9. Article 4.01, Insurance Code, is amended to read
 10-1    as follows:
 10-2          Art. 4.01.  TAX OTHER THAN PREMIUM TAX. All insurance
 10-3    companies incorporated under the laws of this state shall hereafter
 10-4    be required to render for county and municipal taxation all of
 10-5    their real estate and all furniture, fixtures, automobiles,
 10-6    equipment, and data processing systems, as other such real estate
 10-7    and tangible personal property is rendered in the city and county
 10-8    where such property is located.
 10-9          All other personal property owned by such insurance
10-10    companies, except fire insurance companies and casualty insurance
10-11    companies, shall be valued as other such property is valued for
10-12    assessment by the taxing authority in the following manner:
10-13          From the total valuation of the entire assets of each
10-14    insurance company shall be deducted:
10-15          (a)  All the debts of every kind and character owed by such
10-16    insurance company;
10-17          (b)  All intangible personal property owned by such insurance
10-18    company;
10-19          (c)  All reserves, being the amount of the debts of such
10-20    insurance company by reason of its outstanding policies in gross.
10-21          From the remainder shall be deducted the assessed value of
10-22    all real estate and the assessed value of all furniture, fixtures,
10-23    automobiles, equipment, and data-processing systems, rendered for
10-24    taxation, and the remainder, if any there be, shall be taxable as
10-25    personal property by the city and county where the principal
10-26    business office of any such company is fixed by its charter.
 11-1          All other personal property of fire insurance companies and
 11-2    casualty insurance companies incorporated under the laws of this
 11-3    state shall be valued as other such property is valued for
 11-4    assessment by the taxing authority in the following manner:
 11-5          From the total valuation of the entire assets of each
 11-6    insurance company shall be deducted:
 11-7          (a)  All the debts of every kind and character owed by such
 11-8    insurance company;
 11-9          (b)  All intangible personal property owned by such insurance
11-10    company;
11-11          (c)  All reserves, which reserves shall be computed in such
11-12    manner as may be prescribed by the rules and regulations of the
11-13    State Board of Insurance, for unearned premiums and for all bona
11-14    fide outstanding losses.
11-15          From the remainder shall be deducted the assessed value of
11-16    all real estate and the assessed value of all furniture, fixtures,
11-17    automobiles, equipment, and data-processing systems, rendered for
11-18    taxation, and the remainder, if any there be, shall be taxable as
11-19    personal property by the city and county where the principal
11-20    business office of any company is fixed by its charter.
11-21          [Domestic insurance companies shall not be required to pay
11-22    any occupation or gross receipts tax except as otherwise provided
11-23    by this code.]
11-24          SECTION 10. Article 4.06, Insurance Code, is amended to read
11-25    as follows:
11-26          Art. 4.06.  TAXES IMPOSED EXCLUSIVE. (a) This chapter applies
 12-1    to insurance organizations authorized to do insurance business in
 12-2    this state, other than eligible surplus lines insurers.
 12-3          (b)  An insurance organization subject to a tax levied by
 12-4    this chapter may not be required to pay any additional tax in
 12-5    proportion to its gross premium receipts levied by this state or
 12-6    any county or municipality, except as otherwise provided by this
 12-7    code or the Labor Code.  This exemption may not be construed to
 12-8    limit the applicability of other taxes, fees, and assessments that
 12-9    are imposed by other chapters of this code.  This exemption may not
12-10    be construed to prohibit the levy and collection of state, county,
12-11    and municipal taxes on the real and personal property of insurance
12-12    organizations, or the levy and collection of state, county, and
12-13    municipal taxes that are imposed by other laws of this state,
12-14    unless a specific exemption for insurance organizations is provided
12-15    in those laws.  [No occupation tax other than herein imposed shall
12-16    be levied by the State or any county, city or town, upon any
12-17    insurance organization herein subject to the occupation tax in
12-18    proportion to its gross premium receipts, or its agents.  The
12-19    occupation tax imposed by this chapter shall be the sole occupation
12-20    tax which any company doing business in this State under the
12-21    provisions of this chapter shall be required to pay.]
12-22          SECTION 11. Section 8, Article 9.59, Insurance Code, is
12-23    amended to read as follows:
12-24          Sec. 8.  NO OTHER TAXES TO BE LEVIED OR COLLECTED;
12-25    EXCEPTIONS. (a)  Title insurance companies and title insurance
12-26    agents subject to the tax levied by this article may not be
 13-1    required to pay any additional tax in proportion to their gross
 13-2    premium receipts levied by this state or any county or
 13-3    municipality, except as otherwise provided by this code and the
 13-4    Labor Code.  This exemption may not be construed to limit the
 13-5    applicability of other taxes, fees, and assessments that are
 13-6    imposed by other chapters of this code.  This exemption may not be
 13-7    construed to prohibit the levy and collection of state, county, and
 13-8    municipal taxes on the real and personal property of title
 13-9    insurance companies and title insurance agents, or the levy and
13-10    collection of state, county, and municipal taxes that are imposed
13-11    by other laws of this state, unless a specific exemption for title
13-12    insurance companies and title insurance agents is provided in those
13-13    laws.  [An occupational tax may not be levied on title insurance
13-14    companies or title insurance agents who are subject to this premium
13-15    tax by any county, city, or town.  The taxes in this article
13-16    constitute all taxes collectible under the laws of this state
13-17    against any title insurance company or title insurance agent,
13-18    except maintenance taxes specifically levied under the laws of this
13-19    state and assessed by the State Board of Insurance to support the
13-20    various activities of the divisions of the State Board of
13-21    Insurance.]
13-22          (b)  [No other tax may be levied or collected from any title
13-23    insurance company or title insurance agent by the state or any
13-24    county or city, but this law may not be construed to prohibit the
13-25    levy and collection of state, county, and municipal taxes on the
13-26    real and personal property of the title insurance company or title
 14-1    insurance agent.]  The premium tax is levied on all amounts defined
 14-2    to be premium in this Chapter, whether paid to the title insurance
 14-3    company or retained by the title insurance agent, such tax being in
 14-4    lieu of the tax on the premium retained by the agent.  The State of
 14-5    Texas facilitates the collection of the premium tax on the premium
 14-6    retained by the agent by setting the division of the premium
 14-7    between insurer and agent so that the insurer receives the premium
 14-8    tax due on the agent's portion of the premium and remits it to the
 14-9    State.
14-10          SECTION 12. The following provisions of the Insurance Code
14-11    are repealed:
14-12                (1)  Section 14, Article 4.10; and
14-13                (2)  Section 9, Article 4.11.
14-14          SECTION 13. (a)  Section 171.110(e), Tax Code, as amended by
14-15    Section 8 of this Act, is a clarification of existing law and not a
14-16    substantive change in law.
14-17          (b)  The changes made by this Act to the following provisions
14-18    of the Insurance Code are clarifications of existing law and not
14-19    substantive changes in law.
14-20                (1)  Article 4.01 (Section 9 of this Act);
14-21                (2)  Article 4.06 (Section 10 of this Act);
14-22                (3)  Section 8, Article 9.59, Insurance Code (Section
14-23    11 of this Act);
14-24                (4)  Section 14, Article 4.10 and Section 9, Article
14-25    4.11 (Section 12 of this Act).
14-26          SECTION 14.  (a)  This Act takes effect September 1, 2001.
 15-1          (b)  The change in law made by this Act does not affect taxes
 15-2    imposed before the effective date of this Act, and the law in
 15-3    effect before the effective date of this Act is continued in effect
 15-4    for purposes of the liability for and collection of those taxes.