By: Zerwas H.B. No. 2548
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the imposition of a fee on the sale of cigarettes and
  cigarette tobacco products manufactured by certain companies;
  providing penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 161, Health and Safety Code, is amended
  by adding Subchapter V to read as follows:
  SUBCHAPTER V. FEE ON CIGARETTES AND CIGARETTE TOBACCO PRODUCTS
  MANUFACTURED BY CERTAIN COMPANIES
         Sec. 161.601.  PURPOSE. The purpose of this subchapter is
  to:
               (1)  recover health care costs to the state imposed by
  nonsettling manufacturers;
               (2)  prevent nonsettling manufacturers from
  undermining this state's policy of reducing underage smoking by
  offering cigarettes and cigarette tobacco products at prices that
  are substantially below the prices of cigarettes and cigarette
  tobacco products of other manufacturers;
               (3)  protect the tobacco settlement agreement and
  funding, which has been reduced because of the growth of sales of
  nonsettling manufacturer cigarettes and cigarette tobacco
  products, for programs that are funded wholly or partly by payments
  to this state under the tobacco settlement agreement and recoup for
  this state settlement payment revenue lost because of sales of
  nonsettling manufacturer cigarettes and cigarette tobacco
  products; and
               (4)  provide funding for any purpose the legislature
  determines.
         Sec. 161.602.  DEFINITIONS. In this subchapter:
               (1)  "Brand family" means each style of cigarettes or
  cigarette tobacco products sold under the same trademark. The term
  includes any style of cigarettes or cigarette tobacco products that
  have a brand name, trademark, logo, symbol, motto, selling message,
  recognizable pattern of colors, or other indication of product
  identification that is identical to, similar to, or identifiable
  with a previously known brand of cigarettes or cigarette tobacco
  products.
               (2)  "Cigarette" means any product that contains
  nicotine and is intended to be burned or heated under ordinary
  conditions of use.  The term includes:
                     (A)  a roll of tobacco wrapped in paper or another
  substance that does not contain tobacco;
                     (B)  tobacco, in any form, that is functional in a
  product that, because of the product's appearance, the type of
  tobacco used in the filler, or the product's packaging and
  labeling, is likely to be offered to or purchased by a consumer as a
  cigarette; or
                     (C)  a roll of tobacco wrapped in any substance
  containing tobacco that, because of the product's appearance, the
  type of tobacco used in the filler, or the product's packaging and
  labeling, is likely to be offered to or purchased by a consumer as a
  cigarette.
               (3)  "Cigarette tobacco product" means roll-your-own
  tobacco or tobacco that, because of the tobacco's appearance, type,
  packaging, or labeling, is suitable for use in making cigarettes
  and is likely to be offered to or purchased by a consumer for that
  purpose.
               (4)  "Distributor" has the meaning assigned by Section
  154.001 or 155.001, Tax Code, as appropriate.
               (5)  "Manufacturer" means a person that manufactures,
  fabricates, or assembles cigarettes for sale or distribution. For
  purposes of this subchapter, the term includes a person that is the
  first importer into the United States of cigarettes and cigarette
  tobacco products manufactured, fabricated, or assembled outside
  the United States.
               (6)  "Nonsettling manufacturer" means a manufacturer
  of cigarettes that did not sign the tobacco settlement agreement.
               (7)  "Nonsettling manufacturer cigarettes" means
  cigarettes manufactured, fabricated, assembled, or imported by a
  nonsettling manufacturer.
               (8)  "Nonsettling manufacturer cigarette tobacco
  products" means cigarette tobacco products manufactured,
  fabricated, assembled, or imported by a nonsettling manufacturer.
               (9)  "Tobacco settlement agreement" means the
  Comprehensive Settlement Agreement and Release filed on January 16,
  1998, in the United States District Court, Eastern District of
  Texas, in the case styled The State of Texas v. The American Tobacco
  Co., et al., No. 5-96CV-91, and all subsequent amendments.
         Sec. 161.603.  FEE IMPOSED. (a) A fee is imposed on the
  sale, use, consumption, or distribution in this state of:
               (1)  nonsettling manufacturer cigarettes if a stamp is
  required to be affixed to a package of those cigarettes under
  Chapter 154, Tax Code;
               (2)  nonsettling manufacturer cigarettes that are
  sold, purchased, or distributed in this state but that are not
  required to have a stamp affixed to a package of those cigarettes
  under Chapter 154, Tax Code;
               (3)  nonsettling manufacturer cigarette tobacco
  products that are subject to the tax imposed by Section 155.0211,
  Tax Code; and
               (4)  nonsettling manufacturer cigarette tobacco
  products that are sold, purchased, or distributed in this state but
  that are not subject to the tax imposed by Section 155.0211, Tax
  Code.
         (b)  The fee imposed by this section does not apply to
  cigarettes or cigarette tobacco products that are included in
  computing payments due to be made by a settling manufacturer under
  the tobacco settlement agreement.
         (c)  The fee imposed by this subchapter is in addition to any
  other privilege, license, fee, or tax required or imposed by state
  law.
         (d)  Except as otherwise provided by this subchapter, the fee
  imposed by this subchapter is imposed, collected, paid,
  administered, and enforced in the same manner, taking into account
  that the fee is imposed on nonsettling manufacturers, as the taxes
  imposed by Chapters 154 and 155, Tax Code, as appropriate.
         (e)  The fee imposed by this subchapter does not apply to
  cigarettes and cigarette tobacco products that are sold, purchased
  or otherwise distributed in this state for transportation for
  retail sale outside of this state.  A person may not transport or
  cause to be transported from this state cigarettes or cigarette
  tobacco products for retail sale in another state unless such
  products bear stamps of the state in which they are to be sold that
  have been lawfully affixed in accordance with the laws of such
  state, or if the state in which such products are to be sold does not
  require a stamp, all excise taxes imposed on such products by the
  state in which they are to be sold have been lawfully paid in
  accordance with the laws of such state.  However, a person shall not
  be required to affix a tax stamp of another state or pay the excise
  tax of another state prior to transporting the cigarettes or
  cigarette tobacco products out of this state if the other state
  prohibits that action and such products are being sold to a
  wholesaler licensed by that state.
         Sec. 161.604.  RATE OF FEE.  (a) Except as provided by
  Subsection (b), the fee is imposed at the rate of 2.15 cents for:
               (1)  each nonsettling manufacturer cigarette; and
               (2)  each 0.09 ounce of nonsettling manufacturer
  cigarette tobacco product.
         (b)  On January 1 of each year, the comptroller shall
  increase the rate of the tax prescribed by Subsection (a) by the
  greater of:
               (1)  three percent; or
               (2)  the percentage increase in the most recent annual
  revised Consumer Price Index for All Urban Consumers, as published
  by the Federal Bureau of Labor Statistics of the United States
  Department of Labor.
         Sec. 161.605.  DISTRIBUTOR'S REPORT. (a) A distributor
  required to file a report under Section 154.210 or 155.111, Tax
  Code, shall, in addition to the information required by those
  sections, include in that required report, as appropriate:
               (1)  the number and denominations of stamps affixed to
  individual packages of nonsettling manufacturer cigarettes during
  the preceding month;
               (2)  the amount of nonsettling manufacturer cigarette
  tobacco products subject to the tax imposed by Section 155.0211,
  Tax Code, during the preceding month;
               (3)  the number of individual packages of nonsettling
  manufacturer cigarettes and the amount of nonsettling manufacturer
  cigarette tobacco products not subject to the tax imposed by
  Chapter 154, Tax Code, or Section 155.0211, Tax Code, sold or
  purchased in this state or otherwise distributed in this state for
  sale in the United States; and
               (4)  the number of nonsettling manufacturer cigarettes
  and the amount of nonsettling cigarette tobacco products
  transported or caused to be transported outside of Texas during the
  preceding month, as well as the name and address of the recipient of
  such products outside of Texas; and
               (5)  any other information the comptroller considers
  necessary or appropriate to determine the amount of the fee imposed
  by this subchapter or to enforce this subchapter.
         (b)  The information required by Subsections (a)(1), (2),
  and (3) must be itemized for each place of business and by
  manufacturer and brand family.
         (c)  The requirement to report information under this
  section shall be enforced in the same manner as the requirement to
  deliver to or file with the comptroller a report required under
  Section 154.210 or 155.111, Tax Code, as appropriate.
         (d)  Information obtained from a report provided under
  Subsection (a) regarding cigarettes or cigarette tobacco products
  sold, purchased, or otherwise distributed by a nonsettling
  manufacturer may be disclosed by the comptroller to that
  manufacturer or to the authorized representative of the
  manufacturer.
         Sec. 161.606.  NOTICE AND PAYMENT OF FEE. (a) Each month,
  not later than the 20th day after the date the comptroller receives
  the information required by Section 161.605, the comptroller shall:
               (1)  compute the amount of the fee imposed by this
  subchapter that each nonsettling manufacturer owes for that
  reporting period based on that information and any other
  information available to the comptroller; and
               (2)  mail to each nonsettling manufacturer a notice of
  the amount of fee the manufacturer owes.
         (b)  Not later than the 15th day of the month after the month
  in which the comptroller mails a nonsettling manufacturer a notice
  under Subsection (a), the nonsettling manufacturer shall send to
  the comptroller the amount of the fee due according to the notice.
         Sec. 161.607.  DIRECTORY OF COMPLYING MANUFACTURERS. (a)  
  The comptroller shall develop, maintain, and publish on the
  comptroller's Internet website a directory listing of all
  nonsettling manufacturers that have complied with this subchapter.
         (b)  The comptroller shall provide the list described by
  Subsection (a) to any person on request.
         Sec. 161.608.  PREPAYMENT BEFORE OFFERING NONSETTLING
  MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS FOR SALE OR
  DISTRIBUTION IN THIS STATE. (a) If cigarettes or cigarette tobacco
  products of a nonsettling manufacturer are not offered for sale or
  distribution in this state on September 1, 2011, the nonsettling
  manufacturer may not offer those cigarettes or cigarette tobacco
  products for sale or distribution in this state after that date
  unless the manufacturer first prepays the fee imposed by this
  subchapter for sales of cigarettes and cigarette tobacco products
  that will occur in the first calendar month in which they are sold
  or distributed in this state.
         (b)  The amount a nonsettling manufacturer is required to
  prepay under this section is equal to the greater of:
               (1)  the rate prescribed by Section 161.604 in effect
  on that date multiplied by:
                     (A)  the number of cigarettes the comptroller
  reasonably projects that the nonsettling manufacturer will sell or
  distribute in this state during that calendar month; and
                     (B)  each 0.09 ounce of nonsettling manufacturer
  cigarette tobacco products the comptroller reasonably projects
  that the nonsettling manufacturer will sell or distribute in this
  state during that calendar month; or
               (2)  $50,000.
         (c)  The fee imposed by this section does not apply to
  cigarettes or cigarette tobacco products that are included in
  computing payments due to be made by a settling manufacturer under
  the tobacco settlement agreement.
         (d)  The comptroller may require a nonsettling manufacturer
  to provide any information reasonably necessary to determine the
  prepayment amount.
         (e)  The comptroller shall establish procedures to:
               (1)  reimburse a nonsettling manufacturer if the actual
  sales or distributions in the first calendar month are less than the
  projected sales or distributions; and
               (2)  require additional payments if the actual sales or
  distributions in the first calendar month are greater than the
  projected sales or distributions.
         (f)  A nonsettling manufacturer shall pay the fee imposed by
  this subchapter in the manner provided by Section 161.606 beginning
  in the second calendar month in which the manufacturer offers the
  cigarettes or cigarette tobacco products for sale or distribution
  in this state.
         Sec. 161.609.  REPORT TO ATTORNEY GENERAL BEFORE OFFERING
  NONSETTLING MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS
  FOR SALE OR DISTRIBUTION IN THIS STATE. (a) In addition to
  prepaying the fee required by Section 161.608, a nonsettling
  manufacturer described by Section 161.608(a) shall, before the date
  the cigarettes or cigarette tobacco products are offered for sale
  or distribution in this state, provide to the attorney general on a
  form prescribed by the attorney general:
               (1)  the nonsettling manufacturer's complete name,
  address, and telephone number;
               (2)  the date that the nonsettling manufacturer will
  begin offering cigarettes or cigarette tobacco products for sale or
  distribution in this state;
               (3)  the names of the brand families of the cigarettes
  or cigarette tobacco products that the nonsettling manufacturer
  will offer for sale or distribution in this state;
               (4)  a statement that the nonsettling manufacturer
  intends to comply with this subchapter; and
               (5)  the name, address, telephone number, and signature
  of an officer of the nonsettling manufacturer attesting to all of
  the included information.
         (b)  The attorney general shall make the information
  provided under this section available to the comptroller.
         Sec. 161.610.  PENALTIES FOR NONCOMPLIANCE. (a) Cigarettes
  and cigarette tobacco products of a nonsettling manufacturer that
  has not complied with this subchapter, including full payment of
  the fee imposed by this subchapter, shall be treated as cigarettes
  or tobacco products for which the tax assessed by Chapter 154 or
  155, Tax Code, as appropriate, has not been paid, and the
  manufacturer is subject to all penalties imposed by those chapters
  for violations of those chapters.
         (b)  The comptroller shall provide to a nonsettling
  manufacturer, each distributor authorized to affix stamps under
  Chapter 154, Tax Code, and the attorney general a notice of the
  manufacturer's noncompliance with this subchapter if the
  manufacturer:
               (1)  does not pay in full the fee imposed by this
  subchapter; or
               (2)  is not included on the directory required by
  Section 161.607.
         (c)  If a nonsettling manufacturer does not appear on the
  directory required by Section 161.607, or on receipt of the notice
  of a nonsettling manufacturer's noncompliance, a distributor may
  not:
               (1)  pay the tax imposed by Chapter 154 or 155, Tax
  Code, as appropriate;
               (2)  affix to a package of cigarettes the stamp
  required by Section 154.041, Tax Code; or
               (3)  otherwise purchase, sell, or distribute
  cigarettes manufactured by the nonsettling manufacturer in this
  state.
         (d)  If the comptroller determines that the nonsettling
  manufacturer that is the subject of a notice provided under
  Subsection (b) later complies with this subchapter, the comptroller
  shall provide to the nonsettling manufacturer, each distributor
  authorized to affix stamps under Chapter 154, Tax Code, and the
  attorney general notice that the nonsettling manufacturer is in
  compliance with this subchapter.
         Sec. 161.611.  APPOINTMENT OF AGENT FOR SERVICE OF PROCESS.
  A nonsettling manufacturer shall appoint and engage a resident
  agent for service of process.
         Sec. 161.612.  AUDIT OR INSPECTION. The comptroller or
  attorney general is entitled to conduct reasonable periodic audits
  or inspections of the financial records of a nonsettling
  manufacturer to ensure compliance with this subchapter.
         Sec. 161.613.  ALLOCATION OF CERTAIN REVENUE TO PROPERTY TAX
  RELIEF FUND. The revenue from the fee imposed by this subchapter
  shall be deposited to the credit of the property tax relief fund
  under Section 403.109, Government Code.
         Sec. 161.614.  APPLICATION OF SUBCHAPTER. This subchapter
  applies without regard to Section 154.022, Tax Code, or any other
  law that might be read to create an exemption for interstate sales.
         SECTION 2.  (a) Not later than September 30, 2011, a
  nonsettling manufacturer, as that term is defined by Section
  161.602, Health and Safety Code, as added by this Act, that is
  offering cigarettes or cigarette tobacco products for sale or
  distribution in this state on September 1, 2011, shall provide to
  the attorney general on a form prescribed by the attorney general:
               (1)  the nonsettling manufacturer's complete name,
  address, and telephone number;
               (2)  the date that the nonsettling manufacturer began
  offering cigarettes or cigarette tobacco products for sale or
  distribution in this state;
               (3)  the names of the brand families of the cigarettes
  or cigarette tobacco products that the nonsettling manufacturer
  offers for sale or distribution in this state;
               (4)  a statement that the nonsettling manufacturer
  intends to comply with Subchapter V, Chapter 161, Health and Safety
  Code, as added by this Act; and
               (5)  the name, address, telephone number, and signature
  of an officer of the nonsettling manufacturer attesting to all of
  the included information.
         (b)  The attorney general shall make the information
  provided under Subsection (a) of this section available to the
  comptroller.
         SECTION 3.  This Act takes effect September 1, 2011.