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A BILL TO BE ENTITLED
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AN ACT
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relating to imposing a fee on the sale of cigarettes and cigarette |
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tobacco products manufactured by certain companies; providing |
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penalties. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 161, Health and Safety Code, is amended |
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by adding Subchapter V to read as follows: |
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SUBCHAPTER V. FEE ON CIGARETTES AND CIGARETTE TOBACCO PRODUCTS |
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MANUFACTURED BY CERTAIN COMPANIES |
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Sec. 161.601. PURPOSE. The purpose of this subchapter is |
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to: |
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(1) recover health care costs to the state imposed by |
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non-settling manufacturers; |
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(2) prevent non-settling manufacturers from |
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undermining this state's policy of reducing underage smoking by |
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offering cigarettes and cigarette tobacco products at prices that |
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are substantially below the prices of cigarettes and cigarette |
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tobacco products of other manufacturers; |
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(3) protect the tobacco settlement agreement and |
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funding, which has been reduced because of the growth of sales of |
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non-settling manufacturer cigarettes and cigarette tobacco |
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products, for programs that are funded wholly or partly by payments |
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to this state under the tobacco settlement agreement and recoup for |
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this state settlement payment revenue lost because of sales of |
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non-settling manufacturer cigarettes and cigarette tobacco |
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products; |
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(4) ensure evenhanded treatment of manufacturers and |
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further protect the tobacco settlement agreement and funding by |
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imposing a partial payment obligation on non-settling |
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manufacturers that already make payments on Texas sales under the |
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master settlement agreement until a credit amendment to that |
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agreement that will provide those manufacturers with a credit for |
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payments to Texas is effective; and |
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(5) provide funding for any purpose the legislature |
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determines. |
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Sec. 161.602. DEFINITIONS. In this subchapter: |
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(1) "Brand family" means each style of cigarettes or |
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cigarette tobacco products sold under the same trademark. The term |
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includes any style of cigarettes or cigarette tobacco products that |
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have a brand name, trademark, logo, symbol, motto, selling message, |
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recognizable pattern of colors, or other indication of product |
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identification that is identical to, similar to, or identifiable |
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with a previously known brand of cigarettes or cigarette tobacco |
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products. |
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(2) "Cigarette" means any product that contains |
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nicotine and is intended to be burned or heated under ordinary |
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conditions of use, and consists of or contains: |
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(A) a roll of tobacco wrapped in paper or another |
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substance that does not contain tobacco; |
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(B) tobacco, in any form, that is functional in a |
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product that, because of the product's appearance, the type of |
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tobacco used in the filler, or the product's packaging and |
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labeling, is likely to be offered to or purchased by a consumer as a |
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cigarette; or |
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(C) a roll of tobacco wrapped in any substance |
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containing tobacco that, because of the product's appearance, the |
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type of tobacco used in the filler, or the product's packaging and |
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labeling, is likely to be offered to or purchased by a consumer as a |
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cigarette. |
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(3) "Cigarette tobacco product" means roll-your-own |
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tobacco or tobacco that, because of the tobacco's appearance, type, |
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packaging, or labeling, is suitable for use in making cigarettes |
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and is likely to be offered to or purchased by a consumer for that |
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purpose. |
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(4) "Credit amendment" means an amendment to the |
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master settlement agreement that offers a credit to subsequent |
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participating manufacturers for fees paid under this subchapter |
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with respect to their products in a form agreed on by settling |
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states, as defined in the master settlement agreement, with |
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aggregate allocable shares, as defined in the master settlement |
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agreement, equal to at least 99.937049 percent; by the original |
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participating manufacturers, as defined in the master settlement |
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agreement; and by subsequent participating manufacturers whose |
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aggregate market share, expressed as a percentage of the total |
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number of individual cigarettes sold in the United States, the |
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District of Columbia, and Puerto Rico during the calendar year at |
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issue, as measured by excise taxes collected by the federal |
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government, and in the case of cigarettes sold in Puerto Rico, by |
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arbitrios de cigarillos collected by the Puerto Rico taxing |
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authority, is greater than 2.5 percent. For purposes of the |
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calculation of subsequent participating manufacturer market share |
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under this subchapter, 0.09 ounces of roll-your-own tobacco |
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constitutes one individual cigarette. |
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(5) "Distributor" has the meaning assigned by Section |
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154.001 or 155.001, Tax Code, as appropriate. |
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(6) "Manufacturer" means a person that manufactures, |
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fabricates, or assembles cigarettes or cigarette tobacco products, |
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or causes or arranges for the manufacture, fabrication, or assembly |
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of cigarettes or cigarette tobacco products for sale or |
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distribution. For purposes of this subchapter, the term includes a |
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person that is the first importer into the United States of |
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cigarettes or cigarette tobacco products manufactured, fabricated, |
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or assembled outside the United States. |
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(7) "Master settlement agreement" means the |
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settlement agreement entered into on November 23, 1998, by 46 |
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states and leading United States tobacco manufacturers, as amended |
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as of September 1, 2013. |
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(8) "Non-settling manufacturer" means a manufacturer |
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of cigarettes or cigarette tobacco products that did not sign a |
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tobacco settlement agreement described by Subdivision (13). |
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(9) "Non-settling manufacturer cigarettes" means |
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cigarettes of a non-settling manufacturer. |
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(10) "Non-settling manufacturer cigarette tobacco |
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products" means cigarette tobacco products of a non-settling |
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manufacturer. |
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(11) "Settling manufacturer" means a manufacturer of |
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cigarettes or cigarette tobacco products that signed a tobacco |
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settlement agreement described by Subdivision (13). |
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(12) "Subsequent participating manufacturer" has the |
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same meaning provided for that term in the master settlement |
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agreement, except that the term excludes any settling manufacturer |
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under the tobacco settlement agreement described by Subdivision |
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(13)(B). A manufacturer may not be treated as a subsequent |
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participating manufacturer for purposes of Section 161.604(c) |
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unless it has provided to the comptroller notice and proof, in the |
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form and manner the comptroller may prescribe, that it is a |
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subsequent participating manufacturer. |
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(13) "Tobacco settlement agreement" means either: |
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(A) the Comprehensive Settlement Agreement and |
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Release filed on January 16, 1998, in the United States District |
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Court, Eastern District of Texas, in the case styled The State of |
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Texas v. The American Tobacco Co., et al., No. 5-96CV-91, and all |
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subsequent amendments; or |
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(B) the settlement agreement entered into on |
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March 20, 1997, but only as to companies that signed that agreement |
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on that date. |
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Sec. 161.603. FEE IMPOSED. (a) A fee is imposed on the |
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sale, use, consumption, or distribution in this state of: |
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(1) non-settling manufacturer cigarettes if a stamp is |
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required to be affixed to a package of those cigarettes under |
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Section 154.041, Tax Code; |
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(2) non-settling manufacturer cigarettes that are |
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sold, purchased, or distributed in this state but that are not |
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required to have a stamp affixed to a package of those cigarettes |
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under Chapter 154, Tax Code; |
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(3) non-settling manufacturer cigarette tobacco |
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products that are subject to the tax imposed by Section 155.0211, |
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Tax Code; and |
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(4) non-settling manufacturer cigarette tobacco |
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products that are sold, purchased, or distributed in this state but |
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that are not subject to the tax imposed by Section 155.0211, Tax |
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Code. |
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(b) The fee imposed by this section does not apply to |
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cigarettes or cigarette tobacco products that a settling |
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manufacturer claims as its own, and that are included in computing |
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payments to be made by that settling manufacturer, under the |
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tobacco settlement agreement described by Section 161.602(13)(A). |
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(c) The fee imposed by this subchapter does not apply to |
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cigarettes or cigarette tobacco products that are sold into another |
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state for resale to consumers outside of this state, provided that |
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the sale is reported to the state into which the cigarettes are sold |
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under 15 U.S.C. Section 376. |
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(d) The fee imposed by this subchapter is in addition to any |
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other privilege, license, fee, or tax required or imposed by state |
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law. |
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(e) Except as otherwise provided by this subchapter, the fee |
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imposed by this subchapter is imposed, collected, paid, |
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administered, and enforced in the same manner as the taxes imposed |
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by Chapter 154 or 155, Tax Code, as appropriate, taking into account |
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that the fee is imposed on non-settling manufacturers. |
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(f) The fee imposed by this subchapter shall be collected |
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only once on each cigarette or cigarette tobacco product on which it |
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is due. |
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Sec. 161.604. RATE OF FEE. (a) For cigarettes or cigarette |
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tobacco products sold, used, consumed, or distributed in this |
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state, as provided by Section 161.603, during the 2013 calendar |
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year, the fee is imposed at the rate of 2.75 cents for: |
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(1) each non-settling manufacturer cigarette; and |
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(2) each 0.09 ounces of non-settling manufacturer |
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cigarette tobacco product. |
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(b) Beginning in January 2014, and in January of each |
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subsequent year, the comptroller shall compute the rate of the tax |
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applicable during that calendar year by increasing the rate for the |
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preceding calendar year, as recalculated under Section 161.607 for |
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that year, by the greater of: |
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(1) three percent; or |
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(2) the actual total percentage change in the Consumer |
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|
Price Index for All Urban Consumers (CPI), as published by the |
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|
Bureau of Labor Statistics of the United States Department of |
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|
Labor, during the preceding calendar year, calculated by comparing |
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|
the CPI for December of the preceding calendar year with the CPI for |
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December a year earlier. |
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(c) Notwithstanding Subsection (a), the rate of the fee on |
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the cigarettes and cigarette tobacco products of a subsequent |
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participating manufacturer shall, for calendar months beginning |
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before the effective date of a credit amendment, be calculated by |
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substituting 0.75 cents for 2.75 cents in Subsection (a). For |
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calendar months beginning on or after the effective date of a credit |
|
|
amendment, the rate of the fee on the cigarettes and cigarette |
|
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tobacco products of subsequent participating manufacturers shall |
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be the same as the rate that applies for those months to the |
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cigarettes of non-settling manufacturers who are not subsequent |
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participating manufacturers. |
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Sec. 161.605. DISTRIBUTOR'S REPORT. (a) A distributor |
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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: |
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(1) the number and denominations of stamps affixed to |
|
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individual packages of non-settling manufacturer cigarettes during |
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the preceding month; |
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(2) the amount of non-settling manufacturer cigarette |
|
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tobacco products subject to the tax imposed by Section 155.0211, |
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|
Tax Code, during the preceding month; |
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(3) the number of individual packages of non-settling |
|
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manufacturer cigarettes and the amount of non-settling |
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manufacturer cigarette tobacco products not subject to the tax |
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imposed by Chapter 154, Tax Code, or Section 155.0211, Tax Code, |
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sold or purchased in this state or otherwise distributed in this |
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state for sale in the United States; and |
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(4) any other information the comptroller considers |
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|
necessary or appropriate to determine the amount of the fee imposed |
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by this subchapter or to enforce this subchapter. |
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(b) The information required by Subsections (a)(1), (2), |
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|
and (3) must be itemized for each place of business and by |
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manufacturer and brand family. |
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(c) The requirement to report information under this |
|
|
section shall be enforced in the same manner as the requirement to |
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|
deliver to or file with the comptroller a report required under |
|
|
Section 154.210 or 155.111, Tax Code, as appropriate. |
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(d) Information obtained from a report provided under |
|
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Subsection (a) regarding cigarettes or cigarette tobacco products |
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sold, purchased, or otherwise distributed by a non-settling |
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manufacturer may be disclosed by the comptroller to the |
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manufacturer or to the authorized representative of the |
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manufacturer. |
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Sec. 161.606. NOTICE AND PAYMENT OF FEE. (a) Each month, |
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|
not later than the 20th day after the date the comptroller receives |
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|
the information required by Section 161.605, the comptroller shall: |
|
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(1) compute the amount of the fee imposed by this |
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subchapter that each non-settling manufacturer owes for that |
|
|
reporting period based on that information and any other |
|
|
information available to the comptroller; and |
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(2) mail to each non-settling manufacturer a notice of |
|
|
the fee the manufacturer owes. |
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|
(b) Not later than the 15th day of the month after the month |
|
|
in which the comptroller mails a non-settling manufacturer a notice |
|
|
under Subsection (a), the non-settling manufacturer shall send to |
|
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the comptroller the amount of the fee due according to the notice. |
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Sec. 161.607. ADDITIONAL FEE. (a) In preparing the final |
|
|
notice under Section 161.606 for the 2014 calendar year and for each |
|
|
subsequent calendar year, the comptroller shall recalculate the fee |
|
|
rate for the calendar year to which that notice applies, using the |
|
|
methodology specified in Section 161.604, except that: |
|
|
(1) the rate of tax for the year to which the increases |
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|
are applied shall be the greater of the rate for the preceding year |
|
|
calculated under this section and the rate for that year originally |
|
|
calculated under Section 161.604; and |
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|
(2) Section 161.604(b)(2) shall be applied using the |
|
|
actual total percent change in the Consumer Price Index for All |
|
|
Urban Consumers (CPI), as published by the Bureau of Labor |
|
|
Statistics of the United States Department of Labor, for the |
|
|
calendar year to which that final notice relates, calculated by |
|
|
comparing the CPI for December of the calendar year to which the |
|
|
notice relates with the CPI for December of the year preceding the |
|
|
year to which the notice relates. |
|
|
(b) If the rate as recalculated under Subsection (a) exceeds |
|
|
the rate originally calculated for the calendar year under Section |
|
|
161.604, the amount shown as payable by each non-settling |
|
|
manufacturer in the final notice shall be equal to the amount of |
|
|
non-settling manufacturer cigarettes and non-settling manufacturer |
|
|
cigarette tobacco products of that manufacturer sold, used, |
|
|
consumed, or distributed in this state during the full year to which |
|
|
the notice relates multiplied by the recalculated fee rate computed |
|
|
under Subsection (a), reduced by the amount of fees paid by that |
|
|
manufacturer under the notices previously issued for that year |
|
|
under Section 161.606. |
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Sec. 161.608. DIRECTORY OF COMPLYING MANUFACTURERS. (a) |
|
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The comptroller shall develop, maintain, and publish on the |
|
|
comptroller's Internet website a directory listing of all |
|
|
manufacturers that have complied with this subchapter and their |
|
|
brands. |
|
|
(b) The comptroller shall provide the list described by |
|
|
Subsection (a) to any person on request. |
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Sec. 161.609. PREPAYMENT BEFORE OFFERING NON-SETTLING |
|
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MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS FOR SALE OR |
|
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DISTRIBUTION IN THIS STATE. (a) If cigarettes or cigarette tobacco |
|
|
products of a non-settling manufacturer were not offered for sale |
|
|
or distribution in this state on September 1, 2012, the |
|
|
non-settling 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 non-settling 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 on which the fee |
|
|
would be due that the comptroller reasonably projects that the |
|
|
non-settling manufacturer will sell or distribute in this state |
|
|
during that calendar month; and |
|
|
(B) each 0.09 ounces of non-settling |
|
|
manufacturer cigarette tobacco products on which the fee would be |
|
|
due that the comptroller reasonably projects that the non-settling |
|
|
manufacturer will sell or distribute in this state during that |
|
|
calendar month; or |
|
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(2) $50,000. |
|
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(c) The comptroller may require a non-settling manufacturer |
|
|
to provide any information reasonably necessary to determine the |
|
|
prepayment amount. |
|
|
(d) The comptroller shall establish procedures to: |
|
|
(1) reimburse a non-settling 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. |
|
|
(e) Beginning in the month following the month for which a |
|
|
non-settling manufacturer prepays its fees, the non-settling |
|
|
manufacturer shall thereafter pay the fee imposed by this |
|
|
subchapter in the manner provided by Section 161.606. |
|
|
Sec. 161.610. REPORT TO ATTORNEY GENERAL BEFORE OFFERING |
|
|
NON-SETTLING MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS |
|
|
FOR SALE OR DISTRIBUTION IN THIS STATE. (a) In addition to |
|
|
prepaying the fee required by Section 161.609, a non-settling |
|
|
manufacturer described by Section 161.609(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 non-settling manufacturer's complete name, |
|
|
address, and telephone number; |
|
|
(2) the date that the non-settling 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 non-settling manufacturer |
|
|
will offer for sale or distribution in this state; |
|
|
(4) a statement that the non-settling manufacturer |
|
|
intends to comply with this subchapter; and |
|
|
(5) the name, address, telephone number, and signature |
|
|
of an officer of the non-settling 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. 161.611. PENALTIES FOR NONCOMPLIANCE. (a) Cigarettes |
|
|
and cigarette tobacco products of a non-settling manufacturer that |
|
|
has not complied with this subchapter, including full payment of |
|
|
the fee imposed by this subchapter, shall be treated as cigarettes |
|
|
or cigarette tobacco products for which the tax assessed by Chapter |
|
|
154 or 155, Tax Code, as appropriate, has not been paid, and the |
|
|
non-settling manufacturer is subject to all penalties imposed by |
|
|
those chapters for violations of those chapters. |
|
|
(b) The comptroller shall provide to a non-settling |
|
|
manufacturer, each distributor authorized to affix stamps under |
|
|
Chapter 154, Tax Code, and the attorney general a notice of the |
|
|
non-settling manufacturer's noncompliance with this subchapter if |
|
|
the non-settling manufacturer: |
|
|
(1) does not pay in full the fee imposed by this |
|
|
subchapter; or |
|
|
(2) is not included on the directory required by |
|
|
Section 161.608. |
|
|
(c) If a non-settling manufacturer does not appear on the |
|
|
directory required by Section 161.608, or on receipt of the notice |
|
|
of a non-settling 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 or cigarette tobacco products manufactured by the |
|
|
non-settling manufacturer in this state. |
|
|
(d) If the comptroller determines that the non-settling |
|
|
manufacturer that is the subject of a notice provided under |
|
|
Subsection (b) later complies with this subchapter, the comptroller |
|
|
shall provide to the non-settling manufacturer, each distributor |
|
|
authorized to affix stamps under Chapter 154, Tax Code, and the |
|
|
attorney general notice that the non-settling manufacturer is in |
|
|
compliance with this subchapter. |
|
|
Sec. 161.612. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. |
|
|
A non-settling manufacturer shall appoint and engage a resident |
|
|
agent for service of process. |
|
|
Sec. 161.613. AUDIT OR INSPECTION. The comptroller or |
|
|
attorney general is entitled to conduct reasonable periodic audits |
|
|
or inspections of the financial records of a non-settling |
|
|
manufacturer and its distributors to ensure compliance with this |
|
|
subchapter. |
|
|
Sec. 161.614. COMPTROLLER INFORMATION SHARING. On request, |
|
|
the comptroller shall report annually to the independent auditor or |
|
|
other entities responsible for making calculations or other |
|
|
determinations under a tobacco settlement agreement or the master |
|
|
settlement agreement, as the master settlement agreement may be |
|
|
amended or supplemented by some or all of the parties thereto, the |
|
|
volume of cigarettes on which the fee required under Section |
|
|
161.603 is paid, itemized by cigarette manufacturer and brand |
|
|
family. |
|
|
Sec. 161.615. REVENUE DEPOSITED IN GENERAL REVENUE FUND. |
|
|
The revenue from the tax imposed by this subchapter shall be |
|
|
deposited in the state treasury to the credit of the general revenue |
|
|
fund. |
|
|
Sec. 161.616. 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. |
|
|
Sec. 161.617. RULES. The comptroller and attorney general |
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may issue rules and regulations as necessary to carry out or enforce |
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this subchapter. |
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SECTION 2. (a) Not later than September 30, 2013, a |
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non-settling manufacturer, as that term is defined by Section |
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161.602, Health and Safety Code, as added by this Act, that is |
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offering cigarettes or cigarette tobacco products for sale or |
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distribution in this state on September 1, 2013, shall provide to |
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the attorney general on a form prescribed by the attorney general: |
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(1) the non-settling manufacturer's complete name, |
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address, and telephone number; |
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(2) the date that the non-settling manufacturer began |
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offering cigarettes or cigarette tobacco products for sale or |
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distribution in this state; |
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(3) the names of the brand families of the cigarettes |
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or cigarette tobacco products that the non-settling manufacturer |
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offers for sale or distribution in this state; |
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(4) a statement that the non-settling manufacturer |
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intends to comply with Subchapter V, Chapter 161, Health and Safety |
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Code, as added by this Act; and |
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(5) the name, address, telephone number, and signature |
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of an officer of the non-settling manufacturer attesting to all of |
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the included information. |
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(b) The attorney general shall make the information |
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provided under Subsection (a) of this section available to the |
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comptroller. |
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SECTION 3. This Act takes effect September 1, 2013. |