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A BILL TO BE ENTITLED
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AN ACT
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relating to the regulation of, and taxes imposed on the sale or use |
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of, cigarettes, tobacco products, and e-cigarettes; imposing |
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taxes; requiring a permit; imposing a fee; providing administrative |
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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. Sections 161.081(1-a), (2), and (4), Health and |
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Safety Code, are amended to read as follows: |
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(1-a) "E-cigarette" means an electronic cigarette or |
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any other device that simulates smoking by using a mechanical |
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heating element, battery, or electronic circuit to deliver nicotine |
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or other substances to the individual inhaling from the device or a |
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consumable liquid solution or other material aerosolized or |
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vaporized during the use of an electronic cigarette or other device |
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described by this subdivision, regardless of whether the liquid or |
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other material contains nicotine. The term does not include a |
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prescription medical device unrelated to the cessation of smoking. |
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The term includes: |
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(A) a device described by this subdivision |
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regardless of whether the device is manufactured, distributed, or |
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sold as an e-cigarette, e-cigar, or e-pipe or under another product |
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name or description; and |
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(B) a component, part, or accessory for the |
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device, regardless of whether the component, part, or accessory is |
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sold separately from the device. |
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(2) "Permit holder" has the meaning assigned by |
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Section 154.001, [or] 155.001, or 164.0001, Tax Code, as |
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applicable. |
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(4) "Retailer" means a person who engages in the |
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practice of selling cigarettes, e-cigarettes, or tobacco products |
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to consumers and includes the owner of a coin-operated cigarette, |
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e-cigarette, or tobacco product vending machine. The term includes |
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a retailer as that term is defined by Section 154.001, [or] 155.001, |
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or 164.0001, Tax Code, as applicable. |
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SECTION 2. Section 161.083(d), Health and Safety Code, is |
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amended to read as follows: |
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(d) Notwithstanding any other provision of law, a violation |
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of this section is not a violation of this subchapter for purposes |
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of Section 161.0901 [154.1142 or 155.0592, Tax Code]. |
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SECTION 3. Subchapter H, Chapter 161, Health and Safety |
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Code, is amended by adding Section 161.0901 to read as follows: |
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Sec. 161.0901. DISCIPLINARY ACTION AGAINST CIGARETTE, |
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E-CIGARETTE, AND TOBACCO PRODUCTS RETAILERS. (a) A retailer is |
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subject to disciplinary action as provided by this section if an |
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agent or employee of the retailer commits an offense under this |
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subchapter or Subchapter K. |
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(b) If the comptroller finds, after notice and an |
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opportunity for a hearing as provided by Chapter 2001, Government |
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Code, that a permit holder has violated this subchapter or |
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Subchapter K at a place of business for which a permit is issued, |
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the comptroller may suspend the permit for that place of business |
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and administratively assess a fine as follows: |
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(1) if the permit holder has not been found to have |
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violated this subchapter or Subchapter K at that place of business |
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during the 24-month period preceding the violation, the comptroller |
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may require the permit holder to pay a fine in an amount not to |
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exceed $1,000; |
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(2) if the permit holder has been found to have |
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violated this subchapter or Subchapter K at that place of business |
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once during the 24-month period preceding the violation, the |
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comptroller may require the permit holder to pay a fine in an amount |
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not to exceed $2,000; and |
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(3) if the permit holder has been found to have |
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violated this subchapter or Subchapter K at that place of business |
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at least twice during the 24-month period preceding the violation, |
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the comptroller may: |
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(A) require the permit holder to pay a fine in an |
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amount not to exceed $3,000; and |
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(B) suspend the permit for that place of business |
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for not more than five days. |
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(c) Except as provided by Subsection (e), if the permit |
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holder has been found to have violated this subchapter or |
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Subchapter K on four or more previous and separate occasions at the |
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same place of business during the 24-month period preceding the |
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violation, the comptroller shall revoke the permit issued under |
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Chapter 154, 155, or 164, Tax Code, as applicable. If the permit |
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holder does not hold a permit under Chapter 154, 155, or 164, Tax |
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Code, the comptroller shall revoke the permit issued under Section |
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151.201, Tax Code. |
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(d) A permit holder whose permit has been revoked under this |
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section may not apply for a permit for the same place of business |
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before the expiration of six months after the effective date of the |
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revocation. |
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(e) For purposes of this section, the comptroller may |
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suspend a permit but may not revoke the permit under Subsection (c) |
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if the comptroller finds that: |
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(1) the employer has not violated this subchapter or |
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Subchapter K more than seven times at the place of business for |
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which the permit is issued in the 48-month period preceding the |
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violation in question; |
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(2) the employer requires its employees to attend a |
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comptroller-approved seller training program; |
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(3) the employees have actually attended a |
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comptroller-approved seller training program; and |
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(4) the employer has not directly or indirectly |
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encouraged the employees to violate the law. |
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(f) The comptroller may adopt rules to implement this |
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section. |
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SECTION 4. Section 111.00455(b), Tax Code, is amended to |
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read as follows: |
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(b) The following are not contested cases under Subsection |
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(a) and Section 2003.101, Government Code: |
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(1) a show cause hearing or any hearing not related to |
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the collection, receipt, administration, or enforcement of the |
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amount of a tax or fee imposed, or the penalty or interest |
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associated with that amount, except for a hearing under Section |
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151.157(f), 151.1575(c), or 151.712(g) of this code or Section |
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161.0901, Health and Safety Code [, 154.1142, or 155.0592]; |
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(2) a property value study hearing under Subchapter M, |
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Chapter 403, Government Code; |
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(3) a hearing in which the issue relates to: |
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(A) Chapters 72-75, Property Code; |
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(B) forfeiture of a right to do business; |
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(C) a certificate of authority; |
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(D) articles of incorporation; |
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(E) a penalty imposed under Section 151.703(d); |
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(F) the refusal or failure to settle under |
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Section 111.101; or |
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(G) a request for or revocation of an exemption |
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from taxation; and |
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(4) any other hearing not related to the collection, |
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receipt, administration, or enforcement of the amount of a tax or |
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fee imposed, or the penalty or interest associated with that |
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amount. |
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SECTION 5. Section 154.1135(b), Tax Code, is amended to |
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read as follows: |
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(b) The payment must be made in cash or by money order, [or] |
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check, or credit card. |
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SECTION 6. Section 154.121(b), Tax Code, is amended to read |
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as follows: |
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(b) Revenue from the sale of retailer's permits shall be |
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deposited to the general revenue fund and may be appropriated only |
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as provided by this section. The money may be appropriated first to |
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the comptroller for administering: |
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(1) permitting [administration of licensing] of |
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retailers under this chapter and Chapters [or Chapter] 155 and 164; |
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and |
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(2) disciplinary actions taken under Section |
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161.0901, Health and Safety Code. |
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SECTION 7. Section 155.050(b), Tax Code, is amended to read |
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as follows: |
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(b) The payment must be made in cash or by money order, [or] |
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check, or credit card. |
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SECTION 8. Section 155.058(b), Tax Code, is amended to read |
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as follows: |
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(b) Revenue from the sale of retailer's permits shall be |
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deposited to the general revenue fund and may be appropriated only |
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as provided by this section. The money may be appropriated first to |
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the comptroller for administering: |
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(1) permitting [administration of licensing] of |
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retailers under this chapter and Chapters [or Chapter] 154 and 164; |
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and |
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(2) disciplinary actions taken under Section |
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161.0901, Health and Safety Code. |
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SECTION 9. 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. TAX ON E-CIGARETTES |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 164.0001. DEFINITIONS. In this chapter: |
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(1) "E-cigarette" has the meaning assigned by Section |
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161.081, Health and Safety Code. |
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(2) "Marketplace" has the meaning assigned by Section |
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151.0242. |
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(3) "Permit holder" means a person who obtains a |
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permit under Section 164.0102. |
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(4) "Retailer" means a person who engages in the |
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business of selling e-cigarettes to consumers, including a person |
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who sells e-cigarettes to consumers through a marketplace. |
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Sec. 164.0002. INAPPLICABILITY TO CERTAIN PRODUCTS. This |
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chapter does not apply to a product described by Section 161.0815, |
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Health and Safety Code. |
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Sec. 164.0003. RULES. The comptroller may adopt rules to |
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implement this chapter, including rules exempting a person who |
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sells e-cigarettes to consumers through a marketplace from the |
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requirements of this chapter. |
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SUBCHAPTER B. IMPOSITION AND ADMINISTRATION OF E-CIGARETTE SALES |
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AND USE TAXES |
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Sec. 164.0051. E-CIGARETTE SALES TAX. (a) A tax is imposed |
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on each sale of an e-cigarette in this state, including a sale made |
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through a marketplace, except that the tax does not apply to a sale |
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unless the tax imposed under Subchapter C, Chapter 151, applies to |
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the sale. |
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(b) The tax under this section is imposed at the rate |
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determined under Section 164.0053. |
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(c) The tax imposed under this section is in addition to the |
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tax imposed under Subchapter C, Chapter 151. |
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Sec. 164.0052. E-CIGARETTE USE TAX. (a) A tax is imposed |
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on the storage, use, or other consumption in this state of an |
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e-cigarette purchased from a retailer for storage, use, or other |
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consumption in this state, except that the tax does not apply to the |
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storage, use, or other consumption unless the tax imposed under |
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Subchapter D, Chapter 151, applies to the storage, use, or other |
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consumption. |
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(b) The tax under this section is imposed at the rate |
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determined under Section 164.0053. |
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(c) The tax imposed under this section is in addition to the |
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tax imposed under Subchapter D, Chapter 151. |
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Sec. 164.0053. TAX RATE. (a) In this section: |
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(1) "Cigarette" means a roll for smoking described by |
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Section 154.001(2) weighing three pounds or less per thousand. |
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(2) "Federal excise tax rate on cigarettes" means the |
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tax rate imposed on cigarettes under 26 U.S.C Section 5701(b)(1). |
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(3) "First sale" has the meaning assigned by Section |
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154.001. |
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(4) "State excise tax rate on cigarettes" means the |
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tax rate imposed on cigarettes under Section 154.021(b)(1). |
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(b) The rate of the taxes imposed under this chapter in a |
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calendar year is the rate the comptroller computes and publishes in |
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the Texas Register not later than December 1 of the preceding |
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calendar year as required by Subsection (c). |
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(c) As soon as practicable after the end of each state |
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fiscal year but not later than December 1 of each year, the |
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comptroller shall: |
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(1) determine the tax rate to be imposed under this |
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chapter in the subsequent calendar year that is proportionate to |
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the state excise tax rate imposed on cigarettes in this state during |
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the preceding state fiscal year by: |
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(A) determining the estimated mean price of 1,000 |
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cigarettes on first sale in this state during the preceding state |
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fiscal year, including the amount of the federal excise tax imposed |
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on cigarettes and excluding the amount of the state excise tax |
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imposed on cigarettes, using available data and generally accepted |
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statistical methods in making that determination as necessary; |
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(B) dividing the state excise tax rate on |
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cigarettes by the estimated mean price of 1,000 cigarettes on first |
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sale in this state as determined under Paragraph (A); and |
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(C) converting the amount computed under |
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Paragraph (B) into a percentage and rounding that percentage down |
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to the nearest quarter percentage point; and |
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(2) publish the tax rate determined under Subdivision |
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(1) in the Texas Register. |
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Sec. 164.0054. APPLICATION OF OTHER PROVISIONS OF CODE. |
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(a) Except as provided by this chapter: |
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(1) the taxes imposed under this chapter are |
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administered, imposed, collected, and enforced in the same manner |
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as the taxes under Chapter 151 are administered, imposed, |
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collected, and enforced; and |
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(2) the provisions of Chapter 151 applicable to the |
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sales tax imposed under Subchapter C, Chapter 151, and the use tax |
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imposed under Subchapter D, Chapter 151, apply to the sales and use |
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taxes imposed under this chapter. |
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(b) A change in law relating to the taxation of the sale or |
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use of an e-cigarette under Chapter 151 also applies to the sales or |
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use tax imposed under this chapter. |
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Sec. 164.0055. REPORTS. (a) A person required to file a |
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report under Section 151.403 who is also required to collect or pay |
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a tax under this chapter shall file with the comptroller a report |
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stating: |
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(1) for e-cigarette sales tax purposes, the amount of |
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total receipts from e-cigarettes sold by the retailer during the |
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reporting period, if the person is a retailer; |
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(2) for e-cigarette use tax purposes, the amount of |
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total receipts from e-cigarettes sold by the retailer during the |
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reporting period for storage, use, or other consumption in this |
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state, if the person is a retailer described by Section 151.403(b); |
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(3) the amount of the total sales prices of |
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e-cigarettes subject to the e-cigarette use tax that were acquired |
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during the reporting period for storage, use, or other consumption |
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in this state, if the person is a purchaser who did not pay the tax |
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to a retailer; |
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(4) the amount of the taxes due under this chapter for |
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the reporting period; and |
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(5) any other information the comptroller requires. |
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(b) The report required by this section for a reporting |
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period is due on the same date the tax payment for the period is due. |
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Sec. 164.0056. RECORDS. (a) A person required to file a |
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report under Section 151.403 who is also required to collect or pay |
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a tax under this chapter shall keep a complete record of: |
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(1) all gross receipts from each sale to which this |
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chapter applies occurring during each reporting period, along with |
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documentation relating to those receipts; |
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(2) all purchases of e-cigarettes, including the |
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constituent parts of e-cigarettes, from every source during each |
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reporting period, along with documentation relating to those |
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purchases; |
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(3) all sales and use taxes, and any money represented |
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to be sales or use tax, collected under this chapter during each |
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reporting period; and |
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(4) any other information the comptroller requires. |
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(b) A person shall keep the records required by Subsection |
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(a) for the period required by Section 151.025(b). |
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SUBCHAPTER C. E-CIGARETTE RETAILER PERMITS |
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Sec. 164.0101. PERMITS REQUIRED. (a) A person may not |
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engage in business as a retailer in this state unless the person has |
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been issued a permit from the comptroller. A person shall obtain a |
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permit for each place of business the person owns or operates at |
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which sales of e-cigarettes are made. |
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(b) The comptroller shall prescribe the form and content of |
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an application for a permit and provide the form on request. |
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(c) The applicant shall accurately complete all information |
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required by the application and provide the comptroller with |
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additional information the comptroller considers necessary. |
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(d) The comptroller may require each corporation, |
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association, joint venture, syndicate, partnership, or |
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proprietorship to provide: |
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(1) financial information regarding the applicant; |
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and |
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(2) the identity of each officer, director, |
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stockholder owning 10 percent or more of the outstanding stock, |
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partner, member, owner, or managing employee. |
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(e) Each applicant that applies for a permit to sell |
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e-cigarettes from a vehicle must provide the make, model, vehicle |
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identification number, registration number, and any other |
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information concerning the vehicle the comptroller requires. |
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(f) All financial information provided under this section |
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is confidential and not subject to Chapter 552, Government Code. |
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(g) Permits for engaging in business as an e-cigarette |
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retailer are governed exclusively by the provisions of this code. |
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Sec. 164.0102. ISSUANCE OF PERMIT. (a) The comptroller |
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shall issue a permit to an applicant if the comptroller: |
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(1) has received an application and fee, if required; |
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(2) does not reject the application and deny the |
|
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permit under Section 164.0103; and |
|
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(3) determines that issuing the permit will not |
|
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jeopardize the administration and enforcement of this chapter. |
|
|
(b) The permit shall be issued for a designated place of |
|
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business, except as provided by Section 164.0106. |
|
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(c) The permits are nonassignable. |
|
|
(d) The permit must indicate the type of permit that it is |
|
|
and authorize the sale of e-cigarettes in this state. The permit |
|
|
must show that it is revocable and shall be forfeited or suspended |
|
|
if the conditions of issuance, provisions of this chapter, or rules |
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of the comptroller are violated. |
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Sec. 164.0103. DENIAL OF PERMIT. The comptroller may |
|
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reject an application and deny a permit if the comptroller finds, |
|
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after notice and opportunity for hearing, any of the following: |
|
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(1) the premises where business will be conducted are |
|
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not adequate to protect the e-cigarettes; or |
|
|
(2) the applicant or managing employee, or if the |
|
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applicant is a corporation, an officer, director, manager, or any |
|
|
stockholder who holds directly or through family or partner |
|
|
relationship 10 percent or more of the corporation's stock, or, if |
|
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the applicant is a partnership, a partner or manager: |
|
|
(A) has failed to disclose any information |
|
|
required by Sections 164.0101(c), (d), and (e), including previous |
|
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business experience, financial condition of the applicant, present |
|
|
or previous business affiliations, previous employment, and any |
|
|
conviction of a felony, or has made a false statement in the |
|
|
application; or |
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(B) has previously violated provisions of this |
|
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chapter. |
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Sec. 164.0104. PERMIT YEAR; FEES. (a) A permit required |
|
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by this chapter expires on the last day of May of each even-numbered |
|
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year. |
|
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(b) An application for a permit required by this chapter |
|
|
must be accompanied by a fee of: |
|
|
(1) one-half of the amount of the fee for a retailer's |
|
|
permit required by Section 154.111(b) if the applicant holds a |
|
|
valid retailer's permit under Section 154.101, 154.102, or 155.041; |
|
|
or |
|
|
(2) the amount of the fee for a retailer's permit |
|
|
required by Section 154.111(b). |
|
|
(c) For a new or renewal permit required by Section |
|
|
164.0101, the comptroller shall prorate the fee according to the |
|
|
number of months remaining during the calendar year that the permit |
|
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is to be in effect. |
|
|
(d) A person who does not obtain a permit each year in a |
|
|
timely manner must pay a late fee of $50 in addition to the |
|
|
application fee for the permit. |
|
|
(e) If on the date of issuance a permit will expire within |
|
|
three months, the comptroller may collect the prorated permit fee |
|
|
or the fee for the current year and, with the consent of the permit |
|
|
holder, may collect the fee for the next permit year and issue a |
|
|
permit or permits for both periods, as applicable. |
|
|
(f) A person issued a permit for a place of business that |
|
|
permanently closes before the permit expiration date is not |
|
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entitled to a refund of the permit fee. |
|
|
Sec. 164.0105. PAYMENT FOR PERMITS. (a) An applicant for a |
|
|
permit required by Section 164.0101 shall send the required fee |
|
|
with the application. |
|
|
(b) The payment must be made in cash or by money order, |
|
|
check, or credit card. |
|
|
(c) The comptroller may not issue a permit in exchange for a |
|
|
check until after the comptroller receives full payment on the |
|
|
check. |
|
|
Sec. 164.0106. DISPLAY OF PERMIT. (a) A permit holder |
|
|
shall keep the permit on public display at the place of business for |
|
|
which the permit was issued. |
|
|
(b) A permit holder who has a permit assigned to a vehicle |
|
|
shall post the permit in a conspicuous place on the vehicle. |
|
|
Sec. 164.0107. REVENUE. Revenue from the sale of |
|
|
retailer's permits shall be deposited to the general revenue fund |
|
|
and may be appropriated only as provided by this section. The money |
|
|
may be appropriated first to the comptroller for administering: |
|
|
(1) permitting of retailers under this chapter and |
|
|
Chapters 154 and 155; and |
|
|
(2) disciplinary actions taken under Section |
|
|
161.0901, Health and Safety Code. |
|
|
Sec. 164.0108. FINAL SUSPENSION OR REVOCATION OF PERMIT. |
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(a) The comptroller may revoke or suspend a permit holder's permit |
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if the comptroller finds, after notice and hearing as provided by |
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this section, that the permit holder violated this chapter or a rule |
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adopted under this chapter. |
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(b) If the comptroller intends to suspend or revoke a |
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permit, the comptroller shall provide the permit holder with |
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written notice that includes a statement: |
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(1) of the reason for the intended revocation or |
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suspension; |
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(2) that the permit holder is entitled to a hearing by |
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the comptroller on the proposed suspension or revocation; and |
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(3) of the date, time, and place of the hearing. |
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(c) The comptroller shall deliver the written notice by |
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personal service or by mail to the permit holder's mailing address |
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as it appears in the comptroller's records. Service by mail is |
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complete when the notice is deposited with the United States Postal |
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Service. |
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(d) The comptroller shall give the permit holder notice |
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before the 10th day before the final hearing. |
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(e) A permit holder may appeal the comptroller's decision to |
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a district court in Travis County not later than the 30th day after |
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the date the comptroller's decision becomes final. |
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(f) A person whose permit is suspended or revoked may not |
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sell, offer for sale, or distribute e-cigarettes from the place of |
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business to which the permit applied until a new permit is granted |
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or the suspension is removed. |
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Sec. 164.0109. SUMMARY SUSPENSION OF PERMIT. (a) The |
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comptroller may suspend a permit holder's permit without notice or |
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a hearing for the permit holder's failure to comply with this |
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chapter or a rule adopted under this chapter if the permit holder's |
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continued operation constitutes an immediate and substantial |
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threat to the collection of taxes imposed by this chapter and |
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attributable to the permit holder's operation. |
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(b) If the comptroller summarily suspends a permit holder's |
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permit, proceedings for a preliminary hearing before the |
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comptroller or the comptroller's representative must be initiated |
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simultaneously with the summary suspension. The preliminary |
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hearing shall be set for a date not later than the 10th day after the |
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date of the summary suspension, unless the parties agree to a later |
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date. |
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(c) At the preliminary hearing, the permit holder must show |
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cause why the permit should not remain suspended pending a final |
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hearing on suspension or revocation. |
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(d) Chapter 2001, Government Code, does not apply to a |
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summary suspension under this section. |
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(e) To initiate a proceeding to suspend summarily a permit |
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holder's permit, the comptroller shall serve notice on the permit |
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holder informing the permit holder of the right to a preliminary |
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hearing before the comptroller or the comptroller's representative |
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and of the time and place of the preliminary hearing. The notice |
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must be personally served on the permit holder or an officer, |
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employee, or agent of the permit holder or sent by certified or |
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registered mail, return receipt requested, to the permit holder's |
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mailing address as it appears in the comptroller's records. The |
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notice must state the alleged violations that constitute the |
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grounds for summary suspension. The suspension is effective at the |
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time the notice is served. If notice is served in person, the |
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permit holder shall immediately surrender the permit to the |
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comptroller. If notice is served by mail, the permit holder shall |
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immediately return the permit to the comptroller. |
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(f) Section 164.0108, governing hearings for final |
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suspension or revocation of a permit under this subchapter, governs |
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a final administrative hearing. |
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Sec. 164.0110. HEARINGS. Unless otherwise provided by this |
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chapter, the comptroller shall conduct all hearings required by |
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this subchapter in accordance with Chapter 2001, Government Code. |
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The comptroller may designate one or more representatives to |
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conduct the hearings and may prescribe the rules of procedure |
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governing the hearings. |
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SUBCHAPTER D. DISPOSITION OF PROCEEDS |
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Sec. 164.0151. DEPOSIT 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) 25 percent to the credit of an account in the |
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general revenue fund that may be appropriated only to the |
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Department of State Health Services for the purposes of tobacco and |
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e-cigarette use prevention, control, and enforcement; and |
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(2) the remainder to the credit of the general revenue |
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fund. |
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SECTION 10. The following provisions of the Tax Code are |
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repealed: |
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(1) Section 154.1142; |
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(2) Section 154.1143; |
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(3) Section 155.0592; and |
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(4) Section 155.0593. |
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SECTION 11. Section 161.0901, Health and Safety Code, as |
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added by this Act, applies only to a violation that occurs on or |
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after the effective date of this Act. A violation that occurs |
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before the effective date of this Act is governed by the law in |
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effect on the date the violation occurred, and the former law is |
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continued in effect for that purpose. |
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SECTION 12. (a) Notwithstanding Sections 164.0051 and |
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164.0052, Tax Code, as added by this Act, the taxes imposed under |
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those sections apply only to a sale, storage, use, or other |
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consumption of e-cigarettes that occurs on or after January 1, |
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2022. |
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(b) The comptroller of public accounts shall determine and |
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publish the initial tax rate for the taxes imposed under Sections |
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164.0051 and 164.0052, Tax Code, as added by this Act, in the manner |
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required by Section 164.0053, Tax Code, as added by this Act, not |
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later than December 1, 2021. The initial tax rate applies beginning |
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January 1, 2022. |
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SECTION 13. (a) Notwithstanding Section 164.0101, Tax |
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Code, as added by this Act, a person is not required to hold a permit |
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under that section to engage in business as a retailer of |
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e-cigarettes in this state until January 1, 2022. |
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(b) The comptroller of public accounts shall prescribe the |
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form and content of an application for a permit under Section |
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164.0101, Tax Code, as added by this Act, and begin accepting |
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applications for the permit not later than October 1, 2021. |
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SECTION 14. This Act takes effect September 1, 2021. |