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A BILL TO BE ENTITLED
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AN ACT
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relating to taxes on e-cigarettes and alternative nicotine |
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products; imposing taxes; imposing reporting and recordkeeping |
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requirements. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle E, Title 2, Tax Code, is amended by |
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adding Chapter 164 to read as follows: |
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CHAPTER 164. NONCOMBUSTIBLE NICOTINE PRODUCTS TAX |
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Sec. 164.0001. DEFINITIONS. In this chapter: |
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(1) "Alternative Nicotine Product" means any |
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noncombustible product containing nicotine that is intended for |
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human consumption, whether chewed, absorbed, dissolved, ingested, |
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inhaled, or consumed by any other means. "Alternative Nicotine |
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Product" does not include any cigarettes, tobacco products or |
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e-cigarettes as defined this code, or any product regulated as a |
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drug or device by the United States Food and Drug Administration |
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under Chapter V of the Food, Drug and Cosmetic Act. |
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(2) "Commercial business location" means the entire |
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premises occupied by a person required to hold an e-cigarette |
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retailer permit under Chapter 147, Health and Safety Code, or a |
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person who sells alternative nicotine products. |
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(3) "E-cigarette" means a non-combustible product |
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that produces vapor or aerosol for inhalation from the application |
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of a heating element to a liquid substance containing nicotine, |
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derived from tobacco or any other source, and includes an |
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e-cigarette pod or a consumable nicotine liquid suitable for use in |
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an electronic smoking device, whether sold with the product or |
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separately. |
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(4) "E-cigarette pod" means a sealed, prefilled, and |
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disposable container of nicotine in solution for use in an |
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e-cigarette, and in which the solution in the container is |
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inaccessible to the consumer through customary or reasonably |
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foreseeable handling or use. |
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(5) "First sale" means, except as otherwise provided |
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by this chapter: |
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(A) the first transfer of possession in |
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connection with a purchase, sale, or any exchange for value of |
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e-cigarettes or alternative nicotine products in or into this |
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state, which: |
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(i) includes the sale of e-cigarettes or |
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alternative nicotine products by: |
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(a) a distributor in or outside this |
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state to a distributor, wholesaler, or retailer in this state; and |
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(b) a manufacturer in this state who |
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transfers the e-cigarettes or alternative nicotine products in this |
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state; and |
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(ii) does not include: |
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(a) the sale of e-cigarettes or |
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alternative nicotine products by a manufacturer outside this state |
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to a distributor in this state; |
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(b) the transfer of e-cigarettes or |
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alternative nicotine products from a manufacturer outside this |
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state to a bonded agent in this state; or |
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(c) the sale of e-cigarettes or |
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alternative nicotine products by a manufacturer, bonded agent, |
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distributor, or importer to an interstate warehouse in this state; |
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(B) the first use or consumption of e-cigarettes |
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or alternative nicotine products in this state; or |
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(C) the loss of e-cigarettes or alternative |
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nicotine products in this state whether through negligence, theft, |
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or other unaccountable loss. |
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(6) "Manufacturer's representative" means a person |
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employed by a manufacturer to sell or distribute the manufacturer's |
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e-cigarettes or alternative nicotine products for which the tax |
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imposed under this chapter has been paid. |
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Sec. 164.0002. STORAGE. |
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(a) The commercial business location where e-cigarettes or |
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alternative nicotine products are stored or kept cannot be a |
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residence or a unit in a public storage facility. |
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(b) This section does not apply to a manufacturer's |
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representative. |
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Sec. 164.0003. IMPOSITION AND RATE OF TAX. |
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(a) A tax is imposed and becomes due and payable when a |
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person or entity receives e-cigarettes or alternative nicotine |
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products for the purpose of making a first sale in this state. |
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(b) The tax rates are: |
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(1) on all e-cigarettes that use an e-cigarette pod, 5 |
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cents per e-cigarette pod; |
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(2) on all e-cigarettes that do not use an e-cigarette |
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pod, 5 percent of the wholesale cost price, exclusive of any trade, |
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cash, or other discounts or any promotion, advertising, display, or |
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similar allowances; and |
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(2) on alternative nicotine products, $1.23 per ounce. |
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The tax shall be imposed based on the net volume as listed by the |
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manufacturer. |
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Sec. 164.0004. IMPOSITION AND RATE OF USE TAX. |
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(a) A tax is imposed on the storage, use, or other |
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consumption in this state of e-cigarettes and alternative nicotine |
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products purchased for storage, use, or other consumption in this |
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state. |
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(b) The tax rates are the same as is provided by Section |
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164.003 of this code. |
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Sec. 164.0005. PAYMENT OF TAX. |
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(a) A person or entity shall pay the tax on e-cigarettes and |
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alternative nicotine products received for the purpose of making a |
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first sale at the time when filing the report required by Section |
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164.0009. The tax shall be paid by cashier's check payable to the |
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comptroller, by electronic funds transfer to the comptroller, or by |
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any other method of payment authorized by the comptroller. |
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(b) The person or entity in possession of e-cigarettes and |
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alternative nicotine products has the burden to prove payment of |
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the tax on the products. |
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Sec. 164.006. PENALTY FOR FAILURE TO PAY TAX. |
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(a) A person or entity who fails to timely pay the tax when |
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due shall pay five percent of the amount of tax then due as a |
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penalty, and if the person or entity fails to pay the tax on or |
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before the 30th day after the day on which the tax is due, the person |
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or entity shall pay an additional five percent. |
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(b) The minimum penalty imposed by this section is $50. |
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(c) The dishonor of a check delivered to the treasury for |
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payment of taxes constitutes a failure to pay the tax when due. |
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(d) Venue of a suit for collection of a penalty for late |
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payment of taxes is in Travis County. |
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Sec. 164.007. IMPACT OF TAX. |
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The ultimate consumer or user in this state bears the impact |
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of the tax imposed by this chapter. If another person pays the tax, |
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the amount of the tax is added to the price charged to the ultimate |
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consumer or user. |
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Sec. 164.008. RECORD OF PURCHASE OR RECEIPT. |
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Each person or entity who receives e-cigarettes or |
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alternative nicotine products for the purpose of making a first |
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sale shall keep records at each place of business of all such |
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products purchased or received. Each retailer shall keep records at |
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a single commercial business location, which the retailer shall |
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designate as its principal place of business in the state, of all |
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e-cigarettes or alternative nicotine products purchased and |
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received. These records must include: |
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(1) the name and address of the shipper or carrier and |
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the mode of transportation; |
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(2) all shipping records or copies of records, |
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including invoices, bills of lading, waybills, freight bills, and |
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express receipts; |
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(3) the date and the name of the place of origin of the |
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e-cigarettes or alternative nicotine products shipment; |
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(4) the date and the name of the place of arrival of |
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the e-cigarettes or alternative nicotine products shipment; |
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(5) a statement of the number, kind, and price paid for |
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the e-cigarettes or alternative nicotine products; |
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(6) the name, address, and tax identification number |
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of the seller; |
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(7) in the case of a distributor, the manufacturer's |
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list price for the e-cigarettes or alternative nicotine products; |
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and |
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(9) any other information required by rules of the |
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comptroller. |
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Sec. 164.0009. REPORT OF SALE OR USE. |
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(a) Each person or entity who receives e-cigarettes or |
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alternative nicotine products for the purpose of making a first |
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sale shall keep at each place of business in this state records of |
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each sale, distribution, exchange, or use of e-cigarettes or |
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alternative nicotine products whether taxed under this chapter or |
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not. Each such person or entity shall prepare and retain an original |
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invoice for each transaction involving e-cigarettes or alternative |
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nicotine products, and shall keep any supporting documentation, |
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including bills of lading, showing shipment and receipt used in |
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preparing the invoices at the place of business. A duplicate |
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invoice shall be delivered to the purchaser. |
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(b) The records for each sale, distribution, exchange, or |
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use of e-cigarettes or alternative nicotine products must show: |
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(1) the purchaser's name and address, permit number, |
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or tax identification number; |
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(2) the method of delivery and the name of the common |
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carrier or other person delivering the e-cigarettes or alternative |
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nicotine products; |
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(3) the date, amount, and type of e-cigarettes or |
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alternative nicotine products sold, distributed, exchanged, or |
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used; |
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(4) the price received for the e-cigarettes or |
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alternative nicotine products; |
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(5) the number and kind of e-cigarettes or alternative |
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nicotine products on which the tax has been paid; |
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(6) for sales from a manufacturer to a person or entity |
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who receives e-cigarettes or alternative nicotine products for the |
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purpose of making a first sale, the manufacturer's list price for |
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the e-cigarettes or alternative nicotine products; |
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(7) the net weight as listed by the manufacturer for |
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each unit; and |
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(8) any other information required by rules of the |
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comptroller. |
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(c) Records shall be kept for inspection and copying by the |
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comptroller and the attorney general for at least four years, and |
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copies of records shall be provided to the comptroller on demand. |
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(d) A person's failure to produce the records required by |
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this subchapter or a person's inability to provide other proof of |
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tax payment, on demand by the comptroller, is prima facie evidence |
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that e-cigarettes and alternative nicotine products possessed by |
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the person were received for the purpose of making a first sale |
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without payment of the tax imposed by this chapter. This provision |
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does not apply to a failure to produce records or provide other |
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proof of tax payment if the failure results from an occurrence |
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beyond the person's control. |
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Sec. 164.0009. MONTHLY REPORT. |
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(a) A person or entity who receives e-cigarettes or |
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alternative nicotine products for the purpose of making a first |
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sale shall file with the comptroller on or before the 25th day of |
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each month a report for the preceding month. |
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(b) The report must show: |
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(1) the date the report was made; |
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(2) the filer's name and address; |
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(3) the month the report covers; |
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(4) the amount of e-cigarettes and alternative |
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nicotine products purchased, received, and acquired; |
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(5) the manufacturer's list price of e-cigarettes and |
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alternative nicotine products purchased, received, and acquired; |
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(6) the amount of e-cigarettes and alternative |
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nicotine products sold, distributed, used, lost, or otherwise |
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disposed of; |
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(7) the amount of e-cigarettes and alternative |
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nicotine products on hand at the beginning and the end of the month; |
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(8) the net weight as listed by the manufacturer for |
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each unit of e-cigarettes and alternative nicotine products that is |
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purchased, received, or acquired; and |
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(9) any other information the comptroller requires |
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relating to e-cigarettes and alternative nicotine products and to |
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the payment of taxes due on them. |
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(c) The comptroller shall prescribe the form and content of |
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the report. |
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(d) If more than 50 percent of all untaxed e-cigarettes and |
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alternative nicotine products received by the person or entity in |
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this state are actually sold outside of this state, the person or |
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entity shall include in the report only e-cigarettes and |
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alternative nicotine products that are sold in this state. |
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Sec. 164.0010. DISPOSITION OF PROCEEDS. |
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The comptroller shall deposit the proceeds from taxes imposed |
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under this chapter to the credit of the foundation school fund. |
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Sec. 164.0011. ENFORCEMENT AND ADMINISTRATION. |
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(a) The comptroller shall adopt rules for the enforcement |
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and administration of this chapter. The rules shall be |
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substantially similar to the provisions in Subchapter E and |
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Subchapter F, Chapter 155, Tax Code. |
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(b) The comptroller may adopt other reasonable rules |
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necessary to carry out the purposes of this subchapter. |
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(c) All rules issued under this subchapter must be adopted |
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and published in accordance with state requirements. |
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SECTION 2. This Act takes effect September 1, 2023. |