By: Thierry, Burrows, Noble, Button, Cortez H.B. No. 4772
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to an excise tax on, and storage, reporting, and
  recordkeeping requirements for, certain nontobacco nicotine
  products; providing a civil penalty; imposing a tax.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle E, Title 2, Tax Code, is amended by
  adding Chapter 164 to read as follows:
  CHAPTER 164.  EXCISE TAX ON NONTOBACCO NICOTINE PRODUCTS
         Sec. 164.0001.  DEFINITIONS. In this chapter:
               (1)  "Alternative nicotine product" means any
  noncombustible product containing nicotine that is intended for
  human consumption, whether chewed, absorbed, dissolved, ingested,
  inhaled, or consumed by any other means. The term does not include:
                     (A)  an e-cigarette;
                     (B)  a cigarette, as defined by Section 154.001;
                     (C)  a tobacco product, as defined by Section
  155.001; or
                     (D)  a product regulated as a drug or device by the
  United States Food and Drug Administration.
               (2)  "Closed-system e-cigarette" means an e-cigarette
  that utilizes a nicotine solution in a sealed and prefilled
  container that makes the nicotine solution inaccessible to the
  consumer through customary or reasonably foreseeable handling or
  use, other than use by inhaling vapor or aerosol produced from the
  nicotine solution. The term includes a disposable e-cigarette and a
  sealed, prefilled, and disposable container of nicotine solution
  for use in an e-cigarette.
               (3)  "Commercial business location" means the entire
  premises occupied by a retailer.
               (4)  "E-cigarette" means a noncombustible product
  that:
                     (A)  produces vapor or aerosol for inhalation from
  the application of a heating element to a solution that contains
  nicotine; and
                     (B)  includes a solution that contains nicotine
  intended for use in an e-cigarette, whether sold with the
  e-cigarette or separately.
               (5)  "First sale" means, except as otherwise provided
  by this chapter:
                     (A)  the first transfer of possession in
  connection with a purchase, sale, or any exchange for value of an
  e-cigarette or an alternative nicotine product in or into this
  state, which:
                           (i)  includes the sale of an e-cigarette or
  an alternative nicotine product by:
                                 (a)  a distributor in or outside this
  state to a distributor, wholesaler, or retailer in this state; and
                                 (b)  a manufacturer in this state who
  transfers the e-cigarette or alternative nicotine product in this
  state; and
                           (ii)  does not include:
                                 (a)  the sale of an e-cigarette or an
  alternative nicotine product by a manufacturer outside this state
  to a distributor in this state;
                                 (b)  the transfer of an e-cigarette or
  an alternative nicotine product from a manufacturer outside this
  state to a bonded agent in this state; or
                                 (c)  the sale of an e-cigarette or an
  alternative nicotine product by a manufacturer, bonded agent,
  distributor, or importer to an interstate warehouse in this state;
                     (B)  the first use or consumption of an
  e-cigarette or an alternative nicotine product in this state; or
                     (C)  the loss of an e-cigarette or an alternative
  nicotine product in this state whether through negligence, theft,
  or other unaccountable loss.
               (6)  "Manufacturer's representative" means a person
  employed by a manufacturer to sell or distribute the manufacturer's
  e-cigarettes or alternative nicotine products for which the tax
  imposed under this chapter has been paid.
               (7)  "Open-system e-cigarette" means an e-cigarette
  that utilizes a nicotine solution in a container that is refillable
  or otherwise makes the nicotine solution accessible to the consumer
  through customary or reasonably foreseeable handling or use.
               (8)  "Retailer" means a person:
                     (A)  required to hold a permit under Chapter 147,
  Health and Safety Code; or
                     (B)  who sells alternative nicotine products to
  consumers.
         Sec. 164.0002.  DESIGNATION OF COMMERCIAL BUSINESS LOCATION
  AS PRINCIPAL PLACE OF BUSINESS; STORAGE.  (a)  A retailer shall
  designate one commercial business location as the retailer's
  principal place of business.
         (b)  Except as provided by Subsection (c), a commercial
  business location where e-cigarettes or alternative nicotine
  products are stored cannot be a residence or a unit in a public
  storage facility.
         (c)  A manufacturer's representative may use a residence or
  storage facility as a commercial business location.
         Sec. 164.0003.  TAX IMPOSED ON FIRST SALE. (a)  A tax is
  imposed and becomes due and payable when a person receives an
  e-cigarette or alternative nicotine product for the purpose of
  making a first sale in this state.
         (b)  The tax rate:
               (1)  for a closed-system e-cigarette is seven cents for
  each milliliter of nicotine solution and a proportionate rate on
  all fractional parts of a milliliter of nicotine solution;
               (2)  for an open-system e-cigarette is three percent of
  the wholesale cost price of the open-system e-cigarette; and
               (3)  for an alternative nicotine product is $1.22 per
  ounce of net weight of the alternative nicotine product, as listed
  by the manufacturer.
         Sec. 164.0004.  FINAL POINT OF IMPOSITION OF TAX. The
  ultimate consumer of an e-cigarette or alternative nicotine product
  in this state shall pay the tax imposed by this chapter.  If another
  person pays the tax, the amount of the tax is added to the price
  charged to the ultimate consumer.
         Sec. 164.0005.  PAYMENT OF TAX. (a)  A person shall pay the
  tax on an e-cigarette or alternative nicotine product received for
  the purpose of making a first sale at the time the person files the
  report under Section 164.0010 in the manner prescribed by the
  comptroller.
         (b)  The person in possession of an e-cigarette or
  alternative nicotine product has the burden to prove payment of the
  tax on that product.
         Sec. 164.0006.  PENALTY FOR FAILURE TO PAY TAX. (a) Subject
  to Subsection (c), a person who fails to pay the tax when due under
  Section 164.0005 shall pay an additional five percent of the amount
  of the tax due as a penalty.
         (b)  A person who fails to pay the tax imposed under this
  chapter and penalty imposed under Subsection (a), as applicable,
  before the 31st day after the date that the tax is due shall pay, in
  addition to the amount required under Subsection (a), an additional
  five percent of the amount of the tax due as a penalty.
         (c)  The minimum penalty imposed by this section is $50.
         (d)  The dishonor of a check delivered to the treasury or
  other form of payment for payment of taxes constitutes a failure to
  pay the tax when due.
         (e)  The attorney general shall bring a suit to collect a
  penalty for late payment of a tax imposed under this section. A
  suit to collect a penalty under this section may be brought in a
  court of competent jurisdiction in Travis County.
         Sec. 164.0007.  RECORDS OF PURCHASES AND RECEIPTS. (a)  A
  person who receives an e-cigarette or an alternative nicotine
  product for the purpose of making a first sale shall maintain at
  each place of business the records of all e-cigarettes or
  alternative nicotine products purchased or received. 
         (b)  A retailer shall maintain all records described by
  Subsection (a) at the commercial business location designated by
  the retailer under Section 164.0002.
         (c)  The records maintained under this section must include: 
               (1)  the name and address of the shipper or carrier and
  the mode of transportation;
               (2)  all shipping records or copies of records,
  including invoices, bills of lading, waybills, freight bills, and
  express receipts;
               (3)  the date and the name of the place of origin of the
  e-cigarette or alternative nicotine product shipment;
               (4)  the date and the name of the place of arrival of
  the e-cigarette or alternative nicotine product shipment;
               (5)  a statement of the number, kind, and price paid for
  the e-cigarettes or alternative nicotine products;
               (6)  the number of milliliters of nicotine solution for
  use in a closed-system e-cigarette;
               (7)  the name, address, and tax identification number
  of the seller;
               (8)  the manufacturer's wholesale price for the
  e-cigarette or alternative nicotine product;
               (9)  the net weight as listed by the manufacturer of
  each unit of alternative nicotine product, measured in ounces; and
               (10)  any other information required by the
  comptroller.
         Sec. 164.0008.  RECORDS OF SALE AND USE. (a) A person who
  receives an e-cigarette or alternative nicotine product for the
  purpose of making a first sale shall maintain at each place of
  business in this state records of each sale, distribution,
  exchange, or use of an e-cigarette or an alternative nicotine
  product, regardless of whether subject to a tax imposed by this
  chapter.
         (b)  The records maintained under this section must include:
               (1)  the purchaser's name and address, permit number,
  or tax identification number;
               (2)  the method of delivery and the name of the common
  carrier or other person delivering the e-cigarettes or alternative
  nicotine products;
               (3)  the date, amount, and kind of e-cigarettes or
  alternative nicotine products sold, distributed, exchanged, or
  used;
               (4)  the number of milliliters of nicotine solution for
  use in a closed-system e-cigarette sold, distributed, exchanged, or
  used;
               (5)  the wholesale price of all open-system
  e-cigarettes sold, distributed, exchanged, or used;
               (6)  the price received for the e-cigarettes or
  alternative nicotine products;
               (7)  the number and kind of e-cigarettes or alternative
  nicotine products on which the tax has been paid;
               (8)  the net weight as listed by the manufacturer for
  each unit of alternative nicotine product, measured in ounces; and
               (9)  any other information required by the comptroller.
         (c)  In addition to the records maintained under Subsection
  (a), a person required to maintain records under that subsection
  shall prepare and retain:
               (1)  an original invoice for each transaction involving
  an e-cigarette or an alternative nicotine product; and
               (2)  any supporting documentation relevant to each
  transaction showing shipment and receipt used in preparing the
  invoices at the place of business, including all bills of lading.
         (d)  A person required to prepare and retain an invoice under
  Subsection (c) shall deliver a duplicate invoice to the purchaser.
         (e)  A person required to maintain, prepare, or retain any
  record described by this section shall maintain all records, as
  applicable, for at least four years after the date of the
  transaction.
         (f)  On request of the comptroller, the person shall provide
  the records to the comptroller in a manner prescribed by the
  comptroller.
         Sec. 164.0009.  FAILURE TO PRODUCE RECORDS. (a)  Except as
  provided by Subsection (b), a person's failure to produce a record
  on request of the comptroller under Section 164.0007 or 164.0008 is
  prima facie evidence that e-cigarettes and alternative nicotine
  products not accounted for in a requested report were received for
  the purpose of making a first sale without payment of a tax required
  under this chapter.
         (b)  This section does not apply to a person's failure to
  produce a record that results from an occurrence beyond the
  person's reasonable control.
         Sec. 164.0010.  MONTHLY REPORT. (a)  A person who receives
  an e-cigarette or alternative nicotine product for the purpose of
  making a first sale shall file a report for the preceding month on
  or before the 25th day of each month.
         (b)  Except as provided by Subsection (c), the report filed
  under Subsection (a) must include:
               (1)  the date the person submitted the report;
               (2)  the name and address of the person submitting the
  report;
               (3)  the applicable month covered by the report;
               (4)  the number of units or amount, as applicable, of
  e-cigarettes and alternative nicotine products the person
  purchased, received, and acquired during the month covered by the
  report, with separately stated amounts for:
                     (A)  milliliters of nicotine solution for use in a
  closed-system e-cigarette;
                     (B)  the wholesale price of all open-system
  e-cigarettes; and
                     (C)  the net weight as listed by the manufacturer
  of all alternative nicotine products, measured in ounces;
               (5)  the number of units or amount, as applicable, of
  e-cigarettes and alternative nicotine products the person sold,
  distributed, used, lost, or otherwise disposed of during the month
  covered by the report, with separately stated amounts for:
                     (A)  milliliters of nicotine solution for use in a
  closed-system e-cigarette;
                     (B)  the wholesale price of all open-system
  e-cigarettes; and
                     (C)  the net weight as listed by the manufacturer
  of all alternative nicotine products, measured in ounces;
               (6)  the amount of e-cigarettes and alternative
  nicotine products the person had in stock at the beginning and at
  the end of the month covered by the report; and
               (7)  any other information required by the comptroller.
         (c)  If more than 50 percent of all untaxed e-cigarettes or
  alternative nicotine products received by the person in this state
  are actually sold outside of this state, the person may include in
  the report only the e-cigarettes or alternative nicotine products,
  as applicable, that are sold in this state.
         (d)  The comptroller shall prescribe the form and method for
  submitting the report under this section.
         Sec. 164.0011.  INSPECTION. (a)  To determine the tax
  liability of a person under, or compliance by a person with, this
  chapter, the comptroller may:
               (1)  inspect any premises where e-cigarettes or
  alternative nicotine products are manufactured, produced, stored,
  transported, sold, or offered for sale or exchange;
               (2)  remain on the premises as long as necessary to
  determine the tax liability under or compliance with this chapter;
               (3)  examine the records required by this chapter or
  other records, books, documents, papers, accounts, and objects that
  the comptroller determines are necessary for conducting a complete
  examination; and
               (4)  examine stocks of e-cigarettes or alternative
  nicotine products.
         (b)  A person:
               (1)  must, on request of the comptroller, produce
  records required by this chapter; and
               (2)  may not hinder or prevent the comptroller's
  inspection of records or the examination of the premises under this
  section.
         Sec. 164.0012.  SEIZURE. (a)  The comptroller with or
  without process may seize:
               (1)  e-cigarettes and alternative nicotine products
  that are possessed or controlled by a person for the purpose of
  selling or removing the e-cigarettes or alternative nicotine
  products in violation of this chapter;
               (2)  e-cigarettes and alternative nicotine products
  that are removed, deposited, or concealed by a person intending to
  avoid payment of taxes imposed by this chapter;
               (3)  an automobile, truck, boat, conveyance, or other
  type of vehicle used to remove or transport e-cigarettes or
  alternative nicotine products by a person intending to avoid
  payment of taxes imposed by this chapter; and
               (4)  equipment, paraphernalia, or other tangible
  personal property used by a person intending to avoid payment of
  taxes imposed by this chapter found in the place where the
  e-cigarettes or alternative nicotine products are found.
         (b)  An item seized under this section is forfeited to the
  state and remains in the custody of the comptroller for disposition
  as provided by this chapter. The seized item is not subject to
  replevin.
         Sec. 164.0013.  PENALTIES. (a)  A person violates this
  chapter if the person does not:
               (1)  keep records required by this chapter;
               (2)  make a report required by this chapter to the
  comptroller or the person makes a false or incomplete report
  required by this chapter to the comptroller; or
               (3)  abide by, or the person violates, any other
  provision of this chapter or a rule adopted by the comptroller under
  this chapter.
         (b)  A person who violates this chapter shall pay the state a
  penalty of not more than $2,000 for each violation.
         (c)  A person is liable for a separate penalty for each day on
  which a violation occurs.
         (d)  The attorney general shall bring suit to recover
  penalties under this section.
         (e)  A suit under this section may be brought in a court of
  competent jurisdiction in Travis County.
         Sec. 164.0014.  RULES. The comptroller shall adopt rules as
  necessary to implement, administer, and enforce this chapter in a
  manner substantively similar to rules adopted for implementation,
  administration, and enforcement provided by Chapters 154 and 155.
         Sec. 164.0015.  DISPOSITION AND USE OF PROCEEDS. The
  comptroller shall deposit the proceeds from taxes imposed under
  this chapter as follows:
               (1)  50 percent to the credit of an account in the
  general revenue fund administered by the Department of State Health
  Services, which may be appropriated to the department only for the
  purpose of administering youth vaping prevention and awareness
  programs;
               (2)  20 percent to the credit of an account in the
  general revenue fund administered by the comptroller, which may be
  appropriated to the comptroller only for the purpose of
  administering and enforcing this chapter; and
               (3)  the remainder to the credit of the property tax
  relief fund.
         SECTION 2.  The change in law made by this Act does not
  affect tax liability accruing before the effective date of this
  Act.
         SECTION 3.  This Act takes effect September 1, 2023.