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STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
COMMITTEE SUBSTITUTE
FOR ENGROSSED
SENATE BILL NO. 601 By: Rader of the Senate
and
Pfeiffer of the House
COMMITTEE SUBSTITUTE
An Act relating to cigarette and tobacco products;
amending 68 O.S. 2021, Sect ions 304 and 415, which
relate to licenses; modifying definition ; amending 68
O.S. 2021, Section 400.1, which relates to
enforcement of tobacco tax laws; providing for
membership of industry advisory committee; amending
68 O.S. 2021, Section 400.5, which relates to the
purchase of tobacco products; clarifying certain
enforcement procedure; amending 68 O.S. 2021, Section
417, which relates to seizure of untaxed tobacco
products; clarifying certain enforcement procedure;
providing an effective date; and declaring an
emergency.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 304, is
amended to read as follows:
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Section 304. A. Every manufacturer and wholesaler of
cigarettes in this state, as a condition of carrying on such
business, shall annually secure from the Oklahoma Tax Commission a
written license, and shall p ay therefor an annual fee of Two Hundred
Fifty Dollars ($250.00). Application for such license, which shall
be made upon such forms as prescribed by the Oklahoma T ax
Commission, shall include the following:
1. The applicant’s agreement to the jurisdictio n of the Tax
Commission and the courts of this state for the purpos e of
enforcement of the provisions of Section 301 et seq. of this title;
2. The applicant’s agre ement to abide by the provisions of
Section 301 et seq. of this title and the rules promulga ted by the
Tax Commission with reference thereto;
3. The wholesaler applicant’s agreement to sell cigarettes only
to licensed retailers or Indian tribal entities o r licensees of
Indian tribal entities; and
4. The manufacturer applicant's agreement to sel l cigarettes
only to a licensed wholesaler.
This license, which wil l be for the ensuing year, must at all
times be displayed in a conspicuous place so that it can b e seen.
Persons operating more than one place of business must secure a
license for each place of business. "Place of business" shall be
construed to include the place where orders are received, or where
cigarettes are sold. A "place of business" cannot be a location
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with a physical residential address. The Tax Commission shall not
issue a license for a place of business with a physical residential
address. If cigarettes are sold on or from any vehicle, the vehicle
shall constitute a place of business an d the regular license fee
shall be paid with respect thereto. However, if the vehicle is
owned or operated by a place of business for which the regular fee
is paid, the annual fee for the license with respect to such vehicle
shall be only Ten Dollars ($10 .00). The expiration for such vehicle
license shall expire on the same date as the curren t license of the
place of business.
Provided, that the Tax Commission shall not authorize the use of
a stamp-metering device by any manufacturer or wholesaler who doe s
not maintain a wareh ouse or wholesale establishment or place of
business within the Stat e of Oklahoma from which cigarettes are
received, stocked and sold an d where such metering device is kept
and used; but the Tax Commission may, in its discretion, per mit the
use of such metering device by manufacturers and wholesalers of
cigarettes residing wholly within another state where such state
permits a licensed Okl ahoma resident, manufacturer or wholesaler of
cigarettes the use of the metering device of such s tate without
first requiring that such manufacturer or wholesaler establish a
place of business in such other state. The provisions of this
subsection relating to metering devices shall not apply to states
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which do not require the affixing of tax stamps t o packages of
cigarettes before same are offered for sale in such states.
B. Every retailer in this state, except Indian tribal entities
or licenses of Indian tribal entities, as a condition of carrying on
such business, shall secure from the Tax Commissi on a license and
shall pay therefor a fee of Thirty Dollars ($30.00). Application
for such license, which shall be made upon such forms as prescribed
by the Tax Commission, shall include the following:
1. The applicant’s agreement to the jurisdiction of the Tax
Commission and the courts of this state for the purpose of
enforcement of the prov isions of Section 301 et seq. of this title;
2. The applicant’s agre ement to abide by the provisions of
Section 301 et seq. of this title and the rules promulgated b y the
Tax Commission with reference thereto;
3. The applicant’s agreement that it shall n ot purchase any
cigarettes for resale from a supplier that does not h old a current
wholesaler’s license issued pursuant to this section; and
4. The applicant’s agree ment to sell cigarette s only to
consumers.
Such license, which will be for the ensuing thr ee (3) years,
must at all times be displayed in a conspicuous place s o that it can
be seen. Upon expiration of such license, the retailer to whom such
license was issued may obtain a rene wal license which shall be valid
for three (3) years. The manner an d prorated fee for renewals shall
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be prescribed by the Tax Commission . Every person operating under
such license as a retailer and who owns or operates more than one
place of business mus t secure a license for each place of business.
"Place of business" shall be construed to include places where
orders are received or whe re cigarettes are sold. A "place of
business" cannot be a location with a physical residential a ddress.
The Tax Commission shall not issue a license for a place of business
with a physical residential address.
C. Every distributing agent shall, as a cond ition of carrying
on such business, pursuant to written application on a form
prescribed by and in such detailed form as the Tax Commission may
require, annually secure from the Tax Comm ission a license, and
shall pay therefor an annual fee of One Hundred Dollars ($100.00).
An application shall be filed and a license obtained for each place
of business owned or operated by a distributing agent. The license,
which will be for the ensuing year, shall be consecutively numbered,
nonassignable and nontransfera ble, and shall authorize the storing
and distribution of unstamped cigarettes within this state w hen such
distribution is made upon interstate orders only.
D. 1. All wholesale, retail, and distributing agent's licenses
shall be nonassignable and nontrans ferable from one person to
another person. Such licenses may be transferred from one location
to another location after an application has been filed with the Tax
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Commission requesting such transfer and after the approval of the
Tax Commission.
2. Wholesale, retail, and distributing agent's licenses shall
be applied for on a form prescribed by the T ax Commission. Any
person operating as a wholesaler, retailer, or distributing agent
must at all times have a valid license which has been issued by the
Tax Commission. If any such person or licensee continues to operate
as such on a license issued by th e Tax Commission which has expired,
or operates without ever having obtained from the Tax Commission
such license, such person or licensee shall, after becomin g
delinquent for a period in excess of fifteen (15) days, pay to the
Tax Commission, in addition to the annual license f ee, a penalty of
twenty-five cents ($0.25) per day on each delinqu ent license for
each day so operated in excess of fifteen (15) days. The penalty
provided for herein shall not exceed the annual license fee for such
license.
E. No license may be granted, maintained or renewed if any of
the following conditions applies to the applicant. For purposes of
this section, "applicant" includes any combination of persons owning
directly or indirectly, in the aggregate, more than ten percent
(10%) of the ownership interests in the applicant:
1. The applicant owes Five Hundred D ollars ($500.00) or more in
delinquent cigarette taxes;
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2. The applicant had a cigarette manufacturer, wholesaler,
retailer or distributor license revoked by the Tax Commission within
the past two (2) years;
3. The applicant has been convicted of a crime relating to
stolen or counterfeit cigarettes, or receiving stolen or counterfeit
cigarettes or has been convicted of or has entered a plea of guilty
or nolo contendere to any felony;
4. If the applicant is a cigarette manufacturer, the applicant
is neither:
a. a participating manufacturer as defined in Section II
(jj) of the Master Settlement Agreement as defined in
Section 600.22 of Title 37 of the Oklahoma Statutes,
nor
b. in full compliance with the provisions of paragraph 2
of subsection A of Section 600.23 of Title 37 of the
Oklahoma Statutes;
5. If the applicant is a cigarette manufacturer, if any
cigarette imported by such applicant is imported into the United
States in violation of 19 U.S.C., Section 1681a; or
6. If the applicant is a cigarette m anufacturer, if any
cigarette imported or manufactured by the applican t does not fully
comply with the Federal Cigarette Labeling and Advertising Act, 15
U.S.C., Section 1331 et seq.
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F. No person or entity licensed pursuant to the provisions of
this section shall purchase cigarettes from or sell cigarettes to a
person or entity required to obtain a license unless such person or
entity has obtained such license.
G. No person licensed as a retailer in this state shall:
1. Sell any cigarettes to any other p erson licensed as a
retailer in this state unless such sale is for the purpose of moving
inventory between stores which are part of the same company; or
2. Purchase any cigarettes from any person or entity other than
a wholesaler licensed pursuant to Sect ion 301 et seq. of this title.
H. In addition to any civil or crimina l penalty provided by
law, upon a finding that a licensee has violated any provision of
Section 301 et seq. of this title, the Tax Commission may revoke or
suspend the license or license s of the licensee pursuant to the
procedures applicable to revocation of a license set forth in
Section 316 of this title.
I. The Tax Commission shall create and main tain a web site
setting forth all current valid licenses and the identity of
licensees holding such licenses, and shall update the site no less
frequently than once per month.
SECTION 2. AMENDATORY 68 O.S. 2021, Section 415, is
amended to read as follows:
Section 415. A. Every wholesaler of tobacco products in this
state, as a condition of carrying on such business, shall annually
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secure from the Oklahoma Tax Commission a written license and shall
pay an annual fee of Two Hundred Fifty Dollars ($250.00); provided,
such fee shall not be applicable if paid pursuant to Section 304 of
this title. The Tax Commission shall promulgate rules which provide
a procedure for the issuance of a joint license for any wholesaler
making application pursuant to this section and Section 304 of this
title. Application for such license, which shall be made upon such
forms as prescribed by the Tax Commissi on, shall include the
following:
1. The applicant's agreement to the jurisdiction of the Tax
Commission and the courts of this state for purposes of enforcement
of the provisions of Sec tion 301 et seq. of this title; and
2. The applicant's agreement to a bide by the provisions of
Section 301 et seq. of this title and the rules promulgated by the
Tax Commission with reference thereto. This license, which will be
for the ensuing year, mus t at all times be displayed in a
conspicuous place so that it can be s een. Persons operating more
than one place of business must secure a license for each place of
business. "Place of business" shall be construed to include the
place where orders are re ceived, or where tobacco products are sold.
A "place of business" can not be a location with a physical
residential address. The Tax Commission shall not issue a licen se
for a place of business with a physical residential address. If
tobacco products are sold on or from any vehicle, the vehicle shall
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constitute a place of b usiness, and the license fee of Two Hundred
Fifty Dollars ($250.00) shall be paid with respect th ereto.
However, if the vehicle is owned or operated by a place of business
for which the regular license fee is paid, the annual fee for the
license with respect to such vehicle shall be only Ten Dollars
($10.00). The expiration for such vehicle license shall expire on
the same date as the current license of the place of business.
B. Every retailer in this state, as a condition of carrying on
such business, shall secure from the Tax Commission a license and
shall pay therefor a fee of Thirty Dollars ($30 .00). Application
for such license, which shall be made upon such forms as prescribed
by the Tax Commission, shall include the following:
1. The applicant's agreement to the jurisdiction of the Tax
Commission and the courts of this state for purposes of enforcement
of the provisions of Section 301 et seq. of this title;
2. The applicant's agreement to abide by the provisions of
Section 301 et seq. of this ti tle and the rules promulgated by the
Tax Commission with reference thereto;
3. The applicant's a greement that it shall not purchase any
tobacco products for resale from a supplier that does not hold a
current wholesaler's license issued pursuant to this s ection; and
4. The applicant's agreement to sell tobacco products only to
consumers.
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Such license, which will be for the ensuing three (3) years,
must at all times be displayed in a co nspicuous place so that it can
be seen. Upon expiration of such licens e, the retailer to whom such
license was issued may obtain a renewal license which shall be valid
for three (3) years or until expiration of the retailer's sales tax
permit, whichever is earlier, after which a renewal license shall be
valid for three (3) y ears. The manner and prorated fee for renewals
shall be prescribed by the Tax Commission. Every person operating
under such license as a retailer and who owns or operates more than
one place of business must secure a license for each place of
business. "Place of business" shall be construed to include places
where orders are received or where tobac co products are sold. A
"place of business" cannot be a location with a physical reside ntial
address. The Tax Commission shall not issue a license for a plac e
of business with a physical residential address.
C. Nothing in this section shall be construed to prohibit any
person holding a retail license from also holding a wholesaler
license.
D. 1. All wholesale or retail licenses shall be nonassignable
and nontransferable from one person to another person. Such
licenses may be transferred from one locat ion to another location
after an application has been filed with the Tax Commission
requesting such transfer and after the approval of the Tax
Commission.
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2. Wholesale and retail licenses shall be applied for on a form
prescribed by the Tax Commission. A ny person operating as a
wholesaler or retailer must at all times have an effective unex pired
license which has been issued by the Tax Commission. If any such
person or licensee continues to operate as such on a license issued
by the Tax Commission which has expired, or operates without ever
having obtained from the Tax Commission such licen se, such person or
licensee shall, after becoming delinquent for a peri od in excess of
fifteen (15) days, pay to the Tax Commission, in addition to the
annual license fee, a penalty of Ten Dollars ($10.00) per day on
each delinquent license for each day so operated in excess of
fifteen (15) days. The penalty provided for her ein shall not exceed
the annual license fee for such license. The penalties collected
pursuant to the provisions of this paragraph shall be deposited in
the Tobacco Products Tax Enforc ement Unit Revolving Fund created in
Section 7 400.6 of this act title.
E. No license may be granted, maintained or renewed if any of
the following conditions apply to the applicant. For purposes of
this section, "applicant" includes any combination of p ersons owning
directly or indirectly, in the aggregate, more than ten p ercent
(10%) of the ownership interests in the applicant:
1. The applicant owes Five Hundred Dol lars ($500.00) or more in
delinquent tobacco products taxes;
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2. The applicant had a who lesaler or retailer license revoked
by the Tax Commission within the pa st two (2) years; or
3. The applicant has been convicted of a crime relating to
stolen or counterfeit tobacco products, or receiving stolen or
counterfeit tobacco products.
F. No person or entity licensed pursuant to the provisions of
this section shall purchase tobacco products from or sell tobacco
products to a person or entity required to obtain a license unless
such person or entity has obtained such license.
G. In addition to any civil or criminal penalty provided by law,
upon a finding that a licen see has violated any provision of Section
301 et seq. of this title, the Tax Commission may revok e or suspend
the license or licenses of the licensee pursuant to the procedures
applicable to revocation of a license set forth in Section 418 of
this title.
SECTION 3. AMENDATORY 68 O.S. 2021, Section 400.1, is
amended to read as follows:
Section 400.1 A. For the purpose of enforcing the tobacco tax
laws of this state, the Oklahoma Tax Commission is authorized,
contingent upon the availabili ty of funds, to establish and maintain
a unit to be known as t he "Tobacco Products Tax Enforcement Unit".
The unit shall enforce the tobacco tax laws of this state and ensure
that all taxes are paid on tobacco products by:
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1. Confirming that all entities selling tobacco products in
this state are properly licensed as provided in Section 400 et seq.
of Title 68 of the Oklahoma Statutes;
2. Verifying that all retailers are only purchasing tobacco
products from wholesalers licensed by the Tax Commission;
3. Providing a dedicated telephone line and email address for
licensed wholesalers, licen sed retailers and the general public to
report suspected violations of tobacco tax laws; provided, no
entity, individual or those who report violations on behalf of a
licensed wholesaler or retailer shall be required to disclose t heir
identity;
4. Auditing licensed wholesalers and retailers to ensure all
tobacco product taxes are paid;
5. Issuing fines for violations as provided in Section 400 et
seq. of Title 68 of th e Oklahoma Statutes;
6. Conducting wholesale and retail tobac co inspections to find
and confiscate untaxed tobacco products;
7. Establishing data-sharing programs with tax dep artments in
surrounding states related to tobacco product taxes;
8. Creating an industry advisory committee including licensed
wholesalers and retailers who may represent the entity related to
tobacco products tax enforcement concerns and suggestions . The
industry advisory committee shall be composed of five (5) members as
follows:
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a. two members who are licensed wholesalers to be
appointed by the Governor,
b. one member who is a license d retailer to be appointed
by the President Pro Tempore of the Oklahoma Senate,
c. one member who is a licensed retailer to be appointed
by the Speaker of the Oklahoma House of
Representatives, and
d. one member who is a licensed wholesaler to be
appointed by the four members provided for in
subparagraphs a through c of this paragraph.
The committee shall meet quarterly. The Oklahoma Tax Commission
shall promulgate rules establishing the membership and minimum
requirements as may be deemed necessary t o carry out the purposes of
the committee; and
9. Working with law enforcement and conducting investigations
to stop illegal acquisition and shipment of tobacco products by
persons not licensed to sell tobacco products in this state.
B. The Tax Commission shall annually submit a report to the
Governor, President Pro Tempore of the Senate and Speaker of the
House of Representatives listing the number of wholesale and retail
tobacco inspections conducted, the amount of untaxed tobacco
products confiscated, the number of tobacco products tax audits
conducted, the amount of taxes assessed and the amount of taxes
collected as the result of audits and confisc ations, the number of
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suspected violations reported and the actions taken in response, and
the number of fines issued and the amount of fines collected.
SECTION 4. AMENDATORY 68 O.S. 2021, Section 400.5, is
amended to read as foll ows:
Section 400.5 A. Retailers shall only purchase tobacco
products from an Oklahoma -licensed tobacco wholesaler evidenced by a
current listing provided by the Oklahoma Tax C ommission. All
purchase invoices shall contain the license number of the whole saler
and shall be made available for ins pection by the Tax Commission.
Any purchases of tobacco produc ts from a person who is not holding a
current Oklahoma wholesale tobacco license shall be punishable by a
fine of the greater of One Thousand Dollars ($ 1,000.00) or five
times the unpaid tax on such products. The fine shall be in
addition to payment of an y unpaid tobacco products tax and the
forfeiture of any tobacco products to the State of Oklahoma as
provided by Section 414 of this title. A second or subsequent
offense shall be punishable b y revocation of the license. If the
retailer fails to pay a fi ne within thirty (30) days, the retailer's
license shall be suspended unt il the fine is paid in full.
B. The Oklahoma Tax Commission shall make availab le for all
licensed retailers a list of c urrently licensed wholesalers at least
monthly or through the u se of a website maintained by or on behalf
of the Oklahoma Tax Commission with updates made as often as
practical but no less than every thirty (30) day s.
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C. Fines collected pursuant to the pr ovisions of subsection A
of this section shall be deposited in the Tobacco Products Tax
Enforcement Unit Revolvin g Fund created in Secti on 7 400.6 of this
act title.
SECTION 5. AMENDATORY 6 8 O.S. 2021, Section 417, is
amended to read as follows:
Section 417. A. All tobacco products upon whi ch a tax is
levied by Section 400 et seq. of this title and all tobacco p roducts
sold, offered for sale or imported into this state i n violation of
the provisions of Section 403.2 of this title , found in the
possession, custody or control of any person for the purpose of
being consumed, sold or transporte d from one place to ano ther in
this state, for the purpose of evading or violating the provisions
of Section 400 et seq. of this title, or with intent to avoid
payment of the tax imposed thereunder, and any vehicle being used in
avoidance of such tax may be seized by any authori zed agent of the
Oklahoma Tax Commission or any sheriff, dep uty sheriff or police
within the state. Tobacco products from the time of seizure shall
be forfeited to the State of Oklah oma and assessment of penal ty as
provided thereby and assessment for any delinquent taxes found to be
owing. A proper proceeding shall be filed to main tain such seizure
and prosecute the forfe iture as herein provided; the p rovisions of
this section shall not apply, however, where the tax on suc h tobacco
products does not excee d One Dollar ($1.00).
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B. All such tobacco products so seized shall first be li sted
and appraised by the officer making such seizure and turned over to
the Tax Commission and a receip t taken therefor.
C. The person making such seizu re shall immediately ma ke and
file a written report thereof to the Tax Commission, showing the
name of the person making such seizure, the plac e where seized, the
person from whom seized, the property seize d and an inventory and
appraisement thereof, which inventory shall be bas ed on the usual
and ordinary retail price or value of the articles seized, and the
Attorney General, in the case of toba cco products sold, offered for
sale or imported into this state in violation of the provisions of
Section 403.2 of this title. Within sixty (60) days of seizure, the
person from whom the property was seized may fil e a request for
hearing with the Tax Comm ission or the Attorney General to show why
the seized property should not be forfeited and destroyed . If a
hearing is requested, the ow ner of the tobacco products shall be
given at least ten (10) days ' notice of the hearing. If no request
for hearing is filed within the time provided, the property seized
will be forfeited and destroyed.
D. The seizure of such toba cco products shall not relieve the
person from whom such tobacco products were seized from prosecution
or the payment of penalties.
E. The forfeiture provisions of Sectio n 400 et seq. of this
title shall only apply to persons having possession of or
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transporting tobacco product s with intent to barter, sell or give
away the same.
SECTION 6. This act shall become effective July 1, 2023.
SECTION 7. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect an d
be in full force from and after its passage an d approval.
59-1-8195 LRB 04/11/23