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HOUSE OF REPRESENTATIVES - FLOOR VERSION
STATE OF OKLAHOMA
2nd Session of the 59th Legislature (2024)
COMMITTEE SUBSTITUTE
FOR
HOUSE BILL NO. 4061 By: Wallace of the House
and
Paxton of the Senate
COMMITTEE SUBSTITUTE
An Act relating to heated tobacco products; ame nding
68 O.S. 2021, Section s 301, 401, and 402-3, which
relate to taxes on cigarettes and tobacco products;
modifying and clarifying definitions; excluding
heated tobacco products from certain definitions;
providing definition for heated tobacco products;
clarifying taxability of product s; establishing levy;
and providing an effective date.
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 301, is
amended to read as follows:
Section 301. For purposes of Section 301 et seq. of this title:
1. The term "cigarette" is defined to mean and include all
rolled tobacco or any substitute therefor for smoking, wrapped in
paper or any substitute ther efor and weighing not to exceed three
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(3) pounds per thousand cigaret tes. The term shall not include a
heated tobacco product as defined in Section 401 of this title ;
2. The term "person" is defined to mean and include any
individual, company, partnershi p, joint venture, joint agreement,
association (mutual or otherwise), limited liability company,
corporation, estate, trust, business trust receiver, or trustee
appointed by any state or federal court, or otherwise, syndicate, or
any political subdivision of the state or combination acting as a
unit, in the plural or singul ar number;
3. The term "wholesaler", "distributor" and/or "jobber" is
defined to mean and include a person, firm or corporation organized
and existing, or doing business, primarily to se ll cigarettes to,
and render service to re tailers in the territory such person, firm
or corporation chooses to serve , and that:
a. purchases cigarettes directly from the manufacturer ,
b. at least seventy-five percent (75%) of whose gross
sales are made at wholesale,
c. handles goods in wholesale q uantities and sells
through salespersons, advertising and/or sales
promotion devices,
d. carries at all times at its principal place of
business a representative st ock of cigarettes for
sale, and
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e. comes into the possession of cigarettes for the
purpose of selling them to retailers or to persons
outside or within the state who might resell or r etail
such cigarettes to consumers.
In addition to the foregoing, and irrespective of the percentage
or type of sales, the term "wholesaler", "distributor" and/or
"jobber" shall also include a ll purchasers of cigarettes making
purchases directly from the m anufacturer for distribution at
wholesale or retail sale and this shall not affect the requirements
relating to retail lice nses;
4. The term "retailer" is defined to be:
a. a person who comes into the possession of cigarettes
for the purpose of selling, o r who sells them at
retail, or
b. a person, not coming within the classification of
wholesaler, distributor and/or jobber as herein
defined, having possession of mor e than one thousand
cigarettes;
5. The term "consumer" is defined to be a person who recei ves
or who in any way comes into possession of cigarettes for the
purpose of consuming them, giving them away, or disposing of them in
a way other than by sale, bart er or exchange;
6. The term "Tax Commission" is defined to mean the Oklahoma
Tax Commission;
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7. The term "sale" and/or "sales" is hereby defined to be and
declared to include sales, barters, exchanges and every o ther
manner, method and form of transferri ng the ownership of persona l
property from one person to another, and is also declared to b e the
use or consumption in this state in the first instance of cigarettes
received from without the state or of any other cigarettes upon
which the tax has not been paid. The term "first sale" shall mean
and include the first sale or distribution of ciga rettes in
intrastate commerce or the first use or consumption of cigarettes
within this state;
8. The term "stamp" as herein used shall mean the stamp or
stamps by use of which:
a. the tax levied pursuant to the provisions of Section
301 et seq. of this t itle is paid,
b. the tax levied pursuant to the provisions of Section
349 of this title is paid , or
c. the payment in lieu of taxes authorized pursuant to a
compact entered into by the State of Oklahoma and a
federally recognized Indian tribe or nation pur suant
to the provisions of subsection C of Section 346 of
this title is paid;
9. The term "drop shipment" shall mean and include any delivery
of cigarettes received by any person within this state when payment
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for such cigarettes is made to the shipper or seller by or through a
person other than the consignee ;
10. The term "distributing agent" shall mean and include every
person in this state who acts as an agent of any person outside the
state by receiving cigarettes in interstate commerce and storing
such cigarettes subject to distribution or delivery upon order from
the person outside the state to distributors, wholesale d ealers and
retail dealers, or to consumers . The term "distributing agent"
shall also mean and include any person who solicits or tak es orders
for cigarettes to be shipped in interstate commerce to a person in
this state by a person residing outside of Okl ahoma, the tax not
having been paid on such cigarettes;
11. The term "vending machine" shall mean and include any coin
operating machine, contrivance, or device, by means of which
cigarettes are sold or dispensed in their original container ;
12. The term "use" means and includes the exercise of any right
or power over cigarettes incident to the ownership or possession
thereof, except that it shall not include the sale of cigarettes in
the regular course of business ;
13. a. The term "delivery sale" means any sale of cigarettes
to a consumer in Oklahoma where either:
(1) the purchaser submits the order for such sale by
means of a telephonic or other method of voice
transmission, the mails or any other delivery
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service, or the Internet or other online servic e,
or
(2) the cigarettes are delivered by use of the mails
or other delivery service.
b. A sale of cigarettes which satisfies the cri teria in
subparagraph a of this paragraph shall be a delivery
sale regardless of whether the seller is located
within or outside of Oklahoma.
c. A sale of cigarettes not for personal consumpti on to a
person who is a wholesale dealer or a retail dealer
shall not be a delivery sale.
d. For purposes of this paragraph, any sale of cigarettes
to an individual in Oklahoma shall be t reated as a
sale to a consumer unless such individual is licensed
as a distributor or retailer of cigarettes by the Tax
Commission;
14. The term "delivery service" means any person, including but
not limited to the United States Postal Service, that is en gaged in
the commercial delivery of letter s, packages, or other conta iners;
15. The term "manufacturer" means any person who manufac tures,
fabricates, assembles, processes, or labels a finished cigarette; or
imports, either directly or indirectly, a finis hed cigarette for
sale or distribution in this state;
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16. The term "mails" or "mailing" means the shipment of
cigarettes through the United States Postal Service;
17. The term "shipping container" means a container in which
cigarettes are shipped in conn ection with a delivery sale; and
18. The term "shipping documents" means bills of lading,
airbills, or any other documents used to e vidence the undertaking by
a delivery service to deliver letters, packages, or other
containers.
SECTION 2. AMENDATORY 68 O.S. 2021, Sectio n 401, is
amended to read as follows:
Section 401. For the purpose of this article:
1. The word "person" shall mean any individual, company,
limited liability compan y, corporation, partnership, association,
joint adventure, estate, tr ust or any other group, or combination
acting as a unit, and the plural as well as the singular, unless the
intention to give a more l imited meaning is disclosed by the
context;
2. The term "Tax Commission" shall mean the Oklahoma Ta x
Commission;
3. The word "wholesaler" shall include dealers whose principal
business is that of a wholesale dealer, and who is known t o the
trade as such, who shall sell any tobacco products to licensed
retail dealers only for the purpose of resale ;
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4. The word "retailer" shall include every dealer, other than a
wholesaler as defined above, whose principal business is that of
selling merchandise at retail, who shall sell, or offer for sale,
tobacco products;
5. The word "consumer" shall mean a person who comes into
possession of tobacco for the purpose of consuming it;
6. The words "first sale" shall mean and include the first
sale, or distribution, of tobacco products in intrastate commerce,
or the first use or consumption of tobacco products within this
state;
7. The words "tobacco products" shall mean any cigars, smoking
tobacco and, smokeless tobacco, and heated tobacco products ;
8. The term "cigars" shall include any roll of tobacco for
smoking, irrespective o f size or shape and irrespective of th e
tobacco being flavor ed, adulterated or m ixed with any other
ingredients, where such roll has a wrapper made chiefly of tobacco.
The term shall not include any roll of tobacco which is a ciga rette
as defined in Section 301 of this title or a heated tobac co product
as defined in this section;
9. The term "smokeless tobacco" shall mean all smokeless
tobacco including snuff and chewing tobacco . The term shall not
include any roll of tobacco which is a ciga rette as defined in
Section 301 of this title or a heated tobacco product as defined in
this section;
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10. The term "snuff" shall mean any finely cut, ground or
powdered tobacco that is not intended to be smoked . The term shall
not include any roll of tobacco which is a ciga rette as defined in
Section 301 of this title or a he ated tobacco product as defined in
this section;
11. The term "chewing tobacco" means any leaf tobacco that is
not intended to be smoked. The term shall not include any roll of
tobacco which is a ciga rette as defined in Section 301 of this title
or a heated tobacco product as defined in this sect ion;
12. The term "smoking tobacco" shall mean any pipe tobacco or
roll-your-own tobacco;
13. The term "pipe tobacco" means any tobacco which, because of
its appearance, type, packaging or labeling, is suitable for use and
likely to be offered to, or purchased by, consumers as tobacco to be
smoked in a pipe;
14. The term "roll-your-own tobacco" means any tobacco which ,
because of its appearance, type, packaging or lab eling, is suitable
for use and likely to be o ffered to, or purchased by, consumers as
tobacco for making cigarettes or cigars, or for use as wrappers
therof thereof; and
15. The term "untaxed" means that the full amo unt of tax has
not been paid as required by Section 400 et seq . of this title; and
16. The term "heated tobacco product" means a single use
consumable unit containing tobacco that produces an inhalable
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aerosol: (i) by heating the tobacco by means of a devi ce without
combustion of the tobacco, or (ii) by heat generated from a
combustion source that only or primarily heats rather than burns th e
tobacco.
SECTION 3. AMENDATORY 68 O.S. 2021, Section 402 -3, is
amended to read as follows:
Section 402-3. A. In addition to the tax levied in Sections
402 and 402-1 of this title, effective January 1, 2005, there shall
be levied, assessed, collected, and paid in respect to the articles
containing tobacco enumerated in Sect ion 401 et seq. of this title,
a tax in the following amounts:
1. Cigars. Upon all cigars of all descriptions made of
tobacco, or any substitute therefor, a nd weighing more than three
(3) pounds per thousand, Ninety D ollars ($90.00) per thousand. For
the purpose of computing the tax, cheroots, sto gies, etc., are
hereby classed as cigars;
2. Smoking Tobacco. Upon all smoking tobacco, the tax shall be
forty percent (40%) of the factory list price exclusive of any trade
discount, special discount or deals; and
3. Smokeless Tobacco. Upon smokeless tobacco, the tax shall be
thirty percent (30%) of the factory list price exclusive of any
trade discount, special discount or deals; and
4. Heated Tobacco Products. Upon all heated tobacco products,
the tax shall be fifty (50) mills per single use consumable unit,
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equating to One Dollar ( $1.00) per package of twenty units or
equivalent.
B. Except as provided in s ubsection C of this section, the
revenue resulting from the addi tional tax levied in subsection A of
this section shall be app ortioned by the Oklahoma Tax Commission and
transmitted to the State Treasurer as follows:
1. Twenty-two and six-hundredths percent (22.06%) shall be
placed to the credit of the Health Employee and Economy Improvement
Act Revolving Fund created in Section 1010.1 of Title 56 of the
Oklahoma Statutes;
2. Three and nine-hundredths percent (3.09%) shall be placed to
the credit of the Comprehensive Cancer Center Debt Service Revolving
Fund created in Section 160.1 of Title 62 of the Oklahoma Statutes;
3. Before July 1, 2008, seven and fifty-hundredths percent
(7.50%) shall be placed to the credit of the Trauma Care Assistance
Revolving Fund created in Section 1-2530.9 of Title 63 of the
Oklahoma Statutes. On and after July 1, 2008, seven and fifty -
hundredths percent (7.50%) shall be allocated as follows:
a. every month, an amount equal to the actual amount
placed to the credit of the Tr auma Care Assistance
Revolving Fund pursuant to this paragraph f or the same
month of the 2008 fiscal year shall be credited to the
Trauma Care Assistance Revolving Fund,
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b. every month, any amount over and above the amount
placed to the credit of the Traum a Care Assistance
Revolving Fund pursuant to subparagraph a of t his
paragraph shall be credited to the Oklahoma Emergency
Response Systems Stabilization and Improvement
Revolving Fund as created in Section 1-2512.1 of Title
63 of the Oklahoma Statutes unti l the combined amount
credited to the Oklahoma Emergency Respons e Systems
Stabilization and Improvement Revolving Fund pursuan t
to this section and Section 302-5 of this title is
equal to Two Million Five Hundred Thousand Dollars
($2,500,000.00) each year, and
c. any additional revenue allocated pursuant to this
paragraph shall be placed to the credit of the Trauma
Care Assistance Revolving Fund;
4. Three and nine-hundredths percent (3.09%) shall be placed to
the credit of the Oklahoma State University Col lege of Osteopathic
Medicine Revolving Fund created in Section 1 60.2 of Title 62 of the
Oklahoma Statutes;
5. Twenty-six and thirty-eight-hundredths percent (26.38%)
shall be placed to the credit of the O klahoma Health Care Authority
Medicaid Program Fund created in Section 5020 of Title 63 of the
Oklahoma Statutes fo r the purposes of maintaining programs and
services funded under the federal "Jobs and Growth Tax Relief
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Reconciliation Act of 2003", reimbursing city/county-owned
hospitals, increasing emerge ncy room physician rates, and providing
TEFRA 134, also known as "Katie Beckett" services;
6. Two and sixty-five-hundredths percent (2.65%) shall be
placed to the credit of the Department of Mental Health and
Substance Abuse Services Revolving Fund create d in Section 2-303 of
Title 43A of the Oklahoma Statutes;
7. Forty-four-hundredths of one percent (0.44%) shall be placed
to the credit of the Belle Maxine Hilliard Breast and Cervical
Cancer Treatment Revolving Fund created in Section 1-559 of Title 63
of the Oklahoma Statutes;
8. One percent (1%) shall be placed to the credit of the
Teachers' Retirement System Revolving Fund created in Section 158 of
Title 62 of the Oklahoma Statutes;
9. Two and seven-hundredths percent (2.07%) shall be placed to
the credit of the Education Reform Revolving Fund created in Section
34.89 of Title 62 of the Oklahoma Statutes;
10. Sixty-six-hundredths percent (0.66%) shall be placed to the
credit of the Tobacco Prevention and Cessation Revolving Fund
created in Section 1 -105d of Title 63 of the Oklahoma Statutes;
11. Sixteen and eigh ty-three-hundredths percent (16.83%) shall
be placed to the credit of the General Revenue Fund; and
12. For fiscal years beginning July 1, 2 004, and ending June
30, 2006, fourteen and twenty -three-hundredths percent (14.23%)
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shall be apportioned to munici palities and counties that levy a
sales tax, in the proportion s which total munici pal and county sales
tax revenue was apportioned by the Tax Commission in the preceding
month.
For fiscal years beginning July 1, 2006, and thereafter, the
apportionment percentage specified in paragraph 12 of this
subsection will be a djusted by dividing t he total municipal and
county sales tax revenue collected i n the calendar year immediately
preceding the commencement of the fiscal year by the sum of the
state sales tax revenue and total municipal and county sales tax
revenue collected in the same year. This ratio shall be divided by
the ratio of the total muni cipal and county sales tax revenue
collected in the calendar year beginning January 1, 2004, and ending
December 31, 2004, divided by the sum of the state sales tax revenue
and total municipal and county sales tax revenue collected in the
same year. The resulting quotient shall be multiplied by fourteen
and twenty-three-hundredths percent (14.23%) to determine the
apportionment percentage for the fiscal year.
For fiscal years beginning July 1, 2006 , and thereafter, any
adjustment to the percentage of reven ues apportioned to
municipalities and counties shal l be reflected in the percent of
revenues apportioned to the Gen eral Revenue Fund.
C. The net amount of any revenue result ing from a payment in
lieu of excise taxes on little cigars, cigars, smoking tobac co and,
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smokeless tobacco, and heated tobacco produ cts levied by this
section, pursuant to a compact with a federally recognized Indian
tribe or nation after deductions for depo sits into trust accounts
pursuant to such compacts, shall be apportioned by the Tax
Commission and transmitted to the Sta te Treasurer as follows:
1. Thirty-three and forty-nine-hundredths percent (33.49%)
shall be placed to the credit of the Health Employ ee and Economy
Improvement Act Revolving Fund created in Section 1010.1 of Title 56
of the Oklahoma Statutes;
2. Four and sixty-nine-hundredths percent (4.69%) shall be
placed to the credit of the Comprehensive Canc er Center Debt Service
Revolving Fund created in Section 160.1 of Title 62 of the Oklahoma
Statutes;
3. Before July 1, 2008, eleven and thirty-nine-hundredths
percent (11.39%) shall be placed to the credit of the Trauma Care
Assistance Revolving Fund crea ted in Section 1-2530.9 of Title 63 of
the Oklahoma Statutes. O n and after July 1, 2008, eleven and
thirty-nine-hundredths percent (11. 39%) shall be allocated a s
follows:
a. every month, an amount equal to the actual amount
placed to the credit of the Tra uma Care Assistance
Revolving Fund pursu ant to this paragraph f or the same
month of the 2008 fiscal year shall be credited to the
Trauma Care Assistance Revolving Fund,
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b. every month, any amount over and above the amount
placed to the credit of the Trauma Care Assistance
Revolving Fund pursuant to subparagraph a of this
paragraph shall be credited to the Oklahoma Emergency
Response Systems Stabilization and Impro vement
Revolving Fund as created in Section 1-2512.1 of Title
63 of the Oklahoma Statutes until the combined amount
credited to the Oklahoma Emergency Respon se Systems
Stabilization and Improvement Revolving Fund pursuant
to this section and Section 302-5 of this title is
equal to Two Million Five Hundred Thousand Dollars
($2,500,000.00) each year, and
c. any additional revenue allocated pursuant to this
paragraph shall be placed to the credit of the Trauma
Care Assistance Revolving Fund;
4. Four and sixty-nine-hundredths percent (4.69%) shall be
placed to the credit of the Oklahoma State University College of
Osteopathic Medicine Revolvi ng Fund created in S ection 160.2 of
Title 62 of the Oklahoma Statutes;
5. Forty and six-hundredths percent (40.06%) shal l be placed to
the credit of the Oklahoma Health Care Authority Medicaid Program
Fund created in Section 5020 of Title 63 of the Oklaho ma Statutes
for the purposes of maintainin g programs and services funded under
the federal "Jobs and Growth Tax Relief Re conciliation Act of 2003",
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reimbursing city/county-owned hospitals, increasing emergency room
physician rates, and providing TEFRA 134, also known as "Katie
Beckett" services;
6. Four and one-hundredths percent (4.01%) shall be pl aced to
the credit of the Department of Mental Health and Substance Abuse
Services Revolving Fund created in Section 2 -303 of Title 43A of the
Oklahoma Statutes;
7. Sixty-seven-hundredths percent (0.67 %) shall be placed to
the credit of the Belle Maxine Hilliard Breast and Cervic al Cancer
Treatment Revolving Fund created in Section 1-559 of Title 63 of the
Oklahoma Statutes; and
8. One percent (1%) shall be pla ced to the credit of the
Tobacco Prevention and Cessation Revolving Fund created in Section
1-105d of Title 63 of the Oklahoma Statutes.
D. It shall not be permissible for a retailer to advertise that
the retailer will absorb the tax due on the taxable me rchandise
described herein. Such tax shal l be paid by the consumer.
SECTION 4. This act shall become effective November 1, 2024.
COMMITTEE REPORT BY: COMMITTEE ON APPROPRIATIONS AND BUDGET, dated
02/26/2024 - DO PASS, As Amended and Coauthored.