By: Otto H.B. No. 3536
A BILL TO BE ENTITLED
AN ACT
relating to the imposition of a fee on the sale of cigarettes and
cigarette tobacco products manufactured by certain companies;
providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 161, Health and Safety Code, is amended
by adding Subchapter V to read as follows:
SUBCHAPTER V. FEE ON CIGARETTES AND CIGARETTE TOBACCO PRODUCTS
MANUFACTURED BY CERTAIN COMPANIES
Sec. 161.601. PURPOSE. The purpose of this subchapter is
to:
(1) recover health care costs to the state imposed by
non-settling manufacturers;
(2) prevent non-settling manufacturers from
undermining this state's policy of reducing underage smoking by
offering cigarettes and cigarette tobacco products at prices that
are substantially below the prices of cigarettes and cigarette
tobacco products of other manufacturers;
(3) protect the tobacco settlement agreement and
funding, which has been reduced because of the growth of sales of
non-settling manufacturer cigarettes and cigarette tobacco
products, for programs that are funded wholly or partly by payments
to this state under the tobacco settlement agreement and recoup for
this state settlement payment revenue lost because of sales of
non-settling manufacturer cigarettes and cigarette tobacco
products;
(4) ensure evenhanded treatment of manufacturers and
further protect the tobacco settlement agreement and funding by
imposing a partial payment obligation on cigarettes and cigarette
tobacco products of non-settling manufacturers that already make
payments on Texas sales under the Master Settlement Agreement until
an amendment to that agreement that will provide those
manufacturers with a credit for payments to Texas, as defined
herein, is effective; and
(5) provide funding for any purpose the legislature
determines.
Sec. 161.602. DEFINITIONS. In this subchapter:
(1) "Monthly fee" or "fee" means the fee imposed on a
distributor pursuant to Section 161.605, based on the non-settling
manufacturer cigarettes and cigarette tobacco products required to
be included on the distributor's returns under that section, and
calculated using the fee rate under Section 161.604.
(2) "Brand family" means each style of cigarettes or
cigarette tobacco products sold under the same trademark. The term
includes any style of cigarettes or cigarette tobacco products that
have a brand name, trademark, logo, symbol, motto, selling message,
recognizable pattern of colors, or other indication of product
identification that is identical to, similar to, or identifiable
with a previously known brand of cigarettes or cigarette tobacco
products.
(3) "Cigarette" means any product that contains
nicotine and is intended to be burned or heated under ordinary
conditions of use, and consists of or contains:
(A) a roll of tobacco wrapped in paper or another
substance that does not contain tobacco;
(B) tobacco, in any form, that is functional in a
product that, because of the product's appearance, the type of
tobacco used in the filler, or the product's packaging and
labeling, is likely to be offered to or purchased by a consumer as a
cigarette; or
(C) a roll of tobacco wrapped in any substance
containing tobacco that, because of the product's appearance, the
type of tobacco used in the filler, or the product's packaging and
labeling, is likely to be offered to or purchased by a consumer as a
cigarette.
(4) "Cigarette tobacco product" means roll-your-own
tobacco or tobacco that, because of the tobacco's appearance, type,
packaging, or labeling, is suitable for use in making cigarettes
and is likely to be offered to or purchased by a consumer for that
purpose.
(5) "Credit amendment" means an amendment to the
master settlement agreement that offers a credit to subsequent
participating manufacturers for fees paid under this act with
respect to their products in a form agreed upon by (1) Settling
States (as defined in the master settlement agreement) with
aggregate Allocable Shares (as defined in the master settlement
agreement) equal to at least 99.937049%; (2) the original
participating manufacturers (as defined in the master settlement
agreement); and (3) subsequent participating manufacturers whose
aggregate market share, expressed as a percentage, of the total
number of individual cigarettes sold in the fifty United States,
the District of Columbia, and Puerto Rico during the calendar year
at issue, as measured by excise taxes collected by the federal
government, and, in the case of cigarettes sold in Puerto Rico, by
arbitrios de cigarillos collected by the Puerto Rico taxing
authority, is greater than 2.5 percent. For purposes of calculation
of subsequent participating manufacturer market share under this
act, 0.09 ounces of "roll your own" tobacco shall constitute one
cigarette.
(6) "Distributor" has the meaning assigned by Section
154.001 or 155.001, Tax Code, as appropriate.
(7) "Manufacturer" means a person that manufactures,
fabricates, or assembles cigarettes or cigarette tobacco products,
or causes or arranges for the manufacture, fabrication or assembly
of cigarettes or cigarette tobacco products, for sale or
distribution. For purposes of this subchapter, the term includes a
person that is the first importer into the United States of
cigarettes or cigarette tobacco products manufactured, fabricated,
or assembled outside the United States.
(8) "Master settlement agreement" means the
settlement agreement entered into on November 23, 1998 by 46 states
and leading United States tobacco manufacturers, as amended to
date;
(9) "Non-settling manufacturer" means a manufacturer
of cigarettes or cigarette tobacco products that did not sign a
tobacco settlement agreement as described in section 161.602(14).
(10) "Non-settling manufacturer cigarettes" means
cigarettes of a non-settling manufacturer.
(11) "Non-settling manufacturer cigarette tobacco
products" means cigarette tobacco products of a non-settling
manufacturer.
(12) "Settling manufacturer" means a manufacturer of
cigarettes or cigarette tobacco products that signed a tobacco
settlement agreement as described in Section 161.602(14).
(13) "Subsequent participating manufacturer" shall
have the same meaning as provided for that term in the master
settlement agreement, except such term shall exclude any settling
manufacturer under the tobacco settlement agreement described in
section 161.602(14)(B). Provided that a manufacturer shall not be
treated as a subsequent participating manufacturer for purposes of
section 161.604(c) unless it has provided to the comptroller notice
and proof, in such form and manner as the comptroller may prescribe,
that it is a subsequent participating manufacturer.
(14) "Tobacco settlement agreement" means either (A)
the Comprehensive Settlement Agreement and Release filed on January
16,1998, in the United States District Court, Eastern District of
Texas, in the case styled The State of Texas v. The American Tobacco
Co., et al., No. 5-96CV-91, and all subsequent amendments; or (B)
the settlement agreement entered into on March 20, 1997 with
respect to the matter described in paragraph (A), but only as to
companies that signed such agreement on that date.
Sec. 161.603. FEE IMPOSED. (a) A fee is imposed on the sale,
use, consumption, or distribution in this state of:
(1) non-settling manufacturer cigarettes if a stamp is
required to be affixed to a package of those cigarettes under
Section 154.041, Tax Code;
(2) non-settling manufacturer cigarettes that are
sold, purchased, or distributed in this state but that are not
required to have a stamp affixed to a package of those cigarettes
under Chapter 154, Tax Code;
(3) non-settling manufacturer cigarette tobacco
products that are subject to the tax imposed by Section 155.0211,
Tax Code; and
(4) non-settling manufacturer cigarette tobacco
products that are sold, purchased, or distributed in this state but
that are not subject to the tax imposed by Section 155.0211, Tax
Code.
(b) The fee imposed by this section does not apply to
cigarettes or cigarette tobacco products that a settling
manufacturer claims as its own, and that are included in computing
payments to be made by such settling manufacturer, under the
tobacco settlement agreement described in section 161.602(14)(A).
(c) The fee imposed by this subchapter does not apply to
cigarettes or cigarette tobacco products that are sold into another
state for resale to consumers outside of this state, provided that
the sale is reported to the state into which the cigarettes are sold
pursuant to 15 U.S.C. section 376.
(d) The fee imposed by this subchapter is in addition to any
other privilege, license, fee, or tax required or imposed by state
law.
(e) Except as otherwise provided by this subchapter, the fee
imposed by this subchapter is imposed, collected, paid,
administered, and enforced in the same manner as the taxes imposed
by Chapters 154 and 155, Tax Code, as appropriate.
(f) The fee imposed by this subchapter shall be collected
only once as to each cigarette or cigarette tobacco product on which
it is due.
Sec. 161.604. RATE OF FEE. (a) For cigarettes or tobacco
products sold, used, consumed, or distributed in this state, as
provided in section 161.603, during the calendar year 2013, the fee
is imposed at the rate of 2.75 cents for:
(1) each non-settling manufacturer cigarette; and
(2) each 0.09 ounce of non-settling manufacturer
cigarette tobacco product.
(b) Beginning in January 2014, and in January of each
subsequent year, the comptroller shall compute the rate of the fee
applicable during that calendar year by increasing the rate for the
preceding calendar year by the greater of:
(1) three percent; or
(2) the actual total percent -change in the Consumer
Price Index for All Urban Consumers, as published by the Bureau of
Labor Statistics of the United States Department of Labor, during
such preceding calendar year (calculated by comparing the CPI for
December of such preceding calendar year with the CPI for December a
year earlier).
(c) Notwithstanding Section 601.604(a), the rate of the fee
on the cigarettes and cigarette tobacco products of subsequent
participating manufacturers shall, for calendar months beginning
prior to the effective date of a credit amendment, be calculated
under subsections (a) and (b) of this section by substituting 0.75
cents for 2.75 cents in subsection (a) of this section. For calendar
months beginning on or after the effective date of a credit
amendment, the rate of the fee on the cigarettes and cigarette
tobacco products of subsequent participating manufacturers shall
be the same as the rate that applies for such months to the
cigarettes of non-settling manufacturers who are not subsequent
participating manufacturers.
Sec. 161.605. RETURN AND PAYMENT OF MONTHLY FEE. (a) A
distributor required to file a report under Section 154.210 or
155.111, Tax Code, shall, along with the report required by those
sections, make a return which includes, as appropriate:
(1) the number and denominations of stamps affixed to
individual packages of non-settling manufacturer cigarettes during
the preceding month;
(2) the amount of non-settling manufacturer cigarette
tobacco products subject to the tax imposed by Section 155.0211,
Tax Code, during the preceding month;
(3) the number of individual packages of non-settling
manufacturer cigarettes and the amount of non-settling
manufacturer cigarette tobacco products not subject to the tax
imposed by Chapter 154, Tax Code, or Section 155.0211, Tax Code,
sold or purchased in this state or otherwise distributed in this
state for sale in the United States; and
(4) any other information the comptroller considers
necessary or appropriate to determine the amount of the monthly fee
or to enforce this subchapter.
(b) The information required by subsections (a)(1), (2),
and (3) must be itemized for each place of business and by
manufacturer and brand family.
(c) The return required under this Section shall include a
calculation of the monthly fee, which shall be due and payable by
the distributor with the return for that reporting period. To
assist distributors in calculating the monthly fee, the comptroller
shall publish and maintain on the comptroller's Internet website a
current list of the names and brands of the settling manufacturers,
non-settling manufacturers that are subsequent participating
manufacturers, non-settling manufacturers that are not subsequent
participating manufacturers, and the effective date of any credit
amendment.
(d) The requirement to make a return under this section
shall be enforced in the same manner as the requirement to deliver
to or file with the comptroller a report required under Section
154.210 or 155.111, Tax Code, as appropriate.
(e) Information obtained from a return provided under
subsection (a) regarding cigarettes or cigarette tobacco products
sold, purchased, or otherwise distributed by a non-settling
manufacturer may be disclosed by the comptroller to that
manufacturer or to the authorized representative of the
manufacturer.
Sec. 161.606. REPORT TO ATTORNEY GENERAL BEFORE OFFERING
NON-SETTLING MANUFACTURERCIGARETTES OR CIGARETTE TOBACCO PRODUCTS
FOR SALE OR DISTRIBUTION IN THIS STATE. (a) If cigarettes or
cigarette tobacco products of a non-settling manufacturer were not
offered for sale or distribution in this state on September 1, 2013,
such non-settling manufacturer shall, before the date the
cigarettes or cigarette tobacco products are offered for sale or
distribution in this state, provide to the attorney general on a
form prescribed by the attorney general:
(1) the non-settling manufacturer's complete name,
address, and telephone number;
(2) the date that the non-settling manufacturer will
begin offering cigarettes or cigarette tobacco products for sale or
distribution in this state;
(3) the names of the brand families of the cigarettes
or cigarette tobacco products that the non-settling manufacturer
will offer for sale or distribution in this state;
(4) a statement that the non-settling manufacturer
intends to comply with this subchapter
(5) the name, address, telephone number, and signature
of an officer of the non-settling manufacturer attesting to all of
the included information.
(b) The attorney general shall make the information
provided under this section available to the comptroller.
Sec. 161.607. PENALTIES FOR NONCOMPLIANCE. Cigarettes and
cigarette tobacco products of a non-settling manufacturer that are
sold, used, consumed or distributed in this state in violation of
this subchapter, including failure to make full payment of the fees
imposed by this subchapter, shall be treated as cigarettes or
tobacco products for which the tax assessed by Chapter 154 or 155,
Tax Code, as appropriate, has not been paid, and the distributor or
manufacturer is subject to all penalties imposed by those chapters
for violations of those chapters.
Sec. 161.608. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS.
A non-settling manufacturer shall appoint and engage a resident
agent for service of process.
Sec. 161.609 AUDIT OR INSPECTION. The comptroller or
attorney general is entitled to conduct reasonable periodic audits
or inspections of the financial records of a non-settling
manufacturer and its distributors to ensure compliance with this
subchapter.
Sec. 161.610. COMPTROLLER INFORMATION SHARING. Upon
request, the comptroller shall report annually to the Independent
Auditor, or other entities responsible for making calculations or
other determinations under a tobacco settlement agreement or the
Master Settlement Agreement, as the Master Settlement Agreement may
be hereafter amended or supplemented by some or all of the parties
thereto, the volume of cigarettes on which the fee required under
Section 161.603 of this subchapter is paid, itemized by cigarette
manufacturer and brand family.
Sec. 161.611. REVENUE DEPOSITED IN GENERAL REVENUE FUND.
The revenue from the fees imposed by this subchapter shall be
deposited in the state treasury to the credit of the general revenue
fund.
Sec. 161.612. APPLICATION OF SUBCHAPTER. This subchapter
applies without regard to Section 154.022, Tax Code, or any other
law that might be read to create an exemption for interstate sales.
SECTION 2. (a) Not later than September 30, 2013, a
non-settling manufacturer, as that term is defined by Section
161.602, Health and Safety Code, as added by this Act, that is
offering cigarettes or cigarette tobacco products for sale or
distribution in this state on September 1, 2013, shall provide to
the attorney general on a form prescribed by the attorney general:
(1) the non-settling manufacturer's complete name,
address, and telephone number;
(2) the date that the non-settling manufacturer began
offering cigarettes or cigarette tobacco products for sale or
distribution in this state;
(3) the names of the brand families of the cigarettes
or cigarette tobacco products that the non-settling manufacturer
offers for sale or distribution in this state;
(4) a statement that the non-settling manufacturer
intends to comply with Subchapter V, Chapter 161, Health and Safety
Code, as added by this Act; and
(5) the name, address, telephone number, and signature
of an officer of the non-settling manufacturer attesting to all of
the included information.
(b) The attorney general shall make the information
provided under subsection (a) of this section available to the
comptroller.
SECTION 3. The comptroller and the attorney general shall
have the authority to adopt rules as necessary to carry out or
enforce Chapter 161, Subchapter V.
SECTION 4. This Act takes effect September 1, 2013.