83R9839 ADM-F
By: Hinojosa S.B. No. 1136
A BILL TO BE ENTITLED
AN ACT
relating to imposing 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 non-settling
manufacturers that already make payments on Texas sales under the
master settlement agreement until a credit amendment to that
agreement that will provide those manufacturers with a credit for
payments to Texas is effective; and
(5) provide funding for any purpose the legislature
determines.
Sec. 161.602. DEFINITIONS. In this subchapter:
(1) "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.
(2) "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.
(3) "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.
(4) "Credit amendment" means an amendment to the
master settlement agreement that offers a credit to subsequent
participating manufacturers for fees paid under this subchapter
with respect to their products in a form agreed on by 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 percent; by the original
participating manufacturers, as defined in the master settlement
agreement; and by subsequent participating manufacturers whose
aggregate market share, expressed as a percentage of the total
number of individual cigarettes sold in the 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 the
calculation of subsequent participating manufacturer market share
under this subchapter, 0.09 ounces of roll-your-own tobacco
constitutes one individual cigarette.
(5) "Distributor" has the meaning assigned by Section
154.001 or 155.001, Tax Code, as appropriate.
(6) "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.
(7) "Master settlement agreement" means the
settlement agreement entered into on November 23, 1998, by 46
states and leading United States tobacco manufacturers, as amended
as of September 1, 2013.
(8) "Non-settling manufacturer" means a manufacturer
of cigarettes or cigarette tobacco products that did not sign a
tobacco settlement agreement described by Subdivision (13).
(9) "Non-settling manufacturer cigarettes" means
cigarettes of a non-settling manufacturer.
(10) "Non-settling manufacturer cigarette tobacco
products" means cigarette tobacco products of a non-settling
manufacturer.
(11) "Settling manufacturer" means a manufacturer of
cigarettes or cigarette tobacco products that signed a tobacco
settlement agreement described by Subdivision (13).
(12) "Subsequent participating manufacturer" has the
same meaning provided for that term in the master settlement
agreement, except that the term excludes any settling manufacturer
under the tobacco settlement agreement described by Subdivision
(13)(B). A manufacturer may 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 the
form and manner the comptroller may prescribe, that it is a
subsequent participating manufacturer.
(13) "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, but only as to companies that signed that 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 that settling manufacturer, under the
tobacco settlement agreement described by Section 161.602(13)(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
under 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 Chapter 154 or 155, Tax Code, as appropriate, taking into account
that the fee is imposed on non-settling manufacturers.
(f) The fee imposed by this subchapter shall be collected
only once on each cigarette or cigarette tobacco product on which it
is due.
Sec. 161.604. RATE OF FEE. (a) For cigarettes or cigarette
tobacco products sold, used, consumed, or distributed in this
state, as provided by Section 161.603, during the 2013 calendar
year, the fee is imposed at the rate of 2.75 cents for:
(1) each non-settling manufacturer cigarette; and
(2) each 0.09 ounces 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 tax
applicable during that calendar year by increasing the rate for the
preceding calendar year, as recalculated under Section 161.607 for
that year, by the greater of:
(1) three percent; or
(2) the actual total percentage change in the Consumer
Price Index for All Urban Consumers (CPI), as published by the
Bureau of Labor Statistics of the United States Department of
Labor, during the preceding calendar year, calculated by comparing
the CPI for December of the preceding calendar year with the CPI for
December a year earlier.
(c) Notwithstanding Subsection (a), the rate of the fee on
the cigarettes and cigarette tobacco products of a subsequent
participating manufacturer shall, for calendar months beginning
before the effective date of a credit amendment, be calculated by
substituting 0.75 cents for 2.75 cents in Subsection (a). 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 those months to the
cigarettes of non-settling manufacturers who are not subsequent
participating manufacturers.
Sec. 161.605. DISTRIBUTOR'S REPORT. (a) A distributor
required to file a report under Section 154.210 or 155.111, Tax
Code, shall, in addition to the information required by those
sections, include in that required report, 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 fee imposed
by this subchapter 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 requirement to report information 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.
(d) Information obtained from a report 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 the
manufacturer or to the authorized representative of the
manufacturer.
Sec. 161.606. NOTICE AND PAYMENT OF FEE. (a) Each month,
not later than the 20th day after the date the comptroller receives
the information required by Section 161.605, the comptroller shall:
(1) compute the amount of the fee imposed by this
subchapter that each non-settling manufacturer owes for that
reporting period based on that information and any other
information available to the comptroller; and
(2) mail to each non-settling manufacturer a notice of
the fee the manufacturer owes.
(b) Not later than the 15th day of the month after the month
in which the comptroller mails a non-settling manufacturer a notice
under Subsection (a), the non-settling manufacturer shall send to
the comptroller the amount of the fee due according to the notice.
Sec. 161.607. ADDITIONAL FEE. (a) In preparing the final
notice under Section 161.606 for the 2014 calendar year and for each
subsequent calendar year, the comptroller shall recalculate the fee
rate for the calendar year to which that notice applies, using the
methodology specified in Section 161.604, except that:
(1) the rate of tax for the year to which the increases
are applied shall be the greater of the rate for the preceding year
calculated under this section and the rate for that year originally
calculated under Section 161.604; and
(2) Section 161.604(b)(2) shall be applied using the
actual total percent change in the Consumer Price Index for All
Urban Consumers (CPI), as published by the Bureau of Labor
Statistics of the United States Department of Labor, for the
calendar year to which that final notice relates, calculated by
comparing the CPI for December of the calendar year to which the
notice relates with the CPI for December of the year preceding the
year to which the notice relates.
(b) If the rate as recalculated under Subsection (a) exceeds
the rate originally calculated for the calendar year under Section
161.604, the amount shown as payable by each non-settling
manufacturer in the final notice shall be equal to the amount of
non-settling manufacturer cigarettes and non-settling manufacturer
cigarette tobacco products of that manufacturer sold, used,
consumed, or distributed in this state during the full year to which
the notice relates multiplied by the recalculated fee rate computed
under Subsection (a), reduced by the amount of fees paid by that
manufacturer under the notices previously issued for that year
under Section 161.606.
Sec. 161.608. DIRECTORY OF COMPLYING MANUFACTURERS. (a)
The comptroller shall develop, maintain, and publish on the
comptroller's Internet website a directory listing of all
manufacturers that have complied with this subchapter and their
brands.
(b) The comptroller shall provide the list described by
Subsection (a) to any person on request.
Sec. 161.609. PREPAYMENT BEFORE OFFERING NON-SETTLING
MANUFACTURER CIGARETTES 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, 2012, the
non-settling manufacturer may not offer those cigarettes or
cigarette tobacco products for sale or distribution in this state
after that date unless the manufacturer first prepays the fee
imposed by this subchapter for sales of cigarettes and cigarette
tobacco products that will occur in the first calendar month in
which they are sold or distributed in this state.
(b) The amount a non-settling manufacturer is required to
prepay under this section is equal to the greater of:
(1) the rate prescribed by Section 161.604 in effect
on that date multiplied by:
(A) the number of cigarettes on which the fee
would be due that the comptroller reasonably projects that the
non-settling manufacturer will sell or distribute in this state
during that calendar month; and
(B) each 0.09 ounces of non-settling
manufacturer cigarette tobacco products on which the fee would be
due that the comptroller reasonably projects that the non-settling
manufacturer will sell or distribute in this state during that
calendar month; or
(2) $50,000.
(c) The comptroller may require a non-settling manufacturer
to provide any information reasonably necessary to determine the
prepayment amount.
(d) The comptroller shall establish procedures to:
(1) reimburse a non-settling manufacturer if the
actual sales or distributions in the first calendar month are less
than the projected sales or distributions; and
(2) require additional payments if the actual sales or
distributions in the first calendar month are greater than the
projected sales or distributions.
(e) Beginning in the month following the month for which a
non-settling manufacturer prepays its fees, the non-settling
manufacturer shall thereafter pay the fee imposed by this
subchapter in the manner provided by Section 161.606.
Sec. 161.610. REPORT TO ATTORNEY GENERAL BEFORE OFFERING
NON-SETTLING MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS
FOR SALE OR DISTRIBUTION IN THIS STATE. (a) In addition to
prepaying the fee required by Section 161.609, a non-settling
manufacturer described by Section 161.609(a) 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; 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 this section available to the comptroller.
Sec. 161.611. PENALTIES FOR NONCOMPLIANCE. (a) Cigarettes
and cigarette tobacco products of a non-settling manufacturer that
has not complied with this subchapter, including full payment of
the fee imposed by this subchapter, shall be treated as cigarettes
or cigarette tobacco products for which the tax assessed by Chapter
154 or 155, Tax Code, as appropriate, has not been paid, and the
non-settling manufacturer is subject to all penalties imposed by
those chapters for violations of those chapters.
(b) The comptroller shall provide to a non-settling
manufacturer, each distributor authorized to affix stamps under
Chapter 154, Tax Code, and the attorney general a notice of the
non-settling manufacturer's noncompliance with this subchapter if
the non-settling manufacturer:
(1) does not pay in full the fee imposed by this
subchapter; or
(2) is not included on the directory required by
Section 161.608.
(c) If a non-settling manufacturer does not appear on the
directory required by Section 161.608, or on receipt of the notice
of a non-settling manufacturer's noncompliance, a distributor may
not:
(1) pay the tax imposed by Chapter 154 or 155, Tax
Code, as appropriate;
(2) affix to a package of cigarettes the stamp
required by Section 154.041, Tax Code; or
(3) otherwise purchase, sell, or distribute
cigarettes or cigarette tobacco products manufactured by the
non-settling manufacturer in this state.
(d) If the comptroller determines that the non-settling
manufacturer that is the subject of a notice provided under
Subsection (b) later complies with this subchapter, the comptroller
shall provide to the non-settling manufacturer, each distributor
authorized to affix stamps under Chapter 154, Tax Code, and the
attorney general notice that the non-settling manufacturer is in
compliance with this subchapter.
Sec. 161.612. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS.
A non-settling manufacturer shall appoint and engage a resident
agent for service of process.
Sec. 161.613. 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. 161.614. COMPTROLLER INFORMATION SHARING. On 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
amended or supplemented by some or all of the parties thereto, the
volume of cigarettes on which the fee required under Section
161.603 is paid, itemized by cigarette manufacturer and brand
family.
Sec. 161.615. REVENUE DEPOSITED IN GENERAL REVENUE FUND.
The revenue from the tax imposed by this subchapter shall be
deposited in the state treasury to the credit of the general revenue
fund.
Sec. 161.616. 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.
Sec. 161.617. RULES. The comptroller and attorney general
may issue rules and regulations as necessary to carry out or enforce
this subchapter.
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. This Act takes effect September 1, 2013.