87R2175 SRA-D
By: Johnson S.B. No. 216
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of, and taxes imposed on the sale or use
of, cigarettes, tobacco products, and e-cigarettes; imposing
taxes; requiring a permit; imposing a fee; providing administrative
penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 161.081(1-a), (2), and (4), Health and
Safety Code, are amended to read as follows:
(1-a) "E-cigarette" means an electronic cigarette or
any other device that simulates smoking by using a mechanical
heating element, battery, or electronic circuit to deliver nicotine
or other substances to the individual inhaling from the device or a
consumable liquid solution or other material aerosolized or
vaporized during the use of an electronic cigarette or other device
described by this subdivision, regardless of whether the liquid or
other material contains nicotine. The term does not include a
prescription medical device unrelated to the cessation of smoking.
The term includes:
(A) a device described by this subdivision
regardless of whether the device is manufactured, distributed, or
sold as an e-cigarette, e-cigar, or e-pipe or under another product
name or description; and
(B) a component, part, or accessory for the
device, regardless of whether the component, part, or accessory is
sold separately from the device.
(2) "Permit holder" has the meaning assigned by
Section 154.001, [or] 155.001, or 164.0001, Tax Code, as
applicable.
(4) "Retailer" means a person who engages in the
practice of selling cigarettes, e-cigarettes, or tobacco products
to consumers and includes the owner of a coin-operated cigarette,
e-cigarette, or tobacco product vending machine. The term includes
a retailer as that term is defined by Section 154.001, [or] 155.001,
or 164.0001, Tax Code, as applicable.
SECTION 2. Section 161.083(d), Health and Safety Code, is
amended to read as follows:
(d) Notwithstanding any other provision of law, a violation
of this section is not a violation of this subchapter for purposes
of Section 161.0901 [154.1142 or 155.0592, Tax Code].
SECTION 3. Subchapter H, Chapter 161, Health and Safety
Code, is amended by adding Section 161.0901 to read as follows:
Sec. 161.0901. DISCIPLINARY ACTION AGAINST CIGARETTE,
E-CIGARETTE, AND TOBACCO PRODUCTS RETAILERS. (a) A retailer is
subject to disciplinary action as provided by this section if an
agent or employee of the retailer commits an offense under this
subchapter or Subchapter K.
(b) If the comptroller finds, after notice and an
opportunity for a hearing as provided by Chapter 2001, Government
Code, that a permit holder has violated this subchapter or
Subchapter K at a place of business for which a permit is issued,
the comptroller may suspend the permit for that place of business
and administratively assess a fine as follows:
(1) if the permit holder has not been found to have
violated this subchapter or Subchapter K at that place of business
during the 24-month period preceding the violation, the comptroller
may require the permit holder to pay a fine in an amount not to
exceed $1,000;
(2) if the permit holder has been found to have
violated this subchapter or Subchapter K at that place of business
once during the 24-month period preceding the violation, the
comptroller may require the permit holder to pay a fine in an amount
not to exceed $2,000; and
(3) if the permit holder has been found to have
violated this subchapter or Subchapter K at that place of business
at least twice during the 24-month period preceding the violation,
the comptroller may:
(A) require the permit holder to pay a fine in an
amount not to exceed $3,000; and
(B) suspend the permit for that place of business
for not more than five days.
(c) Except as provided by Subsection (e), if the permit
holder has been found to have violated this subchapter or
Subchapter K on four or more previous and separate occasions at the
same place of business during the 24-month period preceding the
violation, the comptroller shall revoke the permit issued under
Chapter 154, 155, or 164, Tax Code, as applicable. If the permit
holder does not hold a permit under Chapter 154, 155, or 164, Tax
Code, the comptroller shall revoke the permit issued under Section
151.201, Tax Code.
(d) A permit holder whose permit has been revoked under this
section may not apply for a permit for the same place of business
before the expiration of six months after the effective date of the
revocation.
(e) For purposes of this section, the comptroller may
suspend a permit but may not revoke the permit under Subsection (c)
if the comptroller finds that:
(1) the employer has not violated this subchapter or
Subchapter K more than seven times at the place of business for
which the permit is issued in the 48-month period preceding the
violation in question;
(2) the employer requires its employees to attend a
comptroller-approved seller training program;
(3) the employees have actually attended a
comptroller-approved seller training program; and
(4) the employer has not directly or indirectly
encouraged the employees to violate the law.
(f) The comptroller may adopt rules to implement this
section.
SECTION 4. Section 111.00455(b), Tax Code, is amended to
read as follows:
(b) The following are not contested cases under Subsection
(a) and Section 2003.101, Government Code:
(1) a show cause hearing or any hearing not related to
the collection, receipt, administration, or enforcement of the
amount of a tax or fee imposed, or the penalty or interest
associated with that amount, except for a hearing under Section
151.157(f), 151.1575(c), or 151.712(g) of this code or Section
161.0901, Health and Safety Code [, 154.1142, or 155.0592];
(2) a property value study hearing under Subchapter M,
Chapter 403, Government Code;
(3) a hearing in which the issue relates to:
(A) Chapters 72-75, Property Code;
(B) forfeiture of a right to do business;
(C) a certificate of authority;
(D) articles of incorporation;
(E) a penalty imposed under Section 151.703(d);
(F) the refusal or failure to settle under
Section 111.101; or
(G) a request for or revocation of an exemption
from taxation; and
(4) any other hearing not related to the collection,
receipt, administration, or enforcement of the amount of a tax or
fee imposed, or the penalty or interest associated with that
amount.
SECTION 5. Section 154.1135(b), Tax Code, is amended to
read as follows:
(b) The payment must be made in cash or by money order, [or]
check, or credit card.
SECTION 6. Section 154.121(b), Tax Code, is amended to read
as follows:
(b) Revenue from the sale of retailer's permits shall be
deposited to the general revenue fund and may be appropriated only
as provided by this section. The money may be appropriated first to
the comptroller for administering:
(1) permitting [administration of licensing] of
retailers under this chapter and Chapters [or Chapter] 155 and 164;
and
(2) disciplinary actions taken under Section
161.0901, Health and Safety Code.
SECTION 7. Section 155.050(b), Tax Code, is amended to read
as follows:
(b) The payment must be made in cash or by money order, [or]
check, or credit card.
SECTION 8. Section 155.058(b), Tax Code, is amended to read
as follows:
(b) Revenue from the sale of retailer's permits shall be
deposited to the general revenue fund and may be appropriated only
as provided by this section. The money may be appropriated first to
the comptroller for administering:
(1) permitting [administration of licensing] of
retailers under this chapter and Chapters [or Chapter] 154 and 164;
and
(2) disciplinary actions taken under Section
161.0901, Health and Safety Code.
SECTION 9. Subtitle E, Title 2, Tax Code, is amended by
adding Chapter 164 to read as follows:
CHAPTER 164. TAX ON E-CIGARETTES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 164.0001. DEFINITIONS. In this chapter:
(1) "E-cigarette" has the meaning assigned by Section
161.081, Health and Safety Code.
(2) "Marketplace" has the meaning assigned by Section
151.0242.
(3) "Permit holder" means a person who obtains a
permit under Section 164.0102.
(4) "Retailer" means a person who engages in the
business of selling e-cigarettes to consumers, including a person
who sells e-cigarettes to consumers through a marketplace.
Sec. 164.0002. INAPPLICABILITY TO CERTAIN PRODUCTS. This
chapter does not apply to a product described by Section 161.0815,
Health and Safety Code.
Sec. 164.0003. RULES. The comptroller may adopt rules to
implement this chapter, including rules exempting a person who
sells e-cigarettes to consumers through a marketplace from the
requirements of this chapter.
SUBCHAPTER B. IMPOSITION AND ADMINISTRATION OF E-CIGARETTE SALES
AND USE TAXES
Sec. 164.0051. E-CIGARETTE SALES TAX. (a) A tax is imposed
on each sale of an e-cigarette in this state, including a sale made
through a marketplace, except that the tax does not apply to a sale
unless the tax imposed under Subchapter C, Chapter 151, applies to
the sale.
(b) The tax under this section is imposed at the rate
determined under Section 164.0053.
(c) The tax imposed under this section is in addition to the
tax imposed under Subchapter C, Chapter 151.
Sec. 164.0052. E-CIGARETTE USE TAX. (a) A tax is imposed
on the storage, use, or other consumption in this state of an
e-cigarette purchased from a retailer for storage, use, or other
consumption in this state, except that the tax does not apply to the
storage, use, or other consumption unless the tax imposed under
Subchapter D, Chapter 151, applies to the storage, use, or other
consumption.
(b) The tax under this section is imposed at the rate
determined under Section 164.0053.
(c) The tax imposed under this section is in addition to the
tax imposed under Subchapter D, Chapter 151.
Sec. 164.0053. TAX RATE. (a) In this section:
(1) "Cigarette" means a roll for smoking described by
Section 154.001(2) weighing three pounds or less per thousand.
(2) "Federal excise tax rate on cigarettes" means the
tax rate imposed on cigarettes under 26 U.S.C Section 5701(b)(1).
(3) "First sale" has the meaning assigned by Section
154.001.
(4) "State excise tax rate on cigarettes" means the
tax rate imposed on cigarettes under Section 154.021(b)(1).
(b) The rate of the taxes imposed under this chapter in a
calendar year is the rate the comptroller computes and publishes in
the Texas Register not later than December 1 of the preceding
calendar year as required by Subsection (c).
(c) As soon as practicable after the end of each state
fiscal year but not later than December 1 of each year, the
comptroller shall:
(1) determine the tax rate to be imposed under this
chapter in the subsequent calendar year that is proportionate to
the state excise tax rate imposed on cigarettes in this state during
the preceding state fiscal year by:
(A) determining the estimated mean price of 1,000
cigarettes on first sale in this state during the preceding state
fiscal year, including the amount of the federal excise tax imposed
on cigarettes and excluding the amount of the state excise tax
imposed on cigarettes, using available data and generally accepted
statistical methods in making that determination as necessary;
(B) dividing the state excise tax rate on
cigarettes by the estimated mean price of 1,000 cigarettes on first
sale in this state as determined under Paragraph (A); and
(C) converting the amount computed under
Paragraph (B) into a percentage and rounding that percentage down
to the nearest quarter percentage point; and
(2) publish the tax rate determined under Subdivision
(1) in the Texas Register.
Sec. 164.0054. APPLICATION OF OTHER PROVISIONS OF CODE.
(a) Except as provided by this chapter:
(1) the taxes imposed under this chapter are
administered, imposed, collected, and enforced in the same manner
as the taxes under Chapter 151 are administered, imposed,
collected, and enforced; and
(2) the provisions of Chapter 151 applicable to the
sales tax imposed under Subchapter C, Chapter 151, and the use tax
imposed under Subchapter D, Chapter 151, apply to the sales and use
taxes imposed under this chapter.
(b) A change in law relating to the taxation of the sale or
use of an e-cigarette under Chapter 151 also applies to the sales or
use tax imposed under this chapter.
Sec. 164.0055. REPORTS. (a) A person required to file a
report under Section 151.403 who is also required to collect or pay
a tax under this chapter shall file with the comptroller a report
stating:
(1) for e-cigarette sales tax purposes, the amount of
total receipts from e-cigarettes sold by the retailer during the
reporting period, if the person is a retailer;
(2) for e-cigarette use tax purposes, the amount of
total receipts from e-cigarettes sold by the retailer during the
reporting period for storage, use, or other consumption in this
state, if the person is a retailer described by Section 151.403(b);
(3) the amount of the total sales prices of
e-cigarettes subject to the e-cigarette use tax that were acquired
during the reporting period for storage, use, or other consumption
in this state, if the person is a purchaser who did not pay the tax
to a retailer;
(4) the amount of the taxes due under this chapter for
the reporting period; and
(5) any other information the comptroller requires.
(b) The report required by this section for a reporting
period is due on the same date the tax payment for the period is due.
Sec. 164.0056. RECORDS. (a) A person required to file a
report under Section 151.403 who is also required to collect or pay
a tax under this chapter shall keep a complete record of:
(1) all gross receipts from each sale to which this
chapter applies occurring during each reporting period, along with
documentation relating to those receipts;
(2) all purchases of e-cigarettes, including the
constituent parts of e-cigarettes, from every source during each
reporting period, along with documentation relating to those
purchases;
(3) all sales and use taxes, and any money represented
to be sales or use tax, collected under this chapter during each
reporting period; and
(4) any other information the comptroller requires.
(b) A person shall keep the records required by Subsection
(a) for the period required by Section 151.025(b).
SUBCHAPTER C. E-CIGARETTE RETAILER PERMITS
Sec. 164.0101. PERMITS REQUIRED. (a) A person may not
engage in business as a retailer in this state unless the person has
been issued a permit from the comptroller. A person shall obtain a
permit for each place of business the person owns or operates at
which sales of e-cigarettes are made.
(b) The comptroller shall prescribe the form and content of
an application for a permit and provide the form on request.
(c) The applicant shall accurately complete all information
required by the application and provide the comptroller with
additional information the comptroller considers necessary.
(d) The comptroller may require each corporation,
association, joint venture, syndicate, partnership, or
proprietorship to provide:
(1) financial information regarding the applicant;
and
(2) the identity of each officer, director,
stockholder owning 10 percent or more of the outstanding stock,
partner, member, owner, or managing employee.
(e) Each applicant that applies for a permit to sell
e-cigarettes from a vehicle must provide the make, model, vehicle
identification number, registration number, and any other
information concerning the vehicle the comptroller requires.
(f) All financial information provided under this section
is confidential and not subject to Chapter 552, Government Code.
(g) Permits for engaging in business as an e-cigarette
retailer are governed exclusively by the provisions of this code.
Sec. 164.0102. ISSUANCE OF PERMIT. (a) The comptroller
shall issue a permit to an applicant if the comptroller:
(1) has received an application and fee, if required;
(2) does not reject the application and deny the
permit under Section 164.0103; and
(3) determines that issuing the permit will not
jeopardize the administration and enforcement of this chapter.
(b) The permit shall be issued for a designated place of
business, except as provided by Section 164.0106.
(c) The permits are nonassignable.
(d) The permit must indicate the type of permit that it is
and authorize the sale of e-cigarettes in this state. The permit
must show that it is revocable and shall be forfeited or suspended
if the conditions of issuance, provisions of this chapter, or rules
of the comptroller are violated.
Sec. 164.0103. DENIAL OF PERMIT. The comptroller may
reject an application and deny a permit if the comptroller finds,
after notice and opportunity for hearing, any of the following:
(1) the premises where business will be conducted are
not adequate to protect the e-cigarettes; or
(2) the applicant or managing employee, or if the
applicant is a corporation, an officer, director, manager, or any
stockholder who holds directly or through family or partner
relationship 10 percent or more of the corporation's stock, or, if
the applicant is a partnership, a partner or manager:
(A) has failed to disclose any information
required by Sections 164.0101(c), (d), and (e), including previous
business experience, financial condition of the applicant, present
or previous business affiliations, previous employment, and any
conviction of a felony, or has made a false statement in the
application; or
(B) has previously violated provisions of this
chapter.
Sec. 164.0104. PERMIT YEAR; FEES. (a) A permit required
by this chapter expires on the last day of May of each even-numbered
year.
(b) An application for a permit required by this chapter
must be accompanied by a fee of:
(1) one-half of the amount of the fee for a retailer's
permit required by Section 154.111(b) if the applicant holds a
valid retailer's permit under Section 154.101, 154.102, or 155.041;
or
(2) the amount of the fee for a retailer's permit
required by Section 154.111(b).
(c) For a new or renewal permit required by Section
164.0101, the comptroller shall prorate the fee according to the
number of months remaining during the calendar year that the permit
is to be in effect.
(d) A person who does not obtain a permit each year in a
timely manner must pay a late fee of $50 in addition to the
application fee for the permit.
(e) If on the date of issuance a permit will expire within
three months, the comptroller may collect the prorated permit fee
or the fee for the current year and, with the consent of the permit
holder, may collect the fee for the next permit year and issue a
permit or permits for both periods, as applicable.
(f) A person issued a permit for a place of business that
permanently closes before the permit expiration date is not
entitled to a refund of the permit fee.
Sec. 164.0105. PAYMENT FOR PERMITS. (a) An applicant for a
permit required by Section 164.0101 shall send the required fee
with the application.
(b) The payment must be made in cash or by money order,
check, or credit card.
(c) The comptroller may not issue a permit in exchange for a
check until after the comptroller receives full payment on the
check.
Sec. 164.0106. DISPLAY OF PERMIT. (a) A permit holder
shall keep the permit on public display at the place of business for
which the permit was issued.
(b) A permit holder who has a permit assigned to a vehicle
shall post the permit in a conspicuous place on the vehicle.
Sec. 164.0107. REVENUE. Revenue from the sale of
retailer's permits shall be deposited to the general revenue fund
and may be appropriated only as provided by this section. The money
may be appropriated first to the comptroller for administering:
(1) permitting of retailers under this chapter and
Chapters 154 and 155; and
(2) disciplinary actions taken under Section
161.0901, Health and Safety Code.
Sec. 164.0108. FINAL SUSPENSION OR REVOCATION OF PERMIT.
(a) The comptroller may revoke or suspend a permit holder's permit
if the comptroller finds, after notice and hearing as provided by
this section, that the permit holder violated this chapter or a rule
adopted under this chapter.
(b) If the comptroller intends to suspend or revoke a
permit, the comptroller shall provide the permit holder with
written notice that includes a statement:
(1) of the reason for the intended revocation or
suspension;
(2) that the permit holder is entitled to a hearing by
the comptroller on the proposed suspension or revocation; and
(3) of the date, time, and place of the hearing.
(c) The comptroller shall deliver the written notice by
personal service or by mail to the permit holder's mailing address
as it appears in the comptroller's records. Service by mail is
complete when the notice is deposited with the United States Postal
Service.
(d) The comptroller shall give the permit holder notice
before the 10th day before the final hearing.
(e) A permit holder may appeal the comptroller's decision to
a district court in Travis County not later than the 30th day after
the date the comptroller's decision becomes final.
(f) A person whose permit is suspended or revoked may not
sell, offer for sale, or distribute e-cigarettes from the place of
business to which the permit applied until a new permit is granted
or the suspension is removed.
Sec. 164.0109. SUMMARY SUSPENSION OF PERMIT. (a) The
comptroller may suspend a permit holder's permit without notice or
a hearing for the permit holder's failure to comply with this
chapter or a rule adopted under this chapter if the permit holder's
continued operation constitutes an immediate and substantial
threat to the collection of taxes imposed by this chapter and
attributable to the permit holder's operation.
(b) If the comptroller summarily suspends a permit holder's
permit, proceedings for a preliminary hearing before the
comptroller or the comptroller's representative must be initiated
simultaneously with the summary suspension. The preliminary
hearing shall be set for a date not later than the 10th day after the
date of the summary suspension, unless the parties agree to a later
date.
(c) At the preliminary hearing, the permit holder must show
cause why the permit should not remain suspended pending a final
hearing on suspension or revocation.
(d) Chapter 2001, Government Code, does not apply to a
summary suspension under this section.
(e) To initiate a proceeding to suspend summarily a permit
holder's permit, the comptroller shall serve notice on the permit
holder informing the permit holder of the right to a preliminary
hearing before the comptroller or the comptroller's representative
and of the time and place of the preliminary hearing. The notice
must be personally served on the permit holder or an officer,
employee, or agent of the permit holder or sent by certified or
registered mail, return receipt requested, to the permit holder's
mailing address as it appears in the comptroller's records. The
notice must state the alleged violations that constitute the
grounds for summary suspension. The suspension is effective at the
time the notice is served. If notice is served in person, the
permit holder shall immediately surrender the permit to the
comptroller. If notice is served by mail, the permit holder shall
immediately return the permit to the comptroller.
(f) Section 164.0108, governing hearings for final
suspension or revocation of a permit under this subchapter, governs
a final administrative hearing.
Sec. 164.0110. HEARINGS. Unless otherwise provided by this
chapter, the comptroller shall conduct all hearings required by
this subchapter in accordance with Chapter 2001, Government Code.
The comptroller may designate one or more representatives to
conduct the hearings and may prescribe the rules of procedure
governing the hearings.
SUBCHAPTER D. DISPOSITION OF PROCEEDS
Sec. 164.0151. DEPOSIT AND USE OF PROCEEDS. The
comptroller shall deposit the proceeds from taxes imposed under
this chapter as follows:
(1) 25 percent to the credit of an account in the
general revenue fund that may be appropriated only to the
Department of State Health Services for the purposes of tobacco and
e-cigarette use prevention, control, and enforcement; and
(2) the remainder to the credit of the general revenue
fund.
SECTION 10. The following provisions of the Tax Code are
repealed:
(1) Section 154.1142;
(2) Section 154.1143;
(3) Section 155.0592; and
(4) Section 155.0593.
SECTION 11. Section 161.0901, Health and Safety Code, as
added by this Act, applies only to a violation that occurs on or
after the effective date of this Act. A violation that occurs
before the effective date of this Act is governed by the law in
effect on the date the violation occurred, and the former law is
continued in effect for that purpose.
SECTION 12. (a) Notwithstanding Sections 164.0051 and
164.0052, Tax Code, as added by this Act, the taxes imposed under
those sections apply only to a sale, storage, use, or other
consumption of e-cigarettes that occurs on or after January 1,
2022.
(b) The comptroller of public accounts shall determine and
publish the initial tax rate for the taxes imposed under Sections
164.0051 and 164.0052, Tax Code, as added by this Act, in the manner
required by Section 164.0053, Tax Code, as added by this Act, not
later than December 1, 2021. The initial tax rate applies beginning
January 1, 2022.
SECTION 13. (a) Notwithstanding Section 164.0101, Tax
Code, as added by this Act, a person is not required to hold a permit
under that section to engage in business as a retailer of
e-cigarettes in this state until January 1, 2022.
(b) The comptroller of public accounts shall prescribe the
form and content of an application for a permit under Section
164.0101, Tax Code, as added by this Act, and begin accepting
applications for the permit not later than October 1, 2021.
SECTION 14. This Act takes effect September 1, 2021.