By: Thierry, Burrows, Noble, Button, Cortez H.B. No. 4772
A BILL TO BE ENTITLED
AN ACT
relating to an excise tax on, and storage, reporting, and
recordkeeping requirements for, certain nontobacco nicotine
products; providing a civil penalty; imposing a tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle E, Title 2, Tax Code, is amended by
adding Chapter 164 to read as follows:
CHAPTER 164. EXCISE TAX ON NONTOBACCO NICOTINE PRODUCTS
Sec. 164.0001. DEFINITIONS. In this chapter:
(1) "Alternative nicotine product" means any
noncombustible product containing nicotine that is intended for
human consumption, whether chewed, absorbed, dissolved, ingested,
inhaled, or consumed by any other means. The term does not include:
(A) an e-cigarette;
(B) a cigarette, as defined by Section 154.001;
(C) a tobacco product, as defined by Section
155.001; or
(D) a product regulated as a drug or device by the
United States Food and Drug Administration.
(2) "Closed-system e-cigarette" means an e-cigarette
that utilizes a nicotine solution in a sealed and prefilled
container that makes the nicotine solution inaccessible to the
consumer through customary or reasonably foreseeable handling or
use, other than use by inhaling vapor or aerosol produced from the
nicotine solution. The term includes a disposable e-cigarette and a
sealed, prefilled, and disposable container of nicotine solution
for use in an e-cigarette.
(3) "Commercial business location" means the entire
premises occupied by a retailer.
(4) "E-cigarette" means a noncombustible product
that:
(A) produces vapor or aerosol for inhalation from
the application of a heating element to a solution that contains
nicotine; and
(B) includes a solution that contains nicotine
intended for use in an e-cigarette, whether sold with the
e-cigarette or separately.
(5) "First sale" means, except as otherwise provided
by this chapter:
(A) the first transfer of possession in
connection with a purchase, sale, or any exchange for value of an
e-cigarette or an alternative nicotine product in or into this
state, which:
(i) includes the sale of an e-cigarette or
an alternative nicotine product by:
(a) a distributor in or outside this
state to a distributor, wholesaler, or retailer in this state; and
(b) a manufacturer in this state who
transfers the e-cigarette or alternative nicotine product in this
state; and
(ii) does not include:
(a) the sale of an e-cigarette or an
alternative nicotine product by a manufacturer outside this state
to a distributor in this state;
(b) the transfer of an e-cigarette or
an alternative nicotine product from a manufacturer outside this
state to a bonded agent in this state; or
(c) the sale of an e-cigarette or an
alternative nicotine product by a manufacturer, bonded agent,
distributor, or importer to an interstate warehouse in this state;
(B) the first use or consumption of an
e-cigarette or an alternative nicotine product in this state; or
(C) the loss of an e-cigarette or an alternative
nicotine product in this state whether through negligence, theft,
or other unaccountable loss.
(6) "Manufacturer's representative" means a person
employed by a manufacturer to sell or distribute the manufacturer's
e-cigarettes or alternative nicotine products for which the tax
imposed under this chapter has been paid.
(7) "Open-system e-cigarette" means an e-cigarette
that utilizes a nicotine solution in a container that is refillable
or otherwise makes the nicotine solution accessible to the consumer
through customary or reasonably foreseeable handling or use.
(8) "Retailer" means a person:
(A) required to hold a permit under Chapter 147,
Health and Safety Code; or
(B) who sells alternative nicotine products to
consumers.
Sec. 164.0002. DESIGNATION OF COMMERCIAL BUSINESS LOCATION
AS PRINCIPAL PLACE OF BUSINESS; STORAGE. (a) A retailer shall
designate one commercial business location as the retailer's
principal place of business.
(b) Except as provided by Subsection (c), a commercial
business location where e-cigarettes or alternative nicotine
products are stored cannot be a residence or a unit in a public
storage facility.
(c) A manufacturer's representative may use a residence or
storage facility as a commercial business location.
Sec. 164.0003. TAX IMPOSED ON FIRST SALE. (a) A tax is
imposed and becomes due and payable when a person receives an
e-cigarette or alternative nicotine product for the purpose of
making a first sale in this state.
(b) The tax rate:
(1) for a closed-system e-cigarette is seven cents for
each milliliter of nicotine solution and a proportionate rate on
all fractional parts of a milliliter of nicotine solution;
(2) for an open-system e-cigarette is three percent of
the wholesale cost price of the open-system e-cigarette; and
(3) for an alternative nicotine product is $1.22 per
ounce of net weight of the alternative nicotine product, as listed
by the manufacturer.
Sec. 164.0004. FINAL POINT OF IMPOSITION OF TAX. The
ultimate consumer of an e-cigarette or alternative nicotine product
in this state shall pay the tax imposed by this chapter. If another
person pays the tax, the amount of the tax is added to the price
charged to the ultimate consumer.
Sec. 164.0005. PAYMENT OF TAX. (a) A person shall pay the
tax on an e-cigarette or alternative nicotine product received for
the purpose of making a first sale at the time the person files the
report under Section 164.0010 in the manner prescribed by the
comptroller.
(b) The person in possession of an e-cigarette or
alternative nicotine product has the burden to prove payment of the
tax on that product.
Sec. 164.0006. PENALTY FOR FAILURE TO PAY TAX. (a) Subject
to Subsection (c), a person who fails to pay the tax when due under
Section 164.0005 shall pay an additional five percent of the amount
of the tax due as a penalty.
(b) A person who fails to pay the tax imposed under this
chapter and penalty imposed under Subsection (a), as applicable,
before the 31st day after the date that the tax is due shall pay, in
addition to the amount required under Subsection (a), an additional
five percent of the amount of the tax due as a penalty.
(c) The minimum penalty imposed by this section is $50.
(d) The dishonor of a check delivered to the treasury or
other form of payment for payment of taxes constitutes a failure to
pay the tax when due.
(e) The attorney general shall bring a suit to collect a
penalty for late payment of a tax imposed under this section. A
suit to collect a penalty under this section may be brought in a
court of competent jurisdiction in Travis County.
Sec. 164.0007. RECORDS OF PURCHASES AND RECEIPTS. (a) A
person who receives an e-cigarette or an alternative nicotine
product for the purpose of making a first sale shall maintain at
each place of business the records of all e-cigarettes or
alternative nicotine products purchased or received.
(b) A retailer shall maintain all records described by
Subsection (a) at the commercial business location designated by
the retailer under Section 164.0002.
(c) The records maintained under this section must include:
(1) the name and address of the shipper or carrier and
the mode of transportation;
(2) all shipping records or copies of records,
including invoices, bills of lading, waybills, freight bills, and
express receipts;
(3) the date and the name of the place of origin of the
e-cigarette or alternative nicotine product shipment;
(4) the date and the name of the place of arrival of
the e-cigarette or alternative nicotine product shipment;
(5) a statement of the number, kind, and price paid for
the e-cigarettes or alternative nicotine products;
(6) the number of milliliters of nicotine solution for
use in a closed-system e-cigarette;
(7) the name, address, and tax identification number
of the seller;
(8) the manufacturer's wholesale price for the
e-cigarette or alternative nicotine product;
(9) the net weight as listed by the manufacturer of
each unit of alternative nicotine product, measured in ounces; and
(10) any other information required by the
comptroller.
Sec. 164.0008. RECORDS OF SALE AND USE. (a) A person who
receives an e-cigarette or alternative nicotine product for the
purpose of making a first sale shall maintain at each place of
business in this state records of each sale, distribution,
exchange, or use of an e-cigarette or an alternative nicotine
product, regardless of whether subject to a tax imposed by this
chapter.
(b) The records maintained under this section must include:
(1) the purchaser's name and address, permit number,
or tax identification number;
(2) the method of delivery and the name of the common
carrier or other person delivering the e-cigarettes or alternative
nicotine products;
(3) the date, amount, and kind of e-cigarettes or
alternative nicotine products sold, distributed, exchanged, or
used;
(4) the number of milliliters of nicotine solution for
use in a closed-system e-cigarette sold, distributed, exchanged, or
used;
(5) the wholesale price of all open-system
e-cigarettes sold, distributed, exchanged, or used;
(6) the price received for the e-cigarettes or
alternative nicotine products;
(7) the number and kind of e-cigarettes or alternative
nicotine products on which the tax has been paid;
(8) the net weight as listed by the manufacturer for
each unit of alternative nicotine product, measured in ounces; and
(9) any other information required by the comptroller.
(c) In addition to the records maintained under Subsection
(a), a person required to maintain records under that subsection
shall prepare and retain:
(1) an original invoice for each transaction involving
an e-cigarette or an alternative nicotine product; and
(2) any supporting documentation relevant to each
transaction showing shipment and receipt used in preparing the
invoices at the place of business, including all bills of lading.
(d) A person required to prepare and retain an invoice under
Subsection (c) shall deliver a duplicate invoice to the purchaser.
(e) A person required to maintain, prepare, or retain any
record described by this section shall maintain all records, as
applicable, for at least four years after the date of the
transaction.
(f) On request of the comptroller, the person shall provide
the records to the comptroller in a manner prescribed by the
comptroller.
Sec. 164.0009. FAILURE TO PRODUCE RECORDS. (a) Except as
provided by Subsection (b), a person's failure to produce a record
on request of the comptroller under Section 164.0007 or 164.0008 is
prima facie evidence that e-cigarettes and alternative nicotine
products not accounted for in a requested report were received for
the purpose of making a first sale without payment of a tax required
under this chapter.
(b) This section does not apply to a person's failure to
produce a record that results from an occurrence beyond the
person's reasonable control.
Sec. 164.0010. MONTHLY REPORT. (a) A person who receives
an e-cigarette or alternative nicotine product for the purpose of
making a first sale shall file a report for the preceding month on
or before the 25th day of each month.
(b) Except as provided by Subsection (c), the report filed
under Subsection (a) must include:
(1) the date the person submitted the report;
(2) the name and address of the person submitting the
report;
(3) the applicable month covered by the report;
(4) the number of units or amount, as applicable, of
e-cigarettes and alternative nicotine products the person
purchased, received, and acquired during the month covered by the
report, with separately stated amounts for:
(A) milliliters of nicotine solution for use in a
closed-system e-cigarette;
(B) the wholesale price of all open-system
e-cigarettes; and
(C) the net weight as listed by the manufacturer
of all alternative nicotine products, measured in ounces;
(5) the number of units or amount, as applicable, of
e-cigarettes and alternative nicotine products the person sold,
distributed, used, lost, or otherwise disposed of during the month
covered by the report, with separately stated amounts for:
(A) milliliters of nicotine solution for use in a
closed-system e-cigarette;
(B) the wholesale price of all open-system
e-cigarettes; and
(C) the net weight as listed by the manufacturer
of all alternative nicotine products, measured in ounces;
(6) the amount of e-cigarettes and alternative
nicotine products the person had in stock at the beginning and at
the end of the month covered by the report; and
(7) any other information required by the comptroller.
(c) If more than 50 percent of all untaxed e-cigarettes or
alternative nicotine products received by the person in this state
are actually sold outside of this state, the person may include in
the report only the e-cigarettes or alternative nicotine products,
as applicable, that are sold in this state.
(d) The comptroller shall prescribe the form and method for
submitting the report under this section.
Sec. 164.0011. INSPECTION. (a) To determine the tax
liability of a person under, or compliance by a person with, this
chapter, the comptroller may:
(1) inspect any premises where e-cigarettes or
alternative nicotine products are manufactured, produced, stored,
transported, sold, or offered for sale or exchange;
(2) remain on the premises as long as necessary to
determine the tax liability under or compliance with this chapter;
(3) examine the records required by this chapter or
other records, books, documents, papers, accounts, and objects that
the comptroller determines are necessary for conducting a complete
examination; and
(4) examine stocks of e-cigarettes or alternative
nicotine products.
(b) A person:
(1) must, on request of the comptroller, produce
records required by this chapter; and
(2) may not hinder or prevent the comptroller's
inspection of records or the examination of the premises under this
section.
Sec. 164.0012. SEIZURE. (a) The comptroller with or
without process may seize:
(1) e-cigarettes and alternative nicotine products
that are possessed or controlled by a person for the purpose of
selling or removing the e-cigarettes or alternative nicotine
products in violation of this chapter;
(2) e-cigarettes and alternative nicotine products
that are removed, deposited, or concealed by a person intending to
avoid payment of taxes imposed by this chapter;
(3) an automobile, truck, boat, conveyance, or other
type of vehicle used to remove or transport e-cigarettes or
alternative nicotine products by a person intending to avoid
payment of taxes imposed by this chapter; and
(4) equipment, paraphernalia, or other tangible
personal property used by a person intending to avoid payment of
taxes imposed by this chapter found in the place where the
e-cigarettes or alternative nicotine products are found.
(b) An item seized under this section is forfeited to the
state and remains in the custody of the comptroller for disposition
as provided by this chapter. The seized item is not subject to
replevin.
Sec. 164.0013. PENALTIES. (a) A person violates this
chapter if the person does not:
(1) keep records required by this chapter;
(2) make a report required by this chapter to the
comptroller or the person makes a false or incomplete report
required by this chapter to the comptroller; or
(3) abide by, or the person violates, any other
provision of this chapter or a rule adopted by the comptroller under
this chapter.
(b) A person who violates this chapter shall pay the state a
penalty of not more than $2,000 for each violation.
(c) A person is liable for a separate penalty for each day on
which a violation occurs.
(d) The attorney general shall bring suit to recover
penalties under this section.
(e) A suit under this section may be brought in a court of
competent jurisdiction in Travis County.
Sec. 164.0014. RULES. The comptroller shall adopt rules as
necessary to implement, administer, and enforce this chapter in a
manner substantively similar to rules adopted for implementation,
administration, and enforcement provided by Chapters 154 and 155.
Sec. 164.0015. DISPOSITION AND USE OF PROCEEDS. The
comptroller shall deposit the proceeds from taxes imposed under
this chapter as follows:
(1) 50 percent to the credit of an account in the
general revenue fund administered by the Department of State Health
Services, which may be appropriated to the department only for the
purpose of administering youth vaping prevention and awareness
programs;
(2) 20 percent to the credit of an account in the
general revenue fund administered by the comptroller, which may be
appropriated to the comptroller only for the purpose of
administering and enforcing this chapter; and
(3) the remainder to the credit of the property tax
relief fund.
SECTION 2. The change in law made by this Act does not
affect tax liability accruing before the effective date of this
Act.
SECTION 3. This Act takes effect September 1, 2023.