Bill Text: IL SB0850 | 2017-2018 | 100th General Assembly | Introduced


Bill Title: Amends the Cigarette Tax Act. Requires the Department of Revenue to issue a request for proposal to acquire and use digital tax stamps. Provides that, upon implementation of the digital stamps, a stamp is considered affixed if 90% or more of the stamp is affixed to the individual package. Contains provisions concerning reimbursement of licensed distributors for costs associated with the initial purchase of a tax stamping machine, and provides a tax collection discount for licensed distributors.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced) 2017-05-05 - Rule 3-9(a) / Re-referred to Assignments [SB0850 Detail]

Download: Illinois-2017-SB0850-Introduced.html


100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB0850

Introduced 2/7/2017, by Sen. Toi W. Hutchinson

SYNOPSIS AS INTRODUCED:
35 ILCS 130/3-3 new

Amends the Cigarette Tax Act. Requires the Department of Revenue to issue a request for proposal to acquire and use digital tax stamps. Provides that, upon implementation of the digital stamps, a stamp is considered affixed if 90% or more of the stamp is affixed to the individual package. Contains provisions concerning reimbursement of licensed distributors for costs associated with the initial purchase of a tax stamping machine, and provides a tax collection discount for licensed distributors.
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FISCAL NOTE ACT MAY APPLY

A BILL FOR

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1 AN ACT concerning revenue.
2 Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4 Section 5. The Cigarette Tax Act is amended by adding
5Section 3-3 as follows:
6 (35 ILCS 130/3-3 new)
7 Sec. 3-3. Digital tax stamps.
8 (a) Within 180 days after the effective date of this
9amendatory Act of the 100th General Assembly, the Department
10shall issue a request for proposal to acquire and use digital
11stamps that contain a unique nonrepeating code that can be read
12by a device that identifies the taxed product and also contains
13other security and enforcement features as determined by the
14Department. The request for proposal shall include a provision
15that requires the successful bidder on the proposal to share
16digital stamp technology so that handheld devices, including,
17but not limited to, smartphones, can be readily utilized in
18furtherance of the implementation of the use of digital stamps,
19and so that the technology and equipment used by licensed
20distributors to affix the stamps to packages of cigarettes can
21be supplied, as may be permitted by the Department, by the
22successful bidder on the proposal or by any other provider. The
23request for proposal shall also include a provision permitting

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1the Department to manage or restrict access rights to all or
2part of the information contained within, or accessible from,
3the stamps and a provision requiring the successful bidder on
4the proposal to guarantee that the stamps will be designed and
5manufactured to ensure that stamps can be affixed to individual
6packages of cigarettes in accordance with the requirements of
7this Act.
8 (b) Upon implementation of the digital stamps as provided
9in this amendatory Act of the 100th General Assembly, a stamp
10is considered affixed if 90% or more of the stamp is affixed to
11the individual package.
12 (c) Beginning in the first calendar month following the
13implementation of the use of digital stamps as provided in this
14Section, and continuing for the immediately succeeding 17
15months, licensed distributors are entitled to reimbursement of
16direct costs actually incurred by the distributor, as
17determined by the Department, for the initial purchase of
18eligible equipment in an amount equal to 5.5% of the total net
19purchase price of the eligible equipment necessary to affix the
20digital stamp. The reimbursement provided under this
21subsection shall also include any applicable use or occupation
22taxes paid, and shipping and crating charges actually incurred,
23by the distributor in connection with the purchase, but shall
24exclude reimbursement for any other costs incurred by the
25distributor that are not otherwise expressly provided for in
26this Section, including, but not limited to, charges for

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1installation and ongoing maintenance related to eligible
2equipment. A distributor may only receive reimbursement under
3this subsection to the extent that the eligible equipment
4purchased by the distributor does not exceed the total number
5of the distributor's existing equipment, as certified by the
6distributor on a form prescribed by the Department.
7 The total reimbursement available under this subsection
8shall not exceed $60,000 for all distributors combined.
9 (d) Beginning with the first calendar month following the
10implementation of the use of digital stamps as provided in this
11Section, a discount of 0.5% is allowed to each licensed
12distributor until the licensed distributor is compensated in an
13amount equal to the direct cost actually incurred by the
14distributor for the purchase of upgrades to technology and
15equipment, excluding the equipment reimbursed under subsection
16(c) of this Section, that are necessary to affix the digital
17stamp as determined by the Department.
18 Compensation under this subsection may also be claimed by a
19distributor for the direct costs actually incurred by the
20distributor, as determined by the Department and reflected in
21the net purchase price, for the initial and one-time purchase
22of case packers or similar machines or conveyors as follows:
23 (1) case packers or similar machines to be used
24 exclusively to repack cigarette cartons into case
25 boxes after digital stamps have been applied by
26 eligible equipment to the individual packages of

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1 cigarettes contained within those cigarette cartons;
2 compensation under this paragraph (1) may only be
3 claimed by a distributor if the case packers or similar
4 machines are in addition to, and not a replacement for,
5 one or more case packers or similar machines used in
6 connection with cigarette stamping machines that do
7 not use digital stamps authorized under this Section;
8 (2) conveyors to be used exclusively for that
9 portion of a cigarette stamping line that is necessary
10 for and dedicated to cigarette stamping operations
11 using eligible equipment to affix digital stamps to
12 individual packages of cigarettes to be sold in this
13 State; compensation under this paragraph may be
14 claimed by a distributor only if the cigarette stamping
15 line served by the conveyors is in addition to one or
16 more distinct and existing cigarette stamping lines
17 using stamping machines that do not use the digital
18 stamps authorized under this Section, and that
19 compensation shall not exceed a total of 50% of the
20 amount reimbursed under subsection (c) for any
21 particular distributor; and
22 (3) compensation under paragraphs (1) and (2)
23 shall also include any applicable sales or use taxes
24 paid, and shipping and crating charges actually
25 incurred, by the distributor in connection with the
26 purchase, but shall exclude any other costs incurred by

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1 the distributor not otherwise expressly provided for
2 in this subsection, including, but not limited to,
3 charges for installation and ongoing maintenance.
4 (e) As used in this Section:
5 "Eligible equipment" means a cigarette tax stamping
6machine that meets all of the following conditions:
7 (1) it was purchased by a licensed distributor on or
8 after December 31, 2014;
9 (2) it enables the distributor to affix digital stamps
10 to individual packages of cigarettes in accordance with the
11 requirements of this Act; and
12 (3) it was purchased to be used for the primary purpose
13 of permitting the distributor to affix digital stamps to
14 individual packages of cigarettes to be sold in this State
15 following the implementation of the use of digital stamps
16 under this Section.
17 "Existing equipment" means a cigarette tax stamping
18machine that meets all of the following conditions:
19 (1) it was owned by a licensed distributor as of
20 December 31, 2014; and
21 (2) it was a cigarette tax stamping machine used prior
22 to January 1, 2015 by the distributor to apply stamps using
23 stamp rolls of 30,000 stamps.
24 "Qualified Equipment" means equipment that was placed in
25service by a distributor during the first 8 months of digital
26stamp implementation that includes conveyors and additional

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1associated electrical lines and compressed air lines in
2connection with the implementation of a digital stamping line
3approved by the Department. "Qualified equipment" does not
4include the cost of installation of a conveyor.
5 "Smartphone" means a device that combines a cell phone with
6a handheld computer and is capable of internet access, which
7allows a user, in conjunction with an encrypted digital tax
8stamp, to open a public portal.
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