Bill Text: TX SB1136 | 2013-2014 | 83rd Legislature | Introduced


Bill Title: Relating to imposing a fee on the sale of cigarettes and cigarette tobacco products manufactured by certain companies; providing penalties.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2013-04-29 - Reported from s/c favorably with substitute [SB1136 Detail]

Download: Texas-2013-SB1136-Introduced.html
  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.
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