WORKING DRAFT A

SB-0882, As Passed Senate, March 13, 2008

SUBSTITUTE FOR

SENATE BILL NO. 882

A bill to amend 1993 PA 327, entitled

"Tobacco products tax act,"

by amending sections 7 and 8 (MCL 205.427 and 205.428), section 7

as amended by 2004 PA 164 and section 8 as amended by 2005 PA 238.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 7. (1) Beginning May 1, 1994, a tax is levied on the sale

of tobacco products sold in this state as follows:

(a) Through July 31, 2002, for cigars, noncigarette smoking

tobacco, and smokeless tobacco, 16% of the wholesale price.

(b) For cigarettes, 37.5 mills per cigarette.

the tax levied in subdivision (b), an additional 15 mills per

cigarette.

(d) Beginning August 1, 2002, for cigarettes, in addition to

the tax levied in subdivisions (b) and (c), an additional 10 mills

per cigarette.

(e) Beginning July 1, 2004, for cigarettes, in addition to the

tax levied in subdivisions (b), (c), and (d), an additional 37.5

mills per cigarette.

(f) Beginning August 1, 2002 and through June 30, 2004, for

cigars, noncigarette smoking tobacco, and smokeless tobacco, 20% of

the wholesale price.

(g) Beginning July 1, 2004, for cigars, noncigarette smoking

tobacco, and smokeless tobacco, 32% of the wholesale price.

(2) On or before the twentieth day of each calendar month,

every licensee under section 3 other than a retailer, ~~secondary~~

~~wholesaler,~~ unclassified acquirer licensed as a manufacturer, or

vending machine operator shall file a return with the department

stating the wholesale price of each tobacco product other than

cigarettes purchased, the quantity of cigarettes purchased, the

wholesale price charged for all tobacco products other than

cigarettes sold, the number of individual packages of cigarettes

and the number of cigarettes in those individual packages, and the

number and denominations of stamps affixed to individual packages

of cigarettes sold by the licensee for each place of business in

the preceding calendar month. The return shall also include the

number and denomination of unaffixed stamps in the possession of

the licensee at the end of the preceding calendar month.

Wholesalers shall also report accurate inventories of cigarettes,

both stamped and unstamped at the end of the preceding calendar

month. Wholesalers and unclassified acquirers shall also report

accurate inventories of affixed and unaffixed stamps by

denomination at the beginning and end of each calendar month and

all stamps acquired during the preceding calendar month. The return

shall be signed under penalty of perjury. The return shall be on a

form prescribed by the department and shall contain or be

accompanied by any further information the department requires.

(3) To cover the cost of expenses incurred in the

administration of this act, at the time of the filing of the

return, the licensee shall pay to the department the tax levied in

subsection (1) for tobacco products sold during the calendar month

covered by the return, less compensation equal to both of the

following:

(a) One percent of the total amount of the tax due on tobacco

products sold other than cigarettes.

(b) Through July 31, 2002, 1.25% of the total amount of the

tax due on cigarettes sold.

(4) Every licensee and retailer who, on August 1, 2002, has on

hand for sale any cigarettes upon which a tax has been paid

pursuant to subsection (1)(b) shall file a complete inventory of

those cigarettes before September 1, 2002 and shall pay to the

department at the time of filing this inventory a tax equal to the

difference between the tax imposed in subsection (1)(b), (c), and

(d) and the tax that has been paid under subsection (1)(b). Every

licensee and retailer who, on August 1, 2002, has on hand for sale

any cigars, noncigarette smoking tobacco, or smokeless tobacco upon

which a tax has been paid pursuant to subsection (1)(a) shall file

a complete inventory of those cigars, noncigarette smoking tobacco,

and smokeless tobacco before September 1, 2002 and shall pay to the

department at the time of filing this inventory a tax equal to the

difference between the tax imposed in subsection (1)(f) and the tax

that has been paid under subsection (1)(a).

(5) Every licensee and retailer who, on July 1, 2004, has on

hand for sale any cigarettes upon which a tax has been paid

pursuant to subsection (1)(b), (c), and (d) shall file a complete

inventory of those cigarettes before August 1, 2004 and shall pay

to the department at the time of filing this inventory a tax equal

to the difference between the tax imposed in subsection (1)(b),

(c), (d), and (e) and the tax that has been paid under subsection

(1)(b), (c), and (d). Every licensee and retailer who, on July 1,

2004, has on hand for sale any cigars, noncigarette smoking

tobacco, or smokeless tobacco upon which a tax has been paid

pursuant to subsection (1)(f) shall file a complete inventory of

those cigars, noncigarette smoking tobacco, and smokeless tobacco

before August 1, 2004 and shall pay to the department at the time

of filing this inventory a tax equal to the difference between the

tax imposed in subsection (1)(g) and the tax that has been paid

under subsection (1)(f). The proceeds derived under this subsection

shall be credited to the medicaid benefits trust fund created under

section 5 of the Michigan trust fund act, 2000 PA 489, MCL 12.255.

(6) The department may require the payment of the tax imposed

by this act upon the importation or acquisition of a tobacco

product. A tobacco product for which the tax under this act has

once been imposed and that has not been refunded if paid is not

subject upon a subsequent sale to the tax imposed by this act.

(7) An abatement or refund of the tax provided by this act may

be made by the department for causes the department considers

expedient. The department shall certify the amount and the state

treasurer shall pay that amount out of the proceeds of the tax.

(8) A person liable for the tax may reimburse itself by adding

to the price of the tobacco products an amount equal to the tax

levied under this act.

(9) A wholesaler, unclassified acquirer, or other person shall

not sell or transfer any unaffixed stamps acquired by the

wholesaler or unclassified acquirer from the department. A

wholesaler or unclassified acquirer who has any unaffixed stamps on

hand at the time its license is revoked or expires, or at the time

it discontinues the business of selling cigarettes, shall return

those stamps to the department. The department shall refund the

value of the stamps, less the appropriate discount paid.

(10) If the wholesaler or unclassified acquirer has unsalable

packs returned from a retailer, secondary wholesaler, vending

machine operator, wholesaler, or unclassified acquirer with stamps

affixed, the department shall refund the amount of the tax less the

appropriate discount paid. If the wholesaler or unclassified

acquirer has unaffixed unsalable stamps, the department shall

exchange with the wholesaler or unclassified acquirer new stamps in

the same quantity as the unaffixed unsalable stamps. An application

for refund of the tax shall be filed on a form prescribed by the

department for that purpose, within 4 years from the date the

stamps were originally acquired from the department. A wholesaler

or unclassified acquirer shall make available for inspection by the

department the unused or spoiled stamps and the stamps affixed to

unsalable individual packages of cigarettes. The department may, at

its own discretion, witness and certify the destruction of the

unused or spoiled stamps and unsalable individual packages of

cigarettes that are not returnable to the manufacturer. The

wholesaler or unclassified acquirer shall provide certification

from the manufacturer for any unsalable individual packages of

cigarettes that are returned to the manufacturer.

(11) On or before the twentieth of each month, each

manufacturer shall file a report with the department listing all

sales of tobacco products to wholesalers and unclassified acquirers

during the preceding calendar month and any other information the

department finds necessary for the administration of this act. This

report shall be in the form and manner specified by the department.

(12) Each wholesaler or unclassified acquirer shall submit to

the department an unstamped cigarette sales report on or before the

twentieth day of each month covering the sale, delivery, or

distribution of unstamped cigarettes during the preceding calendar

month to points outside of Michigan. A separate schedule shall be

filed for each state, country, or province into which shipments are

made. For purposes of the report described in this subsection,

"unstamped cigarettes" means individual packages of cigarettes that

do not bear a Michigan stamp. The department may provide the

information contained in this report to a proper officer of another

state, country, or province reciprocating in this privilege.

Sec. 8. (1) A person, other than a licensee, who is in control

or in possession of a tobacco product contrary to this act, who

after August 31, 1998 is in control or in possession of an

individual package of cigarettes without a stamp in violation of

this act, or who offers to sell or does sell a tobacco product to

another for purposes of resale without being licensed to do so

under this act, shall be personally liable for the tax imposed by

this act, plus a penalty of 500% of the amount of tax due under

this act.

(2) The department may permit a representative of a licensed

manufacturer of tobacco products whose duties require travel in

this state to transport up to 138,000 cigarettes, of which not more

than 36,000 cigarettes may bear no tax indicia or the tax indicia

of another state. All 138,000 cigarettes must bear the stamp

approved by the department or the tax indicia of another state, if

any. The total value of tobacco products, excluding cigarettes,

carried by a representative shall not exceed a wholesale value of

$5,000.00. A manufacturer shall notify the department of the

manufacturer's representatives that it currently employs who carry

cigarettes or tobacco products other than cigarettes in performing

work duties in this state. The manufacturer shall maintain a record

of each transaction by the manufacturer's representative for a

period of 4 years immediately following the transaction and shall

produce the records upon request of the state treasurer or the

state treasurer's authorized agent. Each record shall identify the

quantity and identity of the tobacco products, detail whether

exchanged, received, removed, or otherwise disposed of and the

identity of the retailer, wholesaler, secondary wholesaler, vending

machine operator, or unclassified acquirer involved. The

representative of the manufacturer shall provide a copy of the

record to the retailer, wholesaler, secondary wholesaler, vending

machine operator, or unclassified acquirer at the time of the

exchange or disposal. The retailer, wholesaler, secondary

wholesaler, vending machine operator, or unclassified acquirer

shall retain the copy of the record in the same place and for the

same time period as other records required by this section. A

representative shall not exchange, or otherwise dispose of, within

this state tobacco products bearing the tax indicia of another

state or receive tobacco products bearing the tax indicia of

another state from retailers located within this state. A

representative who sells, exchanges, or otherwise disposes of

cigarettes or tobacco products other than cigarettes that do not

bear the stamp or other marking required by the department or

sells, exchanges, or otherwise disposes of cigarettes or tobacco

products other than cigarettes bearing the tax indicia of another

state is guilty of a felony, punishable by a fine of not more than

$5,000.00 or imprisonment for not more than 5 years, or both.

(3) A person who possesses, acquires, transports, or offers

for sale contrary to this act 3,000 or more cigarettes, tobacco

products other than cigarettes with an aggregate wholesale price of

$250.00 or more, 3,000 or more counterfeit cigarettes, 3,000 or

more counterfeit cigarette papers, 3,000 or more gray market

cigarettes, or 3,000 or more gray market cigarette papers is guilty

of a felony, punishable by a fine of not more than $50,000.00 or

imprisonment for not more than 5 years, or both.

(4) A person who possesses, acquires, transports, or offers

for sale contrary to this act 1,200 or more, but not more than

2,999, cigarettes, tobacco products other than cigarettes with an

aggregate wholesale value of $100.00 or more but less than $250.00,

or 1,200 or more, but not more than 2,999, counterfeit cigarettes,

counterfeit cigarette papers, gray market cigarettes, or gray

market cigarette papers is guilty of a misdemeanor punishable by a

fine of not more than $5,000.00 or imprisonment of not more than 1

year, or both.

(5) A person who violates a provision of this act for which a

criminal punishment is not otherwise provided is guilty of a

misdemeanor, punishable by a fine of not more than $1,000.00 or 5

times the retail value of the tobacco products involved, whichever

is greater, or imprisonment for not more than 1 year, or both. This

subsection does not apply to conduct described in subsection (12).

(6) A person who manufactures, possesses, or uses a stamp or

manufactures, possesses, or uses a counterfeit stamp or writing or

device intended to replicate a stamp without authorization of the

department, a licensee who purchases or obtains a stamp from any

person other than the department, or who falsifies a manufacturer's

label on cigarettes, counterfeit cigarettes, gray market cigarette

papers, or counterfeit cigarette papers is guilty of a felony and

shall be punished by imprisonment for not less than 1 year or more

than 10 years and may be punished by a fine of not more than

$50,000.00.

(7) A person who falsely makes, counterfeits, or alters a

license, vending machine disc, or marker, or who purchases or

receives a false or altered license, vending machine disc, or

marker, or who assists in or causes to be made a false or altered

license, vending machine disc, or marker, or who possesses a device

used to forge, alter, or counterfeit a license, vending machine

disc, or marker is guilty of a felony punishable by a fine of not

more than $5,000.00 or imprisonment for not more than 5 years, or

both. A person who alters or falsifies records or markings required

under this act is guilty of a felony punishable by a fine of not

more than $5,000.00 or imprisonment for not more than 5 years, or

both.

(8) The attorney general has concurrent power with the

prosecuting attorneys of the state to enforce this act.

(9) At the request of the department or its duly authorized

agent, the state police and all local police authorities shall

enforce the provisions of this act.

(10) The department does not have the authority to enforce the

provisions of this section regarding gray market cigarette papers

or counterfeit cigarette papers.

(11) A person who knowingly possesses, acquires, transports,

or offers for sale contrary to this act 600 or more, but not more

than 1,199, cigarettes, tobacco products other than cigarettes with

an aggregate wholesale value of $50.00 or more but less than

$100.00, or 600 or more, but not more than 1,199, counterfeit

cigarettes, counterfeit cigarette papers, gray market cigarettes,

or gray market cigarette papers is guilty of a misdemeanor

punishable by a fine of not more than $1,000.00 or imprisonment of

not more than 90 days, or both.

(12) A person shall not possess, acquire, transport, or offer

for sale less than 600 cigarettes, tobacco products other than

cigarettes with an aggregate wholesale value of less than $50.00,

or less than 600 counterfeit cigarettes, counterfeit cigarette

papers, gray market cigarettes, or gray market cigarette papers. A

person who possesses, acquires, transports, or offers for sale

contrary to this act 201 or more, but not more than 599,

cigarettes, tobacco products other than cigarettes with an

aggregate wholesale value of $25.00 or more but less than $50.00,

or 201 or more, but not more than 599, counterfeit cigarettes,

counterfeit cigarette papers, gray market cigarettes, or gray

market cigarette papers is responsible for a state civil infraction

and may be ordered to pay a civil fine of not more than $100.00.