November 6, 2007, Introduced by Senators GEORGE, ALLEN, PAPPAGEORGE, JELINEK and GLEASON and referred to the Committee on Commerce and Tourism.
A bill to amend 1993 PA 327, entitled
"Tobacco products tax act,"
by amending sections 2, 7, and 8 (MCL 205.422, 205.427, and
205.428), sections 2 and 8 as amended by 2005 PA 238 and section 7
as amended by 2004 PA 164.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2. As used in this act:
(a) "Cigarette" means a roll for smoking made wholly or in
part of tobacco, irrespective of size or shape and irrespective of
the tobacco being flavored, adulterated, or mixed with any other
ingredient, which roll has a wrapper or cover made of paper or any
other material. Cigarette does not include cigars.
(b) "Commissioner" means the state treasurer.
(c) "Counterfeit cigarette" means a cigarette in an individual
package of cigarettes or other container with a false manufacturing
label or a cigarette in an individual package of cigarettes or
other container with a counterfeit stamp.
(d) "Counterfeit cigarette paper" means a cigarette paper with
a false manufacturing label or that has not been printed,
manufactured, or made by authority of the trademark owner.
(e) "Counterfeit stamp" means any stamp, label, or print,
indicium, or character, that evidences, or purports to evidence,
the payment of any tax levied under this act and that has not been
printed, manufactured, or made by authority of the department as
provided in this act and has not been issued, sold, or circulated
by the department.
(f) "Department" means the department of treasury.
(g) "Financially sound" means a determination by the
department that the wholesaler or unclassified acquirer is able to
pay for its stamps in the ordinary course of business based on
criteria including, but not limited to, all of the following:
(i) Past filing and payment history with the department.
(ii) Outstanding liabilities.
(iii) Review of current financial statements including, but not
limited to, balance sheets and income statements.
(iv) Duration that the wholesaler or unclassified acquirer has
been licensed under this act.
(h) "Gray market cigarette" means any cigarette the package of
which bears any statement, label, stamp, sticker, or notice
indicating that the manufacturer did not intend the cigarettes to
be sold, distributed, or used in the United States, including, but
not limited to, a label stating "For Export Only", "U.S. Tax
Exempt", "For Use Outside U.S.", or similar wording.
(i) "Gray market cigarette paper" means any cigarette paper
the package of which bears any statement, label, stamp, sticker, or
notice indicating that the manufacturer did not intend the
cigarette papers to be sold, distributed, or used in the United
States, including, but not limited to, a label stating "For Export
Only", "U.S. Tax Exempt", "For Use Outside U.S.", "For Use in
______________ (another country) Only", or similar wording.
(j) "Individual package" means an individual packet or pack
used to contain or to convey cigarettes to the consumer. Individual
package does not include cartons, cases, or shipping or storage
containers that contain smaller packaging units of cigarettes.
(k) "Licensee" means a person licensed under this act.
(l) "Manufacturer" means a person who manufactures or produces
a tobacco product.
(m) "Noncigarette smoking tobacco" means tobacco sold in loose
or bulk form that is intended for consumption by smoking and
includes roll-your-own cigarette tobacco.
(n) "Person" means an individual, partnership, fiduciary,
association, limited liability company, corporation, or other legal
entity.
(o) "Place of business" means a place where a tobacco product
is sold or where a tobacco product is brought or kept for the
purpose of sale or consumption, including a vessel, airplane,
train, or vending machine.
(p) "Retailer" means a person other than a transportation
company who operates a place of business for the purpose of making
sales of a tobacco product at retail.
(q) "Sale" means a transaction by which the ownership of
tangible personal property is transferred for consideration and
applies also to use, gifts, exchanges, barter, and theft.
(r) "Secondary wholesaler" means a person who sells a tobacco
product for resale, who purchases a tobacco product from a
wholesaler or unclassified acquirer licensed under this act, and
who maintains an established place of business in this state where
a substantial portion of the business is the sale of tobacco
products and related merchandise at wholesale, and where at all
times a substantial stock of tobacco products and related
merchandise is available to retailers for resale.
(s) "Smokeless tobacco" means snuff, chewing tobacco, and any
other tobacco that is intended to be consumed by means other than
smoking.
(t) "Stamp" means a distinctive character, indication, or
mark, as determined by the department, attached or affixed to an
individual package of cigarettes by mechanical device or other
means authorized by the department to indicate that the tax imposed
under this act has been paid. Beginning July 1, 2008, the
department shall not purchase, acquire, or use stamps unless the
stamps have been produced entirely in a facility that has been
certified as secure by an independent organization accredited by
the American national standards institute or successor
organization. Beginning July 1, 2008, the department shall not
purchase, acquire, or use stamps unless the stamps are capable of
being read by a scanning or similar device, including a minimum of
4 layers of overt, semicovert, and covert data, and are encrypted
with, at a minimum, all of the following information:
(i) The name and address of the wholesaler or other entity
affixing the stamp.
(ii) The date the stamp was affixed.
(iii) The denominated value of the stamp.
(u) "Stamping agent" means a wholesaler or unclassified
acquirer other than a manufacturer who is licensed and authorized
by the department to affix stamps to individual packages of
cigarettes on behalf of themselves and other wholesalers or
unclassified acquirers other than manufacturers.
(v) "Tobacco product" means cigarettes, cigars, noncigarette
smoking tobacco, or smokeless tobacco.
(w) "Transportation company" means a person operating, or
supplying to common carriers, cars, boats, or other vehicles for
the transportation or accommodation of passengers and engaged in
the sale of a tobacco product at retail.
(x) "Transporter" means a person importing or transporting
into this state, or transporting in this state, a tobacco product
obtained from a source located outside this state, or from any
person not duly licensed under this act. Transporter does not
include an interstate commerce carrier licensed by the interstate
commerce commission to carry commodities in interstate commerce, or
a licensee maintaining a warehouse or place of business outside of
this state if the warehouse or place of business is licensed under
this act.
(y) "Unclassified acquirer" means a person, except a
transportation company or a purchaser at retail from a retailer
licensed under the general sales tax act, 1933 PA 167, MCL 205.51
to
205.78, who imports or acquires a tobacco product from a source
other
than a wholesaler or secondary
wholesaler licensed under this
act for use, sale, or distribution. Unclassified acquirer also
means a person who receives cigars, noncigarette smoking tobacco,
or smokeless tobacco directly from a manufacturer licensed under
this
act. or from another source outside this state, which
source
is
not licensed under this act. An
unclassified acquirer does not
include a wholesaler.
(z) "Vending machine operator" means a person who operates 1
or more vending machines for the sale of a tobacco product and who
purchases a tobacco product from a manufacturer, licensed
wholesaler, or secondary wholesaler.
(aa) "Wholesale price" means the actual price paid for a
tobacco product, including any tax, by a wholesaler or unclassified
acquirer to a manufacturer, excluding any discounts or reductions.
(bb) "Wholesaler" means a person who purchases all or part of
his or her tobacco products from a manufacturer, who sells 75% or
more of those tobacco products to others for resale, and who
maintains an established business where substantially all of the
business is the sale of tobacco products or cigarettes and related
merchandise at wholesale and where at all times a substantial stock
of tobacco products and related merchandise is available to
retailers for resale. Wholesaler includes a chain of stores
retailing a tobacco product to the consumer if 75% of its stock of
tobacco products is purchased directly from the manufacturer.
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.
(c) Beginning August 1, 2002, for cigarettes, in addition to
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.
(c) Beginning August 1, 2002, 1.5% 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.
(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 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 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.