UNAPPROVED DRAFT BILL -- Subject to Change Without Notice!
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BILL NO.
INTRODUCED BY
(Primary Sponsor)
A BILL FOR AN ACT ENTITLED: "AN ACT REVISING AND INCREASING THE TAXATION OF CIGARETTES AND TOBACCO PRODUCTS; INCREASING THE RATE OF TAX FOR THE PURCHASE OF CIGARETTES FOR CONSUMPTION OR USE; INCREASING THE RATE OF TAX FOR NONCIGARETTE TOBACCO PRODUCTS; PROVIDING FOR TAXATION OF PRODUCTS RELATED TO VAPOR PRODUCTS; UPDATING THE DEFINITION OF "TOBACCO PRODUCT" FOR PURPOSES OF TAXATION; AMENDING SECTIONS 16-10-306, 16-11-102, 16-11-111, AND 16-11-114, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND AN APPLICABILITY DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 16-10-306, MCA, is amended to read:
"16-10-306. Cigarette and tobacco product labels -- federal requirements -- penalty. (1) A person may not knowingly import into this state for sale or other distribution any package of cigarettes or tobacco product that violates any federal:
(a) tax, trademark, or copyright law; or
(b) requirement for the placement of labels, warnings, or other information, including health hazards, that must be on the container or individual package.
(2) A person may not sell or offer to sell a package of cigarettes or tobacco product or affix the tax insignia on a package of cigarettes, as provided in 16-11-113, knowing that:
(a) the package is marked as manufactured for use outside of the United States;
(b) any label or language has been altered from the manufacturer's original packaging and labeling to conceal the fact that the package was manufactured for use outside of the United States; or
(c) a stamp, label, or decal was affixed to conceal the fact that the package was manufactured for use outside of the United States.
(3) A package of cigarettes or tobacco product found in this state that is marked for use outside of the United States is contraband and may be seized without a warrant by the department, any agent of the department, or any peace officer. Any cigarettes or tobacco products seized as contraband must be destroyed by the department.
(4) (a) The department may proceed against a person who violates this section through a civil action under the civil enforcement provisions of Title 16, chapter 10, part 4.
(b) A violation of this section is criminally punishable by a fine in an amount not to exceed $10,000.
(5) For the purposes of this section,:
(a) "cigarette" has the meaning defined provided in 16-11-102; and
(b) "tobacco product" means all products containing tobacco for human consumption or use except cigarettes has the meaning provided in 16-11-102."
Section 2. Section 16-11-102, MCA, is amended to read:
"16-11-102. Definitions. (1) As used in this chapter, the following definitions apply, unless the context requires otherwise:
(a) "Contraband" means:
(i) any tobacco product possessed, sold, offered for sale, distributed, held, owned, acquired, transported, imported, or caused to be imported in violation of this part;
(ii) any cigarette or roll-your-own tobacco that is possessed, sold, offered for sale, distributed, held, owned, acquired, transported, imported, or caused to be imported in violation of part 4 or part 5;
(iii) any cigarettes that bear trademarks that are counterfeit under state or federal trademark laws;
(iv) any cigarettes bearing false or counterfeit insignia or tax stamps from any state; or
(v) any cigarettes or tobacco products that violate 16-10-306.
(b) "Department" means the department of revenue provided for in 2-15-1301.
(c) "Person" means an individual, firm, partnership, corporation, association, company, committee, other group or persons, or other business entity, however formed.
(2) As used in this part, the following definitions apply, unless the context requires otherwise:
(a) "Cigarette" means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains:
(i) any roll of tobacco wrapped in paper or in any substance not containing tobacco;
(ii) tobacco, in any form, that is functional in the product and that, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to or purchased by consumers as a cigarette; or
(iii) any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance or the type of tobacco used in the filler and regardless of its packaging and labeling, is likely to be offered to or purchased by consumers as a cigarette described in subsection (2)(a)(i).
(b) "Controlling person" means a person who owns an equity interest of 10% or more of a business or the equivalent.
(c) "Directory" means the tobacco product directory as provided in 16-11-504.
(d) "Full face value of insignia" means the total amount of the tax levied under this part.
(e) "Insignia" or "indicia" means the impression, mark, or stamp approved by the department under the provisions of this part.
(f) "Licensed retailer" means any person, other than a wholesaler, subjobber, or tobacco product vendor, who is licensed under the provisions of this part.
(g) "Licensed subjobber" means a subjobber licensed under the provisions of this part. The person must be treated as a wholesaler.
(h) "Licensed wholesaler" means a wholesaler licensed under the provisions of this part.
(i) "Manufacturer" means any person who fabricates tobacco products from raw materials for the purpose of resale.
(j) "Manufacturer's original container" means the original master shipping case or original shipping case used by the tobacco product manufacturer to ship multipack units, such as boxes, cartons, and sleeves, to warehouse distribution points.
(k) "Moist snuff" means any finely cut, ground, or powdered tobacco, other than dry snuff, that is intended to be placed in the oral cavity.
(l) "Record" means an original document, a legible facsimile, or an electronically preserved copy.
(m) "Retailer" means a person, other than a wholesaler, who is engaged in the business of selling tobacco products to the ultimate consumer. The term includes a person who operates fewer than 10 tobacco product vending machines.
(n) "Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes.
(o) "Sale" or "sell" means any transfer of tobacco products for consideration, exchange, barter, gift, offer for sale, or distribution in any manner or by any means.
(p) "Sole distributor" means a person who either causes a unique brand of tobacco products to be manufactured according to distinctive specifications and acts as the exclusive distributor of the tobacco products or is the exclusive distributor of a brand of tobacco products within the continental United States.
(q) "Subjobber" means a person who purchases from a licensed wholesaler cigarettes with the Montana cigarette tax insignia affixed and sells or offers to sell tobacco products to a licensed retailer or tobacco product vendor. An isolated sale or exchange of cigarettes between licensed retailers does not constitute those retailers as subjobbers.
(r) (i) "Tobacco product" means: cigarettes and all other products containing tobacco that are intended for human consumption or use.
(A) a product containing, made, or derived from tobacco or that contains nicotine that is intended for human consumption or is likely to be consumed, whether smoked, heated, chewed, absorbed, dissolved, inhaled, or ingested by any other means, including but not limited to a cigarette, a cigar, pipe tobacco, chewing tobacco, snuff, or snus; or
(B) a substance, regardless of whether or not it contains nicotine, consumed during the use of a device that can be used to deliver nicotine or another substance in any form, including aerosolized or vaporized, to the person inhaling from the device, including but not limited to an e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah.
(ii) The term does not include:
(A) a drug, device, or combination product, as defined in the federal Food, Drug, and Cosmetic Act, that is authorized by the United States food and drug administration for sale as a tobacco cessation product or for other therapeutic purposes when the product is marketed and sold solely for such an approved purpose;
(B) filters, rolling papers, a pipe, or a device described in subsection (2)(r)(i)(B); or
(C) marijuana and marijuana concentrates as defined in 50-46-302 and taxed separately pursuant to Title 15, chapter 64.
(s) (i) "Tobacco product vendor" means a person doing business in the state who purchases tobacco products through a wholesaler, subjobber, or retailer for 10 or more tobacco product vending machines that the person operates for a profit in premises or locations other than the person's own.
(ii) A tobacco product vendor must be treated as a wholesaler.
(t) "Wholesale price" means the established price for which a manufacturer sells a tobacco product to a wholesaler or any other person before any discount or reduction.
(u) "Wholesaler" means a person who:
(i) purchases tobacco products from a manufacturer for the purpose of selling tobacco products to subjobbers, tobacco product vendors, wholesalers, or retailers; or
(ii) purchases tobacco products from a sole distributor, another wholesaler, or any other person for the purpose of selling tobacco products to subjobbers, tobacco product vendors, wholesalers, or retailers."
Section 3. Section 16-11-111, MCA, is amended to read:
"16-11-111. Cigarette, tobacco products, and moist snuff sales tax -- exemption for sale to tribal member. (1) (a) A tax on the purchase of cigarettes for consumption, use, or any purpose other than resale in the regular course of business is imposed and must be precollected by the wholesaler and paid to the state of Montana. The tax is $1.70 $3.20 on each package containing 20 cigarettes. Whenever packages contain other than 20 cigarettes, there is a tax on each cigarette equal to 1/20 the tax on a package containing 20 cigarettes.
(b) The tax computed under subsection (1)(a) applies to illegally packaged cigarettes under 16-11-307.
(2) The tax imposed in subsection (1) does not apply to quota cigarettes.
(3) Subject to the refund or credit provided in subsection (4), the tax must be precollected on all cigarettes entering a Montana Indian reservation.
(4) Pursuant to the procedure provided in subsection (5), a wholesaler making a sale of cigarettes to a retailer within the boundaries of a Montana Indian reservation may apply to the department for a refund or credit for taxes precollected on cigarettes sold by the retailer to a member of the federally recognized Indian tribe or tribes on whose reservation the sale is made. A wholesaler who does not file a claim within 1 year of the shipment date forfeits the refund or credit.
(5) The distribution of tax-free cigarettes to a tribal member must be implemented through a system of preapproved wholesaler shipments. A licensed Montana wholesaler shall contact the department for approval prior to the shipment of the untaxed cigarettes. The department may authorize sales based on whether the quota, as established in a cooperative agreement between the department and an Indian tribe or as set out in this chapter, has been met. If authorized as a tax-exempt sale, the wholesaler, upon providing proof of order and delivery to a retailer within the boundaries of a Montana Indian reservation selling cigarettes to members of a federally recognized tribe or tribes of that reservation, must be given a refund or credit. Once the quota has been filled, the department shall immediately notify all affected wholesalers that further sales on that reservation must be taxed and that a claim for a refund or credit will not be honored for the remainder of the quota period. Quota allocations are not transferable between quota periods or between reservations.
(6) The total amount of refunds or credits allowed by the department to all wholesalers claiming the refund or credit under subsection (4) for any month may not exceed an amount that is equal to the tax due on the quota allocation. The department shall determine the amount of refunds or credits for each Indian reservation at the beginning of each fiscal year, using the most recent census data available from the bureau of Indian affairs or as provided in a cooperative agreement with the tribe or tribes of the Indian reservation.
(7) There must be collected and paid to the state of Montana a tax of 50% 94% of the wholesale price, to the wholesaler, of all tobacco products other than cigarettes and moist snuff. The tax on moist snuff is 85 cents $2.67 an ounce based upon the net weight of the package listed by the manufacturer. For packages of moist snuff that are less than or greater than 1 ounce, the tax must be proportional to the size of the package. Tobacco products shipped from Montana and destined for retail sale and consumption outside the state are not subject to this tax.
(8) The tax imposed by subsection (7) must be precollected and paid by a wholesaler to the department upon sale to a Montana retailer. A wholesaler who fails to report or pay the tax required by this part must be assessed penalty and interest as provided in 15-1-216.
(9) A retailer who purchases tobacco products for resale on which the tobacco products tax has not been collected and paid to the department shall comply with all the provisions of this part and the rules adopted to implement this part as if it were a wholesaler.
(10) A retailer must assume that the tobacco products tax has not been collected and paid to the department in the absence of a statement on the retailer's invoice or sales slip for the tobacco products that states that the applicable Montana tobacco products tax is included in the total billing cost."
Section 4. Section 16-11-114, MCA, is amended to read:
"16-11-114. Insignia discount. (1) Each licensed wholesaler is entitled to purchase an insignia at full face value less the following percentage of the face value upon payment for the insignia as defrayment of the costs of affixing insignia and precollecting the tax on behalf of the state of Montana:
(a) 0.90% 0.478% for the first 2,580 3,000 cartons or portion of 2,580 3,000 cartons purchased in any calendar month;
(b) 0.60% 0.318% for the next 2,580 3,000 cartons or portion of 2,580 3,000 cartons purchased in any calendar month; and
(c) 0.45% 0.239% for purchases in excess of 5,160 6,000 cartons in any calendar month.
(2) The taxes for tobacco products, other than cigarettes, that are paid by the wholesaler must be paid to the department in full less a 1.5% 0.797% defrayment for the wholesaler's collection and administrative expenses and must, in accordance with the provisions of 17-2-124, be deposited by the department in the state general fund except as provided in 16-11-119. Refunds of the tax paid must be made as provided in 15-1-503 in cases in which the tobacco products purchased become unsalable."
NEW SECTION. Section 5. Transition. (1) On or before July 30, 2019, each cigarette wholesaler shall file a report with the department of revenue in the form prescribed by the department showing the number of stamped cigarettes and cigarette tax insignia on hand at 11:59 p.m. on June 30, 2019.
(2) Accompanying the report filed pursuant to subsection (1), each cigarette wholesaler shall pay the difference in tax between the former tax rate and the new tax rate on that portion of inventory of cigarettes and cigarette tax insignia subject to [this act] held by the cigarette wholesaler at 11:59 p.m. on June 30, 2019.
NEW SECTION. Section 6. Notification to tribal governments. The secretary of state shall send a copy of [this act] to each tribal government located on the seven Montana reservations and to the Little Shell Chippewa tribe.
NEW SECTION. Section 7. Effective date. [This act] is effective on passage and approval.
NEW SECTION. Section 8. Applicability. (1) Except as provided in subsections (2) and (3), [this act] applies to tax periods after June 30, 2019.
(2) [Section 3(1)] applies to adhered or unadhered cigarette tax stamps in the possession of the wholesaler after June 30, 2019.
(3) [Section 3(7)] applies to noncigarette tobacco products received by wholesalers after June 30, 2019.
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