HB-5252, As Passed House, September 24, 2007
September 19, 2007, Introduced by Reps. Meisner, Gillard, Alma Smith, Warren, Wojno, Bieda, Clack, Angerer, Kathleen Law, Byrnes, Tobocman and Condino and referred to the Committee on Tax Policy.
A bill to amend 1993 PA 327, entitled
"Tobacco products tax act,"
by amending sections 7 and 7b (MCL 205.427 and 205.427b), section 7
as amended by 2004 PA 164 and section 7b as added by 2002 PA 607.
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.
(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, through September 30, 2007, 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. 7b. (1) Beginning January 1, 2003 through September 30,
2007, a licensee may deduct the amount of bad debts from the tax
levied under section 7. The amount deducted must be charged off as
uncollectible on the books of the licensee. If a person pays all or
part of a bad debt with respect to which a licensee claimed a
deduction under this section, the licensee shall be liable for the
amount of taxes deducted in connection with that portion of the
debt for which payment is received and shall remit these taxes in
his or her next payment to the department under section 7.
(2) Any claim for a bad debt deduction under this section
shall be supported by all of the following:
(a) A copy of the original invoice.
(b) Evidence that the tobacco products described in the
invoice were delivered to the person who ordered them.
(c) Evidence that the person who ordered and received the
tobacco products did not pay the licensee for the tobacco products
and that the licensee used reasonable collection practices in
attempting to collect the debt.
(3) As used in this section, "bad debt" means the taxes
attributable to any portion of a debt that is related to a sale of
tobacco products subject to tax under section 7 that is not
otherwise deductible or excludable, that has become worthless or
uncollectible in the time period between the date when taxes accrue
to the state for the licensee's preceding tax return and the date
when taxes accrue to the state for the present return, and that is
eligible to be claimed, or could be eligible to be claimed if the
licensee kept accounts on an accrual basis, as a deduction pursuant
to section 166 of the internal revenue code. A bad debt shall not
include any interest on the wholesale price of a tobacco product,
uncollectible amounts on property that remains in the possession of
the licensee until the full purchase price is paid, expenses
incurred in attempting to collect any account receivable or any
portion of the debt recovered, any accounts receivable that have
been sold to a third party for collection, and repossessed
property.