SB-1004, As Passed Senate, September 27, 2012

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1004

A bill to amend 1993 PA 327, entitled

"Tobacco products tax act,"

by amending sections 7 and 11 (MCL 205.427 and 205.431), section 7

as amended by 2012 PA 188 and section 11 as amended by 2004 PA 474.

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.

However, beginning November 1, 2012 and through October 31, 2016,

the amount of tax levied under this subdivision on cigars shall not

exceed 50 cents per individual cigar.

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

every licensee under section 3 other than a retailer, 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. The department may also

require licensees to report cigarette acquisition, purchase, and

sales information in other formats and frequency.

(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 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.

tax due on cigarettes sold and, beginning on ~~the effective date of~~

~~the amendatory act that added subdivision (e)~~ June 20, 2012, for

sales of untaxed cigarettes to Indian tribes in this state, an

amount equal to 1.5% of the total amount of the tax due on those

cigarettes sold as if those cigarette sales were taxable sales

under this act.

(d) Beginning on the first calendar month following the

implementation of the use of digital stamps as provided in section

5a(2), for licensees who are stamping agents, 0.5% of the total

amount of the tax due on cigarettes sold and, for sales of untaxed

cigarettes to Indian tribes in this state, 0.5% of the total amount

of the tax due on those cigarettes sold as if those cigarette sales

were taxable sales under this act, until the stamping agent is

compensated in an amount equal to the direct cost actually incurred

by the stamping agent for upgrades to technology and equipment,

excluding the equipment reimbursed under subdivision (e), that are

necessary to affix the digital stamp as determined by the

department.

(e) Beginning in the first calendar month following the

implementation of the use of digital stamps as provided in section

5a(2) and continuing for the immediately succeeding 17 months, for

licensees who are stamping agents, reimbursement of direct costs

actually incurred by the stamping agent, as determined by the

department, for the initial purchase of eligible equipment in an

amount equal to 5.55% of the total net purchase price of the

eligible equipment necessary to affix the digital stamp. The

reimbursement provided under this subdivision shall exclude

reimbursement for any costs for installation or for ongoing

maintenance related to eligible equipment. A stamping agent may

only receive reimbursement under this subdivision to the extent

that the eligible equipment purchased by the stamping agent does

not exceed the total number of the stamping agent's existing

equipment as certified by the stamping agent on a form prescribed

by the department.

(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 Michigan 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.

(13) As used in subsection (3):

(a) "Eligible equipment" means a cigarette tax stamping

machine that meets all of the following conditions:

(i) Was purchased by a stamping agent who was licensed as a

stamping agent as of December 31, 2011.

(ii) Enables the stamping agent to affix digital stamps to

individual packages of cigarettes in accordance with the

requirements under section 6a(2).

(iii) Was purchased to be used for the primary purpose of

permitting the stamping agent to affix digital stamps to individual

packages of cigarettes to be sold in this state following the

implementation of the use of digital stamps as provided in section

5a(2).

(b) "Existing equipment" means a cigarette tax stamping

machine that meets all of the following conditions:

(i) Was owned by a person who was licensed as a stamping agent

as of December 31, 2011.

(ii) Was a cigarette tax stamping machine used prior to January

1, 2012 by the stamping agent to apply stamps using stamp rolls of

30,000 stamps.

Sec. 11. (1) A person, either as principal or agent, shall not

sell or solicit a sale of a tobacco product to be shipped, mailed,

or otherwise sent or brought into the state, to a person not a

licensed manufacturer, licensed wholesaler, licensed secondary

wholesaler, licensed vending machine operator, licensed

unclassified acquirer, licensed transporter, or licensed

transportation company, unless the tobacco product is to be sold to

or through a licensed wholesaler.

(2) All sales conducted through the internet, by telephone, or

in a mail-order transaction shall not be completed unless, before

each delivery of cigarettes is made, whether through the mail,

through a transportation company, or through any other delivery

system, the seller has obtained from the purchaser an affirmation

that includes a copy of a valid government-issued document that

confirms the purchaser's name, address, and date of birth showing

that the purchaser is at least the legal minimum age to purchase

cigarettes; that the cigarettes purchased are not intended for

consumption by an individual who is younger than the legal minimum

age to purchase cigarettes; and a written statement signed by the

purchaser that affirms the purchaser's address and that the

purchaser is at least the minimum legal age to purchase cigarettes.

The statement shall also confirm that the purchaser understands

that signing another person's name to the affirmation is illegal;

that the sale of cigarettes to individuals under the legal minimum

purchase age is illegal; and that the purchase of cigarettes by

individuals under the legal minimum purchase age is illegal under

the laws of the state of Michigan. The seller shall verify the

information contained in the affirmation provided by the purchaser

against a commercially available database of governmental records,

or obtain a photocopy, fax copy, or other image of the valid,

government-issued identification stating the date of birth or age

of the purchaser.

(3) All invoices, bills of lading, sales receipts, or other

documents related to cigarette sales conducted through the

internet, by telephone, or in a mail-order transaction shall

contain the current seller's valid Michigan sales tax registration

number, business name and address of the seller, and a statement as

to whether all sales taxes and taxes levied under this act have

been paid. All packages of cigarettes shipped from a cigarette

seller to purchasers who reside in Michigan shall clearly print or

stamp the package with the word "CIGARETTES" on the outside of all

sides of the package so it is clearly visible to the shipper. In

addition, the package shall contain an externally visible and

clearly legible notice located on the same side of the package as

the address to which the package is delivered, as follows:

"IF THESE CIGARETTES HAVE BEEN SHIPPED TO YOU FROM A SELLER

LOCATED OUTSIDE OF THE STATE IN WHICH YOU RESIDE, THE SELLER HAS

REPORTED UNDER FEDERAL LAW THE SALE OF THESE CIGARETTES TO OUR

STATE TAX COLLECTION AGENCY, INCLUDING YOUR NAME AND ADDRESS. YOU

ARE LEGALLY RESPONSIBLE FOR ALL APPLICABLE UNPAID STATE TAXES ON

THESE CIGARETTES."

If an order is made as a result of advertisement over the

internet, the tobacco retailer shall request the electronic mail

address of the purchaser and shall receive payment by credit card

or check before shipping. This subsection and subsection (2) do not

apply to sales by wholesalers and unclassified acquirers.

(4) The deliverer of the cigarettes is required to obtain

proof from a valid government-issued document that the person

signing for the cigarettes is the purchaser.

(5) Beginning November 1, 2012, a retailer that is licensed as

an unclassified acquirer, retail importer of tobacco products other

than cigarettes, shall post a sign, visible to the public inside

the retail establishment that informs purchasers of cigars through

catalog sales or internet sales of their responsibility to pay all

applicable unpaid state taxes on those cigars.

(6) ~~(5)~~ As used in this section:

(a) "Computer" means any connected, directly interoperable or

interactive device, equipment, or facility that uses a computer

program or other instructions to perform specific operations,

including logical, arithmetic, or memory functions with or on

computer data or a computer program, and that can store, retrieve,

alter, or communicate the results of the operations to a person,

computer program, computer, computer system, or computer network.

(b) "Computer network" means the interconnection of hardwire

or wireless communication lines with a computer through remote

terminals or a complex consisting of 2 or more interconnected

computers.

instructions communicated in a form acceptable to a computer that

directs the functioning of a computer, computer system, or computer

network in a manner designed to provide or produce products or

results from the computer, computer system, or computer network.

(d) "Computer system" means related, connected or unconnected,

computer equipment, devices, software, or hardware.

(e) "Credit card" means a card or device issued by a person

licensed under 1984 PA 379, MCL 493.101 to 493.114, or under the

consumer financial services act, 1988 PA 161, MCL 487.2051 to

487.2072, or issued by a depository financial institution as

defined in section 1a of the mortgage brokers, lenders, and

services licensing act, 1987 PA 173, MCL 445.1651a, under a credit

card arrangement.

(f) "Device" includes, but is not limited to, an electronic,

magnetic, electrochemical, biochemical, hydraulic, optical, or

organic object that performs input, output, or storage functions by

the manipulation of electronic, magnetic, or other impulses.

(g) "Internet" means the connection to the world wide web

through the use of a computer, a computer network, or a computer

system.

(h) "Sale conducted through the internet" means a sale of, a

solicitation to sell, a purchase of, or an offer to purchase

cigarettes conducted all or in part by accessing an internet

website.