HB-5632, As Passed House, May 26, 2004                                      

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                              SUBSTITUTE FOR                                    

                                                                                

                           HOUSE BILL NO. 5632                                  

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 A bill to amend 1993 PA 327, entitled                                             

                                                                                

    "Tobacco products tax act,"                                                 

                                                                                

    by amending sections 7 and 12 (MCL 205.427 and 205.432), as                 

                                                                                

    amended by 2002 PA 503.                                                     

                                                                                

                THE PEOPLE OF THE STATE OF MICHIGAN ENACT:                      

                                                                                

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

                                                                                

2   sale of tobacco products sold in this state as follows:                     

                                                                                

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

                                                                                

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

                                                                                

5       (b) For cigarettes, 37.5 mills per cigarette.                               

                                                                                

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

                                                                                

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

                                                                                

8   cigarette.                                                                  

                                                                                

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

                                                                                

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

                                                                                


     House Bill No. 5632 (H-7) as amended May 26, 2004

   

1   mills per cigarette.                                                        

                                                                                

2       (e) Beginning July 1, 2004 [and through June 30, 2007], for cigarettes, in addition to                                                                     

                                                                                

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

                                                                                

4   37.5 mills per cigarette.                                                   

                                                                                

5       (f)  (e)  Beginning August 1, 2002 [                         ],             

                                                                                

6   for cigars, noncigarette smoking tobacco, and smokeless tobacco,            

                                                                                

7   20% of the wholesale price.                                                 

                                                                                

8                                                                                [                                                                 

                                                                                

9                                                               ]               

                                                                                

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

                                                                                

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

                                                                                

12  wholesaler, unclassified acquirer licensed as a manufacturer, or            

                                                                                

13  vending machine operator shall file a return with the department            

                                                                                

14  stating the wholesale price of each tobacco product other than              

                                                                                

15  cigarettes purchased, the quantity of cigarettes purchased, the             

                                                                                

16  wholesale price charged for all tobacco products other than                 

                                                                                

17  cigarettes sold, the number of individual packages of cigarettes            

                                                                                

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

                                                                                

19  the number and denominations of stamps affixed to individual                

                                                                                

20  packages of cigarettes sold by the licensee for each place of               

                                                                                

21  business in the preceding calendar month.  The return shall also            

                                                                                

22  include the number and denomination of unaffixed stamps in the              

                                                                                

23  possession of the licensee at the end of the preceding calendar             

                                                                                

24  month.  Wholesalers shall also report accurate inventories of               

                                                                                

25  cigarettes, both stamped and unstamped at the end of the                    

                                                                                

26  preceding calendar month.  Wholesalers and unclassified acquirers           

                                                                                

27  shall also report accurate inventories of affixed and unaffixed             


                                                                                

1   stamps by denomination at the beginning and end of each calendar            

                                                                                

2   month and all stamps acquired during the preceding calendar                 

                                                                                

3   month.  The return shall be signed under penalty of perjury.  The           

                                                                                

4   return shall be on a form prescribed by the department and shall            

                                                                                

5   contain or be accompanied by any further information the                    

                                                                                

6   department requires.                                                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

10  in subsection (1) for tobacco products sold during the calendar             

                                                                                

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

                                                                                

12  the following:                                                              

                                                                                

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

                                                                                

14  products sold other than cigarettes.                                        

                                                                                

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

                                                                                

16  tax due on cigarettes sold.                                                 

                                                                                

17      (c) Beginning August 1, 2002, 1.5% of the total amount of the               

                                                                                

18  tax due on cigarettes sold.                                                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

26  Every licensee and retailer who, on August 1, 2002, has on hand             

                                                                                

27  for sale any cigars, noncigarette smoking tobacco, or smokeless             


     House Bill No. 5632 (H-7) as amended May 26, 2004

   

1   tobacco upon which a tax has been paid pursuant to subsection               

                                                                                

2   (1)(a) shall file a complete inventory of those cigars,                     

                                                                                

3   noncigarette smoking tobacco, and smokeless tobacco before                  

                                                                                

4   September 1, 2002 and shall pay to the department at the time of            

                                                                                

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

                                                                                

6   tax imposed in subsection  (1)(e)  (1)(f) and the tax that has              

                                                                                

7   been paid under subsection (1)(a).                                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  inventory of those cigarettes[, less the number of cigarettes that would be sold in a 2-week period calculated by using the average weekly sales for the 6-month period immediately preceding July 1, 2004,] before August 1, 2004 and shall pay                                                                             

                                                                                

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

                                                                                

13  equal to the difference between the tax imposed in subsection               

                                                                                

14  (1)(b), (c), (d), and (e) and the tax that has been paid under              

                                                                                

15  subsection (1)(b), (c), and (d).  [                                         

                                                                                

16                                                                              

                                                                                

17                                                                              

                                                                                

18                                                                              

                                                                                

19                                                                              

                                                                                

20                                                                              

                                                                                

21                                                                              

                                                                                

22                                                                              

                                                                                

23                                                     ]  The proceeds          

                                                                                

24  derived under this subsection shall be credited to the [general fund of     

                                                                                

25  this state.                                                                     

                                                                                

26                                     ]                                        

                                                                                

27      (6)  (5)  The department may require the payment of the tax                 


                                                                                

1   imposed by this act upon the importation or acquisition of a                

                                                                                

2   tobacco product.  A tobacco product for which the tax under this            

                                                                                

3   act has once been imposed and that has not been refunded if paid            

                                                                                

4   is not subject upon a subsequent sale to the tax imposed by this            

                                                                                

5   act.                                                                        

                                                                                

6       (7)  (6)  An abatement or refund of the tax provided by this                

                                                                                

7   act may be made by the department for causes the department                 

                                                                                

8   considers expedient.  The department shall certify the amount and           

                                                                                

9   the state treasurer shall pay that amount out of the proceeds of            

                                                                                

10  the tax.                                                                    

                                                                                

11      (8)  (7)  A person liable for the tax may reimburse itself by               

                                                                                

12  adding to the price of the tobacco products an amount equal to              

                                                                                

13  the tax levied under this act.                                              

                                                                                

14      (9)  (8)  A wholesaler, unclassified acquirer, or other                     

                                                                                

15  person shall not sell or transfer any unaffixed stamps acquired             

                                                                                

16  by the wholesaler or unclassified acquirer from the department.             

                                                                                

17  A wholesaler or unclassified acquirer who has any unaffixed                 

                                                                                

18  stamps on hand at the time its license is revoked or expires, or            

                                                                                

19  at the time it discontinues the business of selling cigarettes,             

                                                                                

20  shall return those stamps to the department.  The department                

                                                                                

21  shall refund the value of the stamps, less the appropriate                  

                                                                                

22  discount paid.                                                              

                                                                                

23      (10)  (9)  If the wholesaler or unclassified acquirer has                   

                                                                                

24  unsalable packs returned from a retailer, secondary wholesaler,             

                                                                                

25  vending machine operator, wholesaler, or unclassified acquirer              

                                                                                

26  with stamps affixed, the department shall refund the amount of              

                                                                                

27  the tax less the appropriate discount paid.  If the wholesaler or           


                                                                                

1   unclassified acquirer has unaffixed unsalable stamps, the                   

                                                                                

2   department shall exchange with the wholesaler or unclassified               

                                                                                

3   acquirer new stamps in the same quantity as the unaffixed                   

                                                                                

4   unsalable stamps.  An application for refund of the tax shall be            

                                                                                

5   filed on a form prescribed by the department for that purpose,              

                                                                                

6   within 4 years from the date the stamps were originally acquired            

                                                                                

7   from the department.  A wholesaler or unclassified acquirer shall           

                                                                                

8   make available for inspection by the department the unused or               

                                                                                

9   spoiled stamps and the stamps affixed to unsalable individual               

                                                                                

10  packages of cigarettes.  The department may, at its own                     

                                                                                

11  discretion, witness and certify the destruction of the unused or            

                                                                                

12  spoiled stamps and unsalable individual packages of cigarettes              

                                                                                

13  that are not returnable to the manufacturer.  The wholesaler or             

                                                                                

14  unclassified acquirer shall provide certification from the                  

                                                                                

15  manufacturer for any unsalable individual packages of cigarettes            

                                                                                

16  that are returned to the manufacturer.                                      

                                                                                

17      (11)  (10)  On or before the twentieth of each month, each                  

                                                                                

18  manufacturer shall file a report with the department listing all            

                                                                                

19  sales of tobacco products to wholesalers and unclassified                   

                                                                                

20  acquirers during the preceding calendar month and any other                 

                                                                                

21  information the department finds necessary for the administration           

                                                                                

22  of this act.  This report shall be in the form and manner                   

                                                                                

23  specified by the department.                                                

                                                                                

24      (12)  (11)  Each wholesaler or unclassified acquirer shall                  

                                                                                

25  submit to the department an unstamped cigarette sales report on             

                                                                                

26  or before the twentieth day of each month covering the sale,                

                                                                                

27  delivery, or distribution of unstamped cigarettes during the                


                                                                                

1   preceding calendar month to points outside of Michigan.  A                  

                                                                                

2   separate schedule shall be filed for each state, country, or                

                                                                                

3   province into which shipments are made.  For purposes of the                

                                                                                

4   report described in this subsection, "unstamped cigarettes" means           

                                                                                

5   individual packages of cigarettes that do not bear a Michigan               

                                                                                

6   stamp.  The department may provide the information contained in             

                                                                                

7   this report to a proper officer of another state, country, or               

                                                                                

8   province reciprocating in this privilege.                                   

                                                                                

9       Sec. 12.  (1) The proceeds derived from the payment of                      

                                                                                

10  taxes, fees, and penalties provided for under this act and the              

                                                                                

11  license fees received by the department shall be deposited with             

                                                                                

12  the state treasurer and disbursed only as provided in this                  

                                                                                

13  section and section 7(5).                                                   

                                                                                

14      (2) The tax imposed under section 7(1)(a) shall be disbursed                

                                                                                

15  as follows:                                                                 

                                                                                

16      (a) 94% of the proceeds shall be credited to the state school               

                                                                                

17  aid fund established by section 11 of article IX of the state               

                                                                                

18  constitution of 1963.                                                       

                                                                                

19      (b) 6% of the proceeds shall be credited to the healthy                     

                                                                                

20  Michigan fund created under section 5953 of the public health               

                                                                                

21  code, 1978 PA 368, MCL 333.5953.                                            

                                                                                

22      (3) The tax imposed on cigarettes under section 7(1)(b) shall               

                                                                                

23  be disbursed as follows:                                                    

                                                                                

24      (a) Beginning May 1, 1994 and through June 30, 2004, 5.3% of                

                                                                                

25  the proceeds shall be credited to the health and safety fund                

                                                                                

26  created in the health and safety fund act, 1987 PA 264, MCL                 

                                                                                

27  141.471 to 141.479.                                                         


                                                                                

1       (b) Beginning July 1, 2004, 6.3% of the proceeds shall be                   

                                                                                

2   credited to the health and safety fund created in the health and            

                                                                                

3   safety fund act, 1987 PA 264, MCL 141.471 to 141.479.                       

                                                                                

4       (c)  (b)  Through June 30, 2004, 25.3% of the proceeds shall                

                                                                                

5   be credited to the general fund of this state.                              

                                                                                

6       (d) Beginning July 1, 2004, 24.3% of the proceeds shall be                  

                                                                                

7   credited to the general fund of this state.                                 

                                                                                

8       (e)  (c)  63.4% of the proceeds shall be credited to the                    

                                                                                

9   state school aid fund established by section 11 of article IX of            

                                                                                

10  the state constitution of 1963.                                             

                                                                                

11      (f)  (d)  6% of the proceeds shall be credited to the healthy               

                                                                                

12  Michigan fund created under section 5953 of the public health               

                                                                                

13  code, 1978 PA 368, MCL 333.5953.                                            

                                                                                

14      (4) Beginning August 1, 2002, the tax imposed on cigarettes                 

                                                                                

15  under section 7(1)(c) shall be disbursed as follows:                        

                                                                                

16      (a) Through June 30, 2004, 74.2%, and beginning July 1, 2004,               

                                                                                

17  5.4% of the proceeds shall be credited to the general fund of               

                                                                                

18  this state.   However, beginning October 1, 2004 and through                

                                                                                

19  September 30, 2007, the proceeds described in this subdivision              

                                                                                

20  shall be credited to the countercyclical budget and economic                

                                                                                

21  stabilization fund created under section 351 of the management              

                                                                                

22  and budget act, 1984 PA 431, MCL 18.1351.                                   

                                                                                

23      (b) Through June 30, 2004, 4.6%, and beginning July 1, 2004,                

                                                                                

24  44.5% of the proceeds shall be credited to the state school aid             

                                                                                

25  fund established by section 11 of article IX of the state                   

                                                                                

26  constitution of 1963.                                                       

                                                                                

27      (c) 6.0% of the proceeds shall be credited to the healthy                   


     House Bill No. 5632 (H-7) as amended May 26, 2004

   

1   Michigan fund created under section 5953 of the public health               

                                                                                

2   code, 1978 PA 368, MCL 333.5953.                                            

                                                                                

3       (d) Through June 30, 2004, 3.0%, and beginning July 1, 2004,                

                                                                                

4   3.6% of the proceeds shall be paid to counties with a 2000                  

                                                                                

5   population of more than 2,000,000, to be used only for indigent             

                                                                                

6   health care.                                                                

                                                                                

7       (e) Through June 30, 2004, 12.2%, and beginning July 1, 2004,               

                                                                                

8   40.5% of the proceeds shall be credited to the medicaid benefits            

                                                                                

9   trust fund created under section 5 of the Michigan trust fund               

                                                                                

10  act, 2000 PA 489, MCL 12.255.                                               

                                                                                

11      (5) Beginning August 1, 2002, the tax imposed under section                 

                                                                                

12  [7(1)(e)         ] shall be disbursed as follows:                           

                                                                                

13      (a) 75.6% of the proceeds shall be credited to the state                    

                                                                                

14  school aid fund established by section 11 of article IX of the              

                                                                                

15  state constitution of 1963.                                                 

                                                                                

16      (b) 6.0% of the proceeds shall be credited to the healthy                   

                                                                                

17  Michigan fund created under section 5953 of the public health               

                                                                                

18  code, 1978 PA 368, MCL 333.5953.                                            

                                                                                

19      (c) 18.4% of the proceeds shall be credited to the general                  

                                                                                

20  fund of this state.   However, beginning October 1, 2004 and                

                                                                                

21  through September 30, 2007, the proceeds described in this                  

                                                                                

22  subdivision shall be credited to the countercyclical budget and             

                                                                                

23  economic stabilization fund created under section 351 of the                

                                                                                

24  management and budget act, 1984 PA 431, MCL 18.1351.                        

                                                                                

25      (6) Beginning August 1, 2002, the tax imposed on cigarettes                 

                                                                                

26  under section 7(1)(d) shall be disbursed as follows:                        

                                                                                

27      (a) 94.0% of the proceeds shall be credited to the state                    


     House Bill No. 5632 (H-7) as amended May 26, 2004

   

1   school aid fund established by section 11 of article IX of the              

                                                                                

2   state constitution of 1963.                                                 

                                                                                

3       (b) 6.0% of the proceeds shall be credited to the healthy                   

                                                                                

4   Michigan fund created under section 5953 of the public health               

                                                                                

5   code, 1978 PA 368, MCL 333.5953.                                            

                                                                                

6       (7) [After the distribution provided in subsection (9), the remaining proceeds shall be distributed under this subsection.]  Beginning July 1, 2004, the tax imposed on cigarettes                                                           

                                                                                

7   under section 7(1)(e) shall be disbursed as follows:                        

                                                                                

8       (a) 8.6% of the proceeds shall be credited to the healthy                   

                                                                                

9   Michigan fund created under section 5953 of the public health               

                                                                                

10  code, 1978 PA 368, MCL 333.5953, and is subject to an                       

                                                                                

11  appropriation.                                                              

                                                                                

12      (b) Through September 30, 2004, 91.4% shall be credited to                  

                                                                                

13  the general fund of this state.                                             

                                                                                

14      (c) Beginning October 1, 2004, 91.4% shall be credited to the               

                                                                                

15  medicaid benefits trust fund created under section 5 of the                 

                                                                                

16  Michigan trust fund act, 2000 PA 489, MCL 12.255.  However, each            

                                                                                

17  fiscal year subject to an appropriation, the first $30,000,000.00           

                                                                                

18  of the amount described in this subdivision shall be allocated in           

                                                                                

19  the following amounts in the following order of priority to the             

                                                                                

20  department of community health for the following purposes:                  

                                                                                

21                                                                               (i) An amount sufficient to provide a 4% increase in medicaid                       

                                                                                

22  payment rates in effect on October 1, 2004 for hospital[, auxiliary medical, nursing home, pharmacist, ambulance,] and                                       

                                                                                

23  physician services.                                                         

                                                                                

24      (ii) The remaining amount to be distributed to unaffiliated                  

                                                                                

25  hospitals and hospital systems that received less than                      

                                                                                

26  $900,000.00 in disproportionate share hospital payments in fiscal           

                                                                                

27  year 2002-2003 based on a formula that is weighted proportional             


     House Bill No. 5632 (H-7) as amended May 26, 2004

   

1   to the product of each eligible unaffiliated hospital's or                  

                                                                                

2   hospital system's medicaid revenue and medicaid utilization.                

                                                                                

3       [                                                                       

                                                                                

4                                                                               

                                                                                

5                                                                               

                                                                                

6                                                                               

                                                                                

7                                                                               

                                                                                

8                                                                               

                                                                                

9                                                                               

                                                                                

10                                                                              

                                                                                

11                                                                             

                                                                                

12                                                                              

         (8) Before distributing any of the proceeds under subsection (7), 1% of the tax imposed on cigarettes under section 7(1)(e) shall be credited to the general fund of this state to be used by the department of treasury solely to fund anti-cigarette smuggling enforcement. The total remaining proceeds from the tax imposed on cigarettes under section 7(1)(e) shall be disbursed as provided in subsection (7).                                                                 

13      (9)] (7) The proceeds of the fees and penalties provided for                

                                                                                

14  in this act shall be used for the administration of this act.