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HB-5052, As Passed House, October 20, 2005

SUBSTITUTE FOR

HOUSE BILL NO. 5052

A bill to amend 1993 PA 327, entitled

"Tobacco products tax act,"

by amending sections 2 and 8 (MCL 205.422 and 205.428), as amended

by 2004 PA 474.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 2. As used in this act:

(a) "Cigarette" means a roll for smoking made wholly or in

part of tobacco, irrespective of size or shape and irrespective of

the tobacco being flavored, adulterated, or mixed with any other

ingredient, which roll has a wrapper or cover made of paper or any

other material. Cigarette does not include cigars.

(b) "Commissioner" means the state treasurer.

package of cigarettes or other container with a false manufacturing

label or a cigarette in an individual package of cigarettes or

other container with a counterfeit stamp.

(d) "Counterfeit cigarette paper" means a cigarette paper with

a false manufacturing label or that has not been printed,

manufactured, or made by authority of the trademark owner.

(e) ~~(d)~~ "Counterfeit stamp" means any stamp, label, or

print, indicium, or character, that evidences, or purports to

evidence, the payment of any tax levied under this act and that has

not been printed, manufactured, or made by authority of the

department as provided in this act and has not been issued, sold,

or circulated by the department.

(f) ~~(e)~~ "Department" means the department of treasury.

(g) ~~(f)~~ "Financially sound" means a determination by the

department that the wholesaler or unclassified acquirer is able to

pay for its stamps in the ordinary course of business based on

criteria including, but not limited to, all of the following:

(i) Past filing and payment history with the department.

(ii) Outstanding liabilities.

(iii) Review of current financial statements including, but not

limited to, balance sheets and income statements.

(iv) Duration that the wholesaler or unclassified acquirer has

been licensed under this act.

(h) "Gray market cigarette" means any cigarette the package of

which bears any statement, label, stamp, sticker, or notice

indicating that the manufacturer did not intend the cigarettes to

be sold, distributed, or used in the United States, including, but

not limited to, a label stating "For Export Only", "U.S. Tax

Exempt", "For Use Outside U.S.", or similar wording.

(i) "Gray market cigarette paper" means any cigarette paper

the package of which bears any statement, label, stamp, sticker, or

notice indicating that the manufacturer did not intend the

cigarette papers to be sold, distributed, or used in the United

States, including, but not limited to, a label stating "For Export

Only", "U.S. Tax Exempt", "For Use Outside U.S.", "For Use in

______________ (another country) Only", or similar wording.

(j) ~~(g)~~ "Individual package" means an individual packet or

pack used to contain or to convey cigarettes to the consumer.

Individual package does not include cartons, cases, or shipping or

storage containers that contain smaller packaging units of

cigarettes.

(k) ~~(h)~~ "Licensee" means a person licensed under this act.

(l) ~~(i)~~ "Manufacturer" means a person who manufactures or

produces a tobacco product.

(m) ~~(j)~~ "Noncigarette smoking tobacco" means tobacco sold in

loose or bulk form that is intended for consumption by smoking and

includes roll-your-own cigarette tobacco.

(n) ~~(k)~~ "Person" means an individual, partnership,

fiduciary, association, limited liability company, corporation, or

other legal entity.

(o) (l) "Place of business" means a place where a tobacco

product is sold or where a tobacco product is brought or kept for

the purpose of sale or consumption, including a vessel, airplane,

train, or vending machine.

(p) ~~(m)~~ "Retailer" means a person other than a

transportation company who operates a place of business for the

purpose of making sales of a tobacco product at retail.

(q) ~~(n)~~ "Sale" means a transaction by which the ownership of

tangible personal property is transferred for consideration and

applies also to use, gifts, exchanges, barter, and theft.

(r) ~~(o)~~ "Secondary wholesaler" means a person who sells a

tobacco product for resale, who purchases a tobacco product from a

wholesaler or unclassified acquirer licensed under this act, and

who maintains an established place of business in this state where

a substantial portion of the business is the sale of tobacco

products and related merchandise at wholesale, and where at all

times a substantial stock of tobacco products and related

merchandise is available to retailers for resale.

(s) ~~(p)~~ "Smokeless tobacco" means snuff, chewing tobacco,

and any other tobacco that is intended to be consumed by means

other than smoking.

(t) ~~(q)~~ "Stamp" means a distinctive character, indication,

or mark, as determined by the department, attached or affixed to an

individual package of cigarettes by mechanical device or other

means authorized by the department to indicate that the tax imposed

under this act has been paid.

(u) ~~(r)~~ "Stamping agent" means a wholesaler or unclassified

acquirer other than a manufacturer who is licensed and authorized

by the department to affix stamps to individual packages of

cigarettes on behalf of themselves and other wholesalers or

unclassified acquirers other than manufacturers.

(v) ~~(s)~~ "Tobacco product" means cigarettes, cigars,

noncigarette smoking tobacco, or smokeless tobacco.

(w) ~~(t)~~ "Transportation company" means a person operating,

or supplying to common carriers, cars, boats, or other vehicles for

the transportation or accommodation of passengers and engaged in

the sale of a tobacco product at retail.

(x) ~~(u)~~ "Transporter" means a person importing or

transporting into this state, or transporting in this state, a

tobacco product obtained from a source located outside this state,

or from any person not duly licensed under this act. Transporter

does not include an interstate commerce carrier licensed by the

interstate commerce commission to carry commodities in interstate

commerce, or a licensee maintaining a warehouse or place of

business outside of this state if the warehouse or place of

business is licensed under this act.

(y) ~~(v)~~ "Unclassified acquirer" means a person, except a

transportation company or a purchaser at retail from a retailer

licensed under the general sales tax act, 1933 PA 167, MCL 205.51

to 205.78, who imports or acquires a tobacco product from a source

other than a wholesaler or secondary wholesaler licensed under this

act for use, sale, or distribution. Unclassified acquirer also

means a person who receives cigars, noncigarette smoking tobacco,

or smokeless tobacco directly from a manufacturer licensed under

this act or from another source outside this state, which source is

not licensed under this act. An unclassified acquirer does not

include a wholesaler.

(z) ~~(w)~~ "Vending machine operator" means a person who

operates 1 or more vending machines for the sale of a tobacco

product and who purchases a tobacco product from a manufacturer,

licensed wholesaler, or secondary wholesaler.

(aa) ~~(x)~~ "Wholesale price" means the actual price paid for a

tobacco product, including any tax, by a wholesaler or unclassified

acquirer to a manufacturer, excluding any discounts or reductions.

(bb) ~~(y)~~ "Wholesaler" means a person who purchases all or

part of his or her tobacco products from a manufacturer, who sells

75% or more of those tobacco products to others for resale, and who

maintains an established business where substantially all of the

business is the sale of tobacco products or cigarettes and related

merchandise at wholesale and where at all times a substantial stock

of tobacco products and related merchandise is available to

retailers for resale. Wholesaler includes a chain of stores

retailing a tobacco product to the consumer if 75% of its stock of

tobacco products is purchased directly from the manufacturer.

Sec. 8. (1) A person, other than a licensee, who is in control

or in possession of a tobacco product contrary to this act, who

after August 31, 1998 is in control or in possession of an

individual package of cigarettes without a stamp in violation of

this act, or who offers to sell or does sell a tobacco product to

another for purposes of resale without being licensed to do so

under this act, shall be personally liable for the tax imposed by

this act, plus a penalty of 500% of the amount of tax due under

this act.

(2) The department may permit a representative of a licensed

manufacturer of tobacco products whose duties require travel in

this state to transport up to 138,000 cigarettes, of which not more

than 36,000 cigarettes may bear no tax indicia or the tax indicia

of another state. All 138,000 cigarettes must bear the stamp

approved by the department or the tax indicia of another state, if

any. The total value of tobacco products, excluding cigarettes,

carried by a representative shall not exceed a wholesale value of

$5,000.00. A manufacturer shall notify the department of the

manufacturer's representatives that it currently employs who carry

cigarettes or tobacco products other than cigarettes in performing

work duties in this state. The manufacturer shall maintain a record

of each transaction by the manufacturer's representative for a

period of 4 years immediately following the transaction and shall

produce the records upon request of the state treasurer or the

state treasurer's authorized agent. Each record shall identify the

quantity and identity of the tobacco products, detail whether

exchanged, received, removed, or otherwise disposed of and the

identity of the retailer, wholesaler, secondary wholesaler, vending

machine operator, or unclassified acquirer involved. The

representative of the manufacturer shall provide a copy of the

record to the retailer, wholesaler, secondary wholesaler, vending

machine operator, or unclassified acquirer at the time of the

exchange or disposal. The retailer, wholesaler, secondary

wholesaler, vending machine operator, or unclassified acquirer

shall retain the copy of the record in the same place and for the

same time period as other records required by this section. A

representative shall not exchange, or otherwise dispose of, within

this state tobacco products bearing the tax indicia of another

state or receive tobacco products bearing the tax indicia of

another state from retailers located within this state. A

representative who sells, exchanges, or otherwise disposes of

cigarettes or tobacco products other than cigarettes that do not

bear the stamp or other marking required by the department or

sells, exchanges, or otherwise disposes of cigarettes or tobacco

products other than cigarettes bearing the tax indicia of another

state is guilty of a felony, punishable by a fine of not more than

$5,000.00 or imprisonment for not more than 5 years, or both.

(3) A person who possesses, acquires, transports, or offers

for sale contrary to this act 3,000 or more cigarettes, tobacco

products other than cigarettes with an aggregate wholesale price of

$250.00 or more, or 3,000 or more counterfeit cigarettes, 3,000

or more counterfeit cigarette papers, 3,000 or more gray market

cigarettes, or 3,000 or more gray market cigarette papers is guilty

of a felony, punishable by a fine of not more than $50,000.00 or

imprisonment for not more than 5 years, or both.

(4) A person who possesses, acquires, transports, or offers

for sale contrary to this act 1,200 or more, but not more than

2,999, cigarettes, tobacco products other than cigarettes with an

aggregate wholesale value of $100.00 or more but less than $250.00,

or 1,200 or more, but not more than 2,999, counterfeit cigarettes,

counterfeit cigarette papers, gray market cigarettes, or gray

market cigarette papers is guilty of a misdemeanor punishable by a

fine of not more than $5,000.00 or imprisonment of not more than 1

year, or both.

(5) A person who violates a provision of this act for which a

criminal punishment is not otherwise provided is guilty of a

misdemeanor, punishable by a fine of not more than $1,000.00 or 5

times the retail value of the tobacco products involved, whichever

is greater, or imprisonment for not more than 1 year, or both.

(6) A person who manufactures, possesses, or uses a stamp or

manufactures, possesses, or uses a counterfeit stamp or writing or

device intended to replicate a stamp without authorization of the

department, a licensee who purchases or obtains a stamp from any

person other than the department, or who falsifies a manufacturer's

label on cigarettes, or counterfeit cigarettes, gray market

cigarette papers, or counterfeit cigarette papers is guilty of a

felony and shall be punished by imprisonment for not less than 1

year or more than 10 years and may be punished by a fine of not

more than $50,000.00.

(7) A person who falsely makes, counterfeits, or alters a

license, vending machine disc, or marker, or who purchases or

receives a false or altered license, vending machine disc, or

marker, or who assists in or causes to be made a false or altered

license, vending machine disc, or marker, or who possesses a device

used to forge, alter, or counterfeit a license, vending machine

disc, or marker is guilty of a felony punishable by a fine of not

more than $5,000.00 or imprisonment for not more than 5 years, or

both. A person who alters or falsifies records or markings required

under this act is guilty of a felony punishable by a fine of not

more than $5,000.00 or imprisonment for not more than 5 years, or

both.

(8) The attorney general has concurrent power with the