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7 LONG TITLE
8 General Description:
9 This bill amends the Cigarette and Tobacco Tax and Licensing Act to enact additional
10 enforcement provisions complimentary to the Master Settlement Agreement.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . creates a certification requirement for participating and nonparticipating tobacco
15 product manufacturers;
16 . requires the tax commission to create and maintain a directory of manufacturers in
17 compliance with the certification requirements;
18 . prohibits stamping agents from applying stamps to products not listed as in
19 compliance on the commission's directory;
20 . requires nonresident or foreign nonparticipating manufacturers to appoint an agent
21 for service of process in the state;
22 . requires certain reporting requirements for stamping agents in the state;
23 . establishes rulemaking authority for the commission;
24 . provides for license revocation and penalties;
25 . enacts miscellaneous provisions regarding:
26 . phase in of reporting requirements;
27 . disgorgement of profits for violations; and
28 . recovery of costs and attorney's fees by the state;
29 . creates the Tobacco Control Restricted Account which consists of profits and gains
30 ordered by the court to be deposited into the account for a violation of this part to be
31 used for enforcement of the act; and
32 . makes technical and conforming amendments.
33 Monies Appropriated in this Bill:
35 Other Special Clauses:
37 Utah Code Sections Affected:
39 59-1-403 (Contingently Superseded 05/02/05), as last amended by Chapter 156, Laws
40 of Utah 2004
41 59-14-211, as last amended by Chapter 217, Laws of Utah 2004
42 59-14-213, as last amended by Chapters 217 and 221, Laws of Utah 2004
43 59-14-214, as enacted by Chapter 221, Laws of Utah 2004
45 59-14-601, Utah Code Annotated 1953
46 59-14-602, Utah Code Annotated 1953
47 59-14-603, Utah Code Annotated 1953
48 59-14-604, Utah Code Annotated 1953
49 59-14-605, Utah Code Annotated 1953
50 59-14-606, Utah Code Annotated 1953
51 59-14-607, Utah Code Annotated 1953
52 59-14-608, Utah Code Annotated 1953
53 59-14-609, Utah Code Annotated 1953
54 59-14-610, Utah Code Annotated 1953
55 59-14-611, Utah Code Annotated 1953
57 59-14-408, as last amended by Chapter 53, Laws of Utah 2004
58 Uncodified Material Affected:
59 ENACTS UNCODIFIED MATERIAL
61 Be it enacted by the Legislature of the state of Utah:
62 Section 1. Section 59-1-403 (Contingently Superseded 05/02/05) is amended to read:
63 59-1-403 (Contingently Superseded 05/02/05). Confidentiality -- Exceptions --
64 Penalty -- Application to property tax.
65 (1) (a) Except as provided in this section, any of the following may not divulge or
66 make known in any manner any information gained by that person from any return filed with
67 the commission:
68 (i) a tax commissioner;
69 (ii) an agent, clerk, or other officer or employee of the commission; or
70 (iii) a representative, agent, clerk, or other officer or employee of any county, city, or
72 (b) Except as provided in Subsection (1)(c), an official charged with the custody of a
73 return filed with the commission is not required to produce the return or evidence of anything
74 contained in the return in any action or proceeding in any court, except:
75 (i) in accordance with judicial order;
76 (ii) on behalf of the commission in any action or proceeding under:
77 (A) this title; or
78 (B) other law under which persons are required to file returns with the commission;
79 (iii) on behalf of the commission in any action or proceeding to which the commission
80 is a party; or
81 (iv) on behalf of any party to any action or proceeding under this title if the report or
82 facts shown by the return are directly involved in the action or proceeding.
83 (c) Notwithstanding Subsection (1)(b), a court may require the production of, and may
84 admit in evidence, any portion of a return or of the facts shown by the return, as are specifically
85 pertinent to the action or proceeding.
86 (2) This section does not prohibit:
87 (a) a person or that person's duly authorized representative from receiving a copy of
88 any return or report filed in connection with that person's own tax;
89 (b) the publication of statistics as long as the statistics are classified to prevent the
90 identification of particular reports or returns; and
91 (c) the inspection by the attorney general or other legal representative of the state of the
92 report or return of any taxpayer:
93 (i) who brings action to set aside or review a tax based on the report or return;
94 (ii) against whom an action or proceeding is contemplated or has been instituted under
95 this title; or
96 (iii) against whom the state has an unsatisfied money judgment.
97 (3) (a) Notwithstanding Subsection (1) and for purposes of administration, the
98 commission may by rule, made in accordance with Title 63, Chapter 46a, Utah Administrative
99 Rulemaking Act, provide for a reciprocal exchange of information with:
100 (i) the United States Internal Revenue Service; or
101 (ii) the revenue service of any other state.
102 (b) Notwithstanding Subsection (1) and for all taxes except individual income tax and
103 corporate franchise tax, the commission may by rule, made in accordance with Title 63,
104 Chapter 46a, Utah Administrative Rulemaking Act, share information gathered from returns
105 and other written statements with the federal government, any other state, any of the political
106 subdivisions of another state, or any political subdivision of this state, except as limited by
107 Sections 59-12-209 and 59-12-210 , if these political subdivisions or the federal government
108 grant substantially similar privileges to this state.
109 (c) Notwithstanding Subsection (1) and for all taxes except individual income tax and
110 corporate franchise tax, the commission may by rule, in accordance with Title 63, Chapter 46a,
111 Utah Administrative Rulemaking Act, provide for the issuance of information concerning the
112 identity and other information of taxpayers who have failed to file tax returns or to pay any tax
114 (d) Notwithstanding Subsection (1), the commission shall provide to the Solid and
115 Hazardous Waste Control Board executive secretary, as defined in Section 19-6-102 , as
116 requested by the executive secretary, any records, returns, or other information filed with the
117 commission under Chapter 13, Motor and Special Fuel Tax Act, or Section 19-6-410.5
118 regarding the environmental assurance program participation fee.
119 (e) Notwithstanding Subsection (1), at the request of any person the commission shall
120 provide that person sales and purchase volume data reported to the commission on a report,
121 return, or other information filed with the commission under:
122 (i) Chapter 13, Part 2, Motor Fuel; or
123 (ii) Chapter 13, Part 4, Aviation Fuel.
124 (f) Notwithstanding Subsection (1), upon request from a tobacco product manufacturer,
125 as defined in Section 59-22-202 , the commission shall report to the manufacturer:
126 (i) the quantity of cigarettes, as defined in Section 59-22-202 , produced by the
127 manufacturer and reported to the commission for the previous calendar year under Section
128 59-14-407 ; and
129 (ii) the quantity of cigarettes, as defined in Section 59-22-202 , produced by the
130 manufacturer for which a tax refund was granted during the previous calendar year under
131 Section 59-14-401 and reported to the commission under Subsection 59-14-401 (1)(a)(v).
132 (g) Notwithstanding Subsection (1), the commission shall notify manufacturers,
133 distributors, wholesalers, and retail dealers of a tobacco product manufacturer that is prohibited
134 from selling cigarettes to consumers within the state under Subsection 59-14-210 (2).
135 (h) Notwithstanding Subsection (1), the commission may:
136 (i) provide to the Division of Consumer Protection within the Department of
137 Commerce and the attorney general data:
138 (A) reported to the commission under Section 59-14-212 ; or
139 (B) related to a violation under Section 59-14-211 ; and
140 (ii) upon request provide to any person data reported to the commission under
141 Subsections 59-14-212 (1)(a) through (c) and Subsection 59-14-212 (1)(g).
142 (i) Notwithstanding Subsection (1), the commission shall, at the request of a committee
143 of the Legislature, Office of the Legislative Fiscal Analyst, or Governor's Office of Planning
144 and Budget, provide to the committee or office the total amount of revenues collected by the
145 commission under Chapter 24, Radioactive Waste Facility Tax Act, for the time period
146 specified by the committee or office.
147 (j) Notwithstanding Subsection (1), the commission shall at the request of the
148 Legislature provide to the Legislature the total amount of sales or uses exempt under
149 Subsection 59-12-104 (50) reported to the commission in accordance with Section 59-12-105 .
150 (k) Notwithstanding Subsection (1), the commission shall make the [
151 required by [
152 (l) Notwithstanding Subsection (1), the commission shall comply with the reporting
153 requirements of Section 10-1-409 .
154 (m) Notwithstanding Subsection (1), the commission may share information with
155 federal, state, or local agencies as provided in Subsection 59-14-606 (3).
156 (4) (a) Reports and returns shall be preserved for at least three years.
157 (b) After the three-year period provided in Subsection (4)(a) the commission may
158 destroy a report or return.
159 (5) (a) Any person who violates this section is guilty of a class A misdemeanor.
160 (b) If the person described in Subsection (5)(a) is an officer or employee of the state,
161 the person shall be dismissed from office and be disqualified from holding public office in this
162 state for a period of five years thereafter.
163 (6) Except as provided in Section 59-1-404 , this part does not apply to the property tax.
164 Section 2. Section 59-14-211 is amended to read:
165 59-14-211. Penalties for dealing with prohibited cigarettes -- Private right of
167 (1) A person, regardless of whether the person is a licensee under Section 59-14-202 , is
168 guilty of a class B misdemeanor for each instance in which the person knowingly or with
169 reason to know:
170 (a) sells or distributes cigarettes described under Section 59-14-210 ;
171 (b) acquires, holds, owns, possesses, transports, imports, or causes to be imported
173 (i) described under Section 59-14-210 ; and
174 (ii) intended for distribution or sale in the state;
175 (c) alters the package of any cigarettes prior to their sale or distribution to the ultimate
176 consumer to remove, conceal, or obscure a notice, warning label, or other package information
177 described in Subsection 59-14-210 (1)(a); or
178 (d) affixes a stamp used to pay the tax imposed under Section 59-14-204 , Part 3,
179 Tobacco Products, or Part 4, Cigarettes and Tobacco Products, to a package or container of
181 (i) described under Section 59-14-210 ;
182 (ii) known by the person affixing the stamp to be altered as described under Subsection
183 (1)(c); or
184 (iii) in violation of Section [
185 (2) If a person knowingly or with reason to know commits an act described in
186 Subsections (1)(a) through (d), the commission shall:
187 (a) suspend or revoke a license issued to the person under Section 59-14-202 ; and
188 (b) regardless of whether the person is licensed under Section 59-14-202 , impose a
189 civil penalty in an amount not to exceed the greater of:
190 (i) 500% of the retail value of the cigarettes; or
191 (ii) $5,000.
192 (3) Any person whose commercial interests have been adversely affected as a result of
193 a violation of this section may bring an action for injunctive relief, damages, or both.
194 (4) (a) The sale or possession for sale of counterfeit cigarettes by a manufacturer,
195 importer, distributor, or retailer is punishable by a court of law as follows:
196 (i) a first violation involving a total quantity of less than 100 cartons of cigarettes is
197 punishable by a fine in an amount the greater of $500 or five times the retail value of the
199 (ii) a subsequent violation involving a total quantity of less than 100 cartons of
200 cigarettes is punishable by:
201 (A) the greater of a fine of $2,000 or five times the retail value of the cigarettes;
202 (B) imprisonment not to exceed one year; or
203 (C) both imprisonment and a fine imposed by this Subsection (4)(a)(ii); and
204 (D) the revocation by the commission of the manufacturer, importer, distributor, or
205 retailer license for a period of up to two years;
206 (iii) a first violation involving a total quantity of 100 cartons of cigarettes or more is
207 punishable by:
208 (A) the greater of a fine of $2,500 or five times the retail value of the cigarettes;
209 (B) imprisonment not to exceed five years; or
210 (C) both the fine and imprisonment imposed by this Subsection (4)(a)(iii);
211 (iv) a second violation involving a quantity of 100 cartons of cigarettes or more is
212 punishable by:
213 (A) the greater of a fine of $10,000 or five times the retail value of the cigarettes;
214 (B) imprisonment not to exceed five years; or
215 (C) both the fine and imprisonment imposed by this Subsection (4)(a)(iv); and
216 (D) the revocation by the commission of the manufacturer, importer, distributor, or
217 retailer license for a period of up to five years; and
218 (v) a third and subsequent violation involving a quantity of 100 cartons of cigarettes or
219 more is punishable by:
220 (A) the greater of a fine of $25,000 or five times the retail value of the cigarettes;
221 (B) imprisonment not to exceed five years; or
222 (C) both the fine and imprisonment imposed by this Subsection (4)(a)(v); and
223 (D) the revocation by the commission of the manufacturer, importer, distributor, or
224 retailer license for a period of up to five years; and
225 (b) any counterfeit cigarette seized by the commission shall be destroyed.
226 Section 3. Section 59-14-213 is amended to read:
227 59-14-213. Contraband goods.
228 (1) Any cigarettes in violation of the requirements of this chapter or of any state or
229 federal law, including Sections 59-14-203 , 59-14-205 , 59-14-209 , 59-14-211 , Subsection
230 59-14-212 (1), or Section 59-14-214 are contraband goods and may be seized without a warrant
231 by the commission, its employees, or any peace officer of the state or its political subdivisions.
232 (2) Any goods seized pursuant to Subsection (1) shall be delivered to the commission
233 and destroyed.
234 (3) Any cigarettes, as defined in Subsection 59-22-202 (4), in violation of [
236 Subsections (1) and (2).
237 Section 4. Section 59-14-214 is amended to read:
238 59-14-214. Nonparticipating manufacturer equity assessment.
239 (1) As used in this section, "nonparticipating manufacturer" means a tobacco product
240 manufacturer, as defined in Subsection 59-22-202 (9), that is not a participating manufacturer
241 within the meaning of Subsection II(jj) of the Master Settlement Agreement, as defined in
242 Subsection 59-22-202 (5).
243 (2) (a) There is levied an equity assessment, at the rate of 1.75 cents on each cigarette,
244 for all cigarette packages of nonparticipating manufacturers to which a stamp is affixed as
245 required under Section 59-14-205 .
246 (b) The equity assessment imposed by this section is in addition to all other
247 assessments, fees, and taxes levied under existing law.
248 (c) The equity assessment imposed by this section shall be paid by affixing a stamp in
249 the manner and at the time described in Section 59-14-205 .
250 (d) Except as otherwise provided in this section, the equity assessment shall be
251 collected, paid, administered, and enforced in the same manner as the tax on cigarettes levied
252 by Section 59-14-204 .
253 (3) The purposes of this equity assessment are:
254 (a) to recover health care costs to the state imposed by nonparticipating manufacturers;
255 (b) to prevent nonparticipating manufacturers from undermining the state's policy of
256 reducing underage smoking by offering cigarettes for sale substantially below the prices of
257 cigarettes of other manufacturers;
258 (c) to protect funding, which is reduced as a result of the growth of nonparticipating
259 manufacturer cigarette sales, for programs funded in whole or in part by payments to the state
260 under the Master Settlement Agreement, as defined in Subsection 59-22-202 (5);
261 (d) to recoup settlement-payment revenue lost to the state as a result of
262 nonparticipating manufacturer cigarette sales; and
263 (e) to fund enforcement and administration of:
264 (i) [
265 Enforcement Provisions;
266 (ii) Sections 59-22-201 through 59-22-203 , related to nonparticipating manufacturers;
268 (iii) the equity assessment imposed by this section.
269 (4) (a) Each manufacturer, distributor, wholesaler, or retail dealer who under Section
270 59-14-205 affixes a stamp to a package of cigarettes, shall report monthly to the commission
271 for each place of business, the number and denominations of stamps affixed to individual
272 packages of nonparticipating manufacturer cigarettes sold by the manufacturer, distributor,
273 wholesaler, or retail dealer in the preceding month, including the manufacturer and brand
275 (b) A person required to file a report under this section is subject to the penalties under
276 Section 59-1-401 for failing to file a report in a timely manner, or for supplying false or
277 fraudulent information.
278 Section 5. Section 59-14-601 is enacted to read:
280 59-14-601. Definitions.
281 As used in this part:
282 (1) "Brand family" means:
283 (a) all styles of cigarettes sold under the same trademark and differentiated from one
284 another by means of additional modifiers or descriptors, including: "menthol," "lights,"
285 "kings," and "100s"; and
286 (b) any brand name, alone or in conjunction with any other word, trademark, logo,
287 symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product
288 identification identical or similar to, or identifiable with, a previously known brand of
290 (2) "Cigarette" has the same meaning as in Subsection 59-22-202 (4).
291 (3) "Commission" means the State Tax Commission as defined in Section 59-1-101 .
292 (4) "Distributor" means a person, wherever residing or located, who purchases
293 nontax-paid cigarettes and stores, sells, or otherwise disposes of the cigarettes.
294 (5) "Master Settlement Agreement" has the same meaning as in Subsection
295 59-22-202 (5).
296 (6) "Nonparticipating manufacturer" means any tobacco product manufacturer that is
297 not a participating manufacturer.
298 (7) "Participating manufacturer" has the meaning given that term in Section II(jj) of the
299 Master Settlement Agreement and all amendments thereto.
300 (8) "Stamping agent" means a person that is authorized to affix tax stamps to packages
301 or other containers of cigarettes under Section 59-14-205 or any person that is required to pay
302 the tobacco tax imposed pursuant to Section 59-14-204 .
303 (9) "Qualified Escrow Fund" has the same meaning as defined in Subsection
304 59-22-202 (6).
305 (10) "Tobacco product manufacturer" has the same meaning as defined in Subsection
306 59-22-202 (9).
307 (11) "Units sold" has the same meaning as defined in Subsection 59-22-202 (10).
308 Section 6. Section 59-14-602 is enacted to read:
309 59-14-602. Certifications -- Directories -- Tax stamps.
310 (1) Every tobacco product manufacturer whose cigarettes are sold in this state, whether
311 directly or through a distributor, retailer, or similar intermediary or intermediaries, shall
312 execute and deliver on a form prescribed by the commission a certification to the attorney
313 general and the commission, no later than April 30th each year, certifying that, as of the date of
314 the certification, the tobacco product manufacturer is either:
315 (a) a participating manufacturer; or
316 (b) in full compliance with Sections 59-14-214 and 59-22-203 .
317 (2) A participating manufacturer shall:
318 (a) include in its certification a list of its brand families; and
319 (b) update the list 30 calendar days prior to any addition to, or modification of, its
320 brand families by executing and delivering a supplemental certification to the commission and
321 the attorney general.
322 (3) (a) A nonparticipating manufacturer shall include in its certification:
323 (i) a list of all of its brand families and the number of units for each brand family that
324 were sold in the state during the preceding calendar year;
325 (ii) a list of all of its brand families that have been sold in the state at any time during
326 the current calendar year;
327 (iii) indicating, by an asterisk, any brand family sold in the state by the manufacturer
328 during the preceding calendar year that is no longer being sold in the state by the manufacturer
329 as of the date of the certification;
330 (iv) identifying by name and address, any other manufacturer of the brand families sold
331 in the state, by the manufacturer submitting the certification, during the preceding or current
332 calendar year;
333 (v) that the nonparticipating manufacturer is registered to do business in the state, or
334 has appointed a resident agent for service of process and provided notice of the registered agent
335 as required by Section 59-14-605 ;
336 (vi) that the nonparticipating manufacturer has:
337 (A) established and continues to maintain a qualified escrow fund; and
338 (B) has executed a qualified escrow agreement which:
339 (I) has been reviewed and approved by the commission; and
340 (II) governs the qualified escrow fund;
341 (vii) that the nonparticipating manufacturer is in full compliance with the Model
342 Tobacco Settlement Act and this part, and any regulations promulgated pursuant to the Model
343 Tobacco Settlement Act or this part; and
344 (viii) the following information concerning the qualified escrow fund:
345 (A) the name, address, and telephone number of the financial institution where the
346 nonparticipating manufacturer established the qualified escrow fund required by Section
347 59-22-203 ;
348 (B) the account number of the qualified escrow fund and any subaccount number for
349 the state;
350 (C) the amount the nonparticipating manufacturer placed in the fund for cigarettes sold
351 in the state during the preceding calendar year;
352 (D) the date and amount of each deposit into the fund, and evidence or verification as
353 required by the commission by administrative rule adopted in accordance with Section
354 59-14-607 as necessary to confirm the information required by Subsection (3)(a); and
355 (E) the amount and date of any withdrawal or transfer of funds the nonparticipating
356 manufacturer made at any time from the fund, or from any other qualified escrow fund into
357 which it ever made escrow payments pursuant to Section 59-22-203 .
358 (b) The nonparticipating manufacturer shall update the list required by this Subsection
359 (3) at least 30 calendar days prior to any addition to, or modification of, its brand families, by
360 executing and delivering a supplemental certification to the commission and the attorney
362 (c) A tobacco product manufacturer subject to this Subsection (3) shall:
363 (i) deposit the escrow payments required by Sections 59-14-214 and 59-22-203 on a
364 quarterly basis during the year in which the sale occurred; and
365 (ii) verify the quarterly deposits to the commission in accordance with Subsection
367 (4) A tobacco product manufacturer may not include a brand family in the certification
368 required by this section unless:
369 (a) in the case of a participating manufacturer, the participating manufacturer affirms
370 that the brand family will be considered its cigarette for purposes of:
371 (i) calculating its payments under the Master Settlement Agreement for the relevant
372 year; and
373 (ii) calculating the volume and shares determined pursuant to the Master Settlement
374 Agreement; and
375 (b) in the case of a nonparticipating manufacturer, the nonparticipating manufacturer
376 affirms that the brand family will be considered its cigarette for purposes of Section 59-22-203 .
377 (5) Nothing in this section shall be construed as limiting or otherwise affecting the
378 state's right to maintain that a brand family constitutes cigarettes of a different tobacco product
379 manufacturer for purposes of calculating payments under the Master Settlement Agreement or
380 for purposes of Section 59-22-203 .
381 (6) Tobacco product manufacturers shall maintain all invoices and documentation of
382 sales and other information relied upon for the certification required by this section for a period
383 of five years, unless otherwise required by law to maintain them for a greater period of time.
384 Section 7. Section 59-14-603 is enacted to read:
385 59-14-603. Directory of cigarettes approved for stamping and sale.
386 (1) No later than August 30, 2005, the commission shall develop and publish on its
387 website a directory listing:
388 (a) all tobacco product manufacturers that have provided current and accurate
389 certifications conforming to the requirements of Section 59-14-602 ; and
390 (b) all brand families that are listed in the certifications required by Section 59-14-602 ,
391 except the commission shall not include or retain in the directory:
392 (i) the name or brand families of any nonparticipating manufacturer:
393 (A) who failed to provide the certification required by Section 59-14-602 ; or
394 (B) whose certification is determined by the commission to be out of compliance with
395 Section 59-14-602 , unless the commission has determined that the violation has been cured to
396 the satisfaction of the commission; or
397 (ii) a tobacco product manufacturer or brand family of a nonparticipating manufacturer
398 for which the commission determines:
399 (A) any escrow payment required by Section 59-22-203 for any period, for any brand
400 family, whether or not listed by the nonparticipating manufacturer, has not been fully paid into
401 a qualified escrow fund governed by a qualified escrow agreement; or
402 (B) any outstanding final judgment, including interest thereon, for a violation of the
403 Model Tobacco Settlement Act has not been fully satisfied for the brand family or the tobacco
404 product manufacturer.
405 (2) The commission shall update the directory required by this section as necessary:
406 (a) to correct mistakes;
407 (b) to add or remove a tobacco product manufacturer or brand family; and
408 (c) to keep the directory in conformity with the requirements of this part.
409 (3) (a) Every stamping agent shall provide to the commission a current and valid
410 electronic mail address for the purpose of receiving notifications from the commission
411 concerning information required by this section and this part.
412 (b) The stamping agent shall update the electronic mail address as necessary.
413 (4) A determination by the commission to not include or to remove a brand family or
414 tobacco product manufacturer from the directory required by this section is subject to review in
415 the manner prescribed by Title 63, Chapter 46b, Administrative Procedures Act.
416 Section 8. Section 59-14-604 is enacted to read:
417 59-14-604. Prohibition against stamping, sale, or import of cigarettes not in the
418 directory -- Requirement to certify compliance.
419 (1) It is unlawful for any person:
420 (a) to affix a stamp to a package or other container of cigarettes of a tobacco product
421 manufacturer or brand family not included in the directory required by Section 59-14-603 ; or
422 (b) to sell, offer, or possess for sale, in this state, or import for personal consumption in
423 this state, cigarettes of a tobacco product manufacturer or brand family not included in the
424 directory required by Section 59-14-603 .
425 (2) (a) It is unlawful for any person to sell or distribute cigarettes, or acquire, hold,
426 own, possess, transport, import, or cause to be imported cigarettes, that the person knows or
427 should know are intended for distribution or sale in the state in violation of Section 59-14-603 .
428 (b) A violation of this Subsection (2) is a class B misdemeanor.
429 Section 9. Section 59-14-605 is enacted to read:
430 59-14-605. Appointment of agent for service of process.
431 (1) (a) A nonresident or foreign nonparticipating manufacturer that has not registered
432 to do business in the state as a foreign corporation or business entity shall, as a condition
433 precedent to having its brand families included or retained in the directory required by Section
434 59-14-603 , appoint and continually engage without interruption the services of an agent in this
436 (b) The agent appointed under Subsection (1)(a) shall:
437 (i) act as agent for the service of process for any action or proceeding against the
438 nonresident or foreign nonparticipating manufacturer concerning or arising out of the
439 enforcement of this part or the Model Tobacco Settlement Act; and
440 (ii) may be served in any manner authorized by law.
441 (c) Service under this Subsection (1) shall constitute legal and valid service of process
442 on the nonparticipating manufacturer.
443 (2) The nonparticipating manufacturer shall provide the name, address, phone number,
444 and proof of the appointment and availability of the agent appointed pursuant to this section to
445 the attorney general and to the commission as established by administrative rule in accordance
446 with Section 59-14-607 .
447 (3) (a) If the nonparticipating manufacturer terminates the authority of an agent
448 appointed under the provisions of this section, the nonparticipating manufacturer shall:
449 (i) provide notice to the attorney general and to the commission 30 calendar days prior
450 to termination of the authority of an agent; and
451 (ii) provide proof to the satisfaction of the commission of the appointment of a new
452 agent no less than five calendar days prior to the termination of the existing agent.
453 (b) If an agent terminates its agency appointment with the nonparticipating
454 manufacturer, the nonparticipating manufacturer shall notify the attorney general and the
455 commission of the termination within five calendar days of the manufacturer's knowledge of
456 the termination, and shall include proof to the commission of the appointment of a new agent
457 as required by commission rule adopted under Section 59-14-607 .
458 (4) (a) If a nonparticipating manufacturer whose cigarettes are sold in this state does
459 not appoint an agent as required by this section, the Department of Commerce shall serve as the
460 agent for service of process.
461 (b) A nonparticipating manufacturer who does not appoint an agent as required by this
462 section, and who has the Department of Commerce appointed as the agent for service of
463 process under the provision of Subsection (4)(a), does not satisfy the condition precedent
464 required by Subsection (1)(a), and may not be included in the directory created in Section
465 59-14-603 .
466 Section 10. Section 59-14-606 is enacted to read:
467 59-14-606. Reporting by stamping agents.
468 (1) A stamping agent shall submit the following information to the commission not
469 later than 20 calendar days after the end of each calendar quarter, or more frequently if required
470 by the commission by administrative rule in accordance with Section 59-14-607 :
471 (a) a list by brand family of the total number of cigarettes for which the stamping agent
472 affixed stamps during the previous reporting period;
473 (b) the equivalent stick count for roll your own tobacco, for which the stamping agent
474 affixed stamps during the previous reporting period;
475 (c) the equivalent total number of cigarettes or stick count for which the stamping
476 agent paid taxes for the previous reporting period; and
477 (d) any other information the commission determines is necessary to enforce this part.
478 (2) The stamping agent shall maintain, and make available to the commission, all
479 invoices and documentation of sales of all nonparticipating manufacturer cigarettes and any
480 other information relied upon in reporting to the commission for a period of five years.
481 (3) The commission may share information received under this part with federal, state,
482 or local agencies as necessary for enforcement of this part, the Model Tobacco Settlement Act,
483 or corresponding laws of other states.
484 (4) For purposes of complying with the Model Tobacco Settlement Act, the
485 commission may require, at any time, from the nonparticipating manufacturer and from the
486 financial institution in which the manufacturer has established a qualified escrow fund, proof
488 (a) the amount of money in the fund, exclusive of interest;
489 (b) the amount and date of each deposit to the fund; and
490 (c) the amount and date of each withdrawal from the fund.
491 (5) In addition to the information required to be submitted pursuant to Sections
492 59-14-214 and 59-22-203 and this part, the commission may require by administrative rule
493 adopted pursuant to Section 59-14-607 , a stamping agent or tobacco product manufacturer to
494 submit any additional information including samples of the packaging or labeling of each brand
495 family, as is necessary to enable the commission to determine whether a tobacco product
496 manufacturer is in compliance with this part.
497 (6) No person shall be issued a license or granted a renewal of a license to act as a
498 stamping agent unless the person has certified in writing, under penalty of perjury, that the
499 person will comply fully with this part.
500 Section 11. Section 59-14-607 is enacted to read:
501 59-14-607. Administrative rulemaking authority.
502 (1) The commission may promulgate administrative rules as necessary to enforce the
503 provisions of this part.
504 (2) The rules authorized by this part include rules:
505 (a) to verify information concerning the escrow deposits required by Section
506 59-14-602 ;
507 (b) regarding the production of information sufficient to enable the commission to
508 determine the adequacy of the amount of the installment deposit required by this part;
509 (c) regarding the certification required by Section 59-14-602 ;
510 (d) necessary to receive and publish information for the directory required by Section
511 59-14-603 ;
512 (e) regarding the notification requirements for the appointment of an agent for service
513 of process in Section 59-14-605 ;
514 (f) for reporting by stamping agents or manufacturers of tobacco products under
515 Section 59-14-606 ; and
516 (g) as authorized by this part or the Master Settlement Agreement.
517 Section 12. Section 59-14-608 is enacted to read:
518 59-14-608. License revocation and penalties.
519 (1) (a) The commission may revoke or suspend the license of a stamping agent in the
520 manner provided in Section 59-14-202 if the commission determines that the stamping agent
521 has violated Sections 59-14-604 , 59-14-606 , or other rule adopted under the provisions of this
523 (b) The penalty imposed under Subsection (1)(a) is in addition to or in lieu of any other
524 civil or criminal remedy provided by law.
525 (c) Each stamp affixed and each sale or offer to sell cigarettes in violation of Section
526 59-14-604 , or other rule adopted under the provisions of this part, shall constitute a separate
528 (d) For each violation under Subsection (1)(c), the commissioner may, in addition to
529 the penalty imposed by Subsection (1)(a), impose a civil penalty in an amount not to exceed the
530 greater of 500% of the retail value of the cigarettes or $5,000.
531 (2) (a) Any cigarettes that have been sold, offered for sale, or possessed for sale, in this
532 state, or imported for personal consumption in this state, in violation of Section 59-14-604 are:
533 (i) contraband under Section 59-14-213 ; and
534 (ii) subject to seizure and forfeiture as provided in Section 59-14-213 .
535 (b) Cigarettes seized and forfeited under the provisions of this section shall be
536 destroyed and not resold.
537 (3) (a) The commission may seek an injunction to:
538 (i) restrain a threatened or actual violation of this part by a stamping agent; or
539 (ii) to compel the stamping agent to comply with this part.
540 (b) In any action brought pursuant to this section, the state is entitled to recover the
541 costs of investigation, costs of the action, and reasonable attorney fees.
542 (4) A person who violates Section 59-14-604 engages in an unfair and deceptive trade
543 practice in violation of Title 13, Chapter 5, Unfair Practices Act.
544 Section 13. Section 59-14-609 is enacted to read:
545 59-14-609. Effective dates for reporting -- Disgorgement of profits -- Recovery of
547 (1) The first report of the stamping agents required by this part are due by June 15,
548 2005. The first certifications of the tobacco product manufacturers required by this part are due
549 June 30, 2005. The directory required by this part shall be published by the commission no
550 later than August 30, 2005.
551 (2) In any action brought by the state to enforce this part, the state shall be entitled to
552 recover the costs of investigation, expert witness fees, costs of the action, and reasonable
553 attorney fees.
554 (3) (a) If a court determines that a person has violated this part, the court shall order
555 any profits, gain, gross receipts, or other benefit from the violation to be disgorged and paid to
556 the State Treasurer for deposit in the Tobacco Control Restricted Account which is created in
557 Section 59-14-610 .
558 (b) Unless otherwise expressly provided, the remedies or penalties provided by this
559 part are cumulative to each other and to the remedies or penalties available under all other laws
560 of this state.
561 Section 14. Section 59-14-610 is enacted to read:
562 59-14-610. Creation of Tobacco Control Restricted Account.
563 (1) There is created within the General Fund a restricted account known as the Tobacco
564 Control Restricted Account.
565 (2) The Tobacco Control Restricted Account consists of:
566 (a) all profits, gains, gross receipts, or other benefits ordered to be disgorged by the
567 court under the provisions of Subsection 59-14-609 (3); and
568 (b) interest on account monies.
569 (3) Upon appropriations by the Legislature, monies from the account shall be used for
570 the enforcement of this part and the Master Settlement Agreement.
571 Section 15. Section 59-14-611 is enacted to read:
572 59-14-611. Severability clause.
573 If a court of competent jurisdiction finds that the provisions of this part and of the
574 Model Tobacco Settlement Act conflict and cannot be harmonized, then the provisions of the
575 Model Tobacco Settlement Act shall control. If any section, subsection, subdivision,
576 paragraph, sentence, clause, or phrase of this part causes the Model Tobacco Settlement Act to
577 no longer constitute a qualifying or model statute, as those terms are defined in the Master
578 Settlement Agreement, then that portion of this part shall not be valid. If any section,
579 subsection, subdivision, paragraph, sentence, clause, or phrase of this part is for any reason
580 held to be invalid, unlawful, or unconstitutional, such decision shall not affect the validity of
581 the remaining portions of this part.
582 Section 16. Repealer.
583 This bill repeals:
584 Section 59-14-408, Compliance certification -- Prohibition on stamping.
585 Section 17. Legislative intent.
586 The Legislature finds that violations of the Model Tobacco Settlement Act (Sections
587 59-22-202 et seq.) threaten the integrity of the tobacco Master Settlement Agreement, the fiscal
588 soundness of the state, and the public health. The Legislature finds that enacting procedural
589 enhancements will help prevent violations and aid the enforcement of the Model Tobacco
590 Settlement Act and thereby safeguard the Master Settlement Agreement, the fiscal soundness
591 of the state, and the public health.
Legislative Review Note
as of 2-4-05 10:00 AM
Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.