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H.B. 37

This document includes House Committee Amendments incorporated into the bill on Tue, Jan 16, 2007 at 10:42 AM by jeyring. -->              1     

CIGARETTE AND TOBACCO TAX AND

             2     
LICENSING AMENDMENTS

             3     
2007 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Craig A. Frank

             6     
Senate Sponsor: Wayne L. Niederhauser

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill modifies the Cigarette and Tobacco Tax and Licensing Act regarding the
             11      payment of cigarette taxes and penalties for nonpayment of cigarette taxes.
             12      Highlighted Provisions:
             13          This bill:
             14          .    provides the procedures and requirements for how a cigarette tax is paid, when the
             15      tax is due, and the penalties associated with nonpayment;
             16          .    provides the conditions under which an assessment of the cigarette tax may take
             17      place;
             18          .    provides when a consumer may obtain a refund for overpayment and the procedures
             19      associated with the refund;
             20          .    provides a time limit within which the State Tax Commission must assess certain
             21      taxes;
             22          .    provides that the State Tax Commission may extend the time period within which it
             23      must assess a cigarette tax or commence a proceeding to collect a cigarette tax;
             24          .    defines terms; and
             25          .    makes technical changes.
             26      Monies Appropriated in this Bill:
             27          None



             28      Other Special Clauses:
             29          This bill provides an immediate effective date.
             30      Utah Code Sections Affected:
             31      AMENDS:
             32          59-14-102, as last amended by Chapter 217, Laws of Utah 2004
             33          59-14-204, as last amended by Chapter 217, Laws of Utah 2004
             34          59-14-205, as last amended by Chapter 217, Laws of Utah 2004
             35          59-14-303, as last amended by Chapter 135, Laws of Utah 2005
             36      ENACTS:
             37          59-14-208.5, Utah Code Annotated 1953
             38          59-14-410, Utah Code Annotated 1953
             39     
             40      Be it enacted by the Legislature of the state of Utah:
             41          Section 1. Section 59-14-102 is amended to read:
             42           59-14-102. Definitions.
             43          As used in this chapter:
             44          (1) "Cigarette" means any roll for smoking made wholly or in part of tobacco,
             45      irrespective of size or shape, and whether or not [such] the tobacco is flavored, adulterated, or
             46      mixed with any other ingredient, the wrapper or cover of which is made of paper or any other
             47      substance or material except tobacco.
             48          (2) "Consumer" means a person that is not required:
             49          (a) under Section 59-14-201 to obtain a license under Section 59-14-202 ; or
             50          (b) under Section 59-14-301 to obtain a license under Section 59-14-202 .
             51          [(2)] (3) "Counterfeit cigarette" means:
             52          (a) cigarettes that have false manufacturing labels; or
             53          (b) packages of cigarettes bearing counterfeit tax stamps.
             54          [(3)] (4) "Importer" means any person who imports into the United States, either
             55      directly or indirectly, a finished cigarette for sale or distribution.
             56          [(4)] (5) "Indian tribal entity" means a federally recognized Indian tribe, tribal entity, or
             57      any other person doing business as a distributor or retailer of cigarettes on tribal lands located
             58      in the state.


             59          [(5)] (6) "Manufacturer" means any person who manufactures, fabricates, assembles,
             60      processes, or labels a finished cigarette.
             61          [(6)] (7) "Retailer" means any person who sells or distributes cigarettes or intends to
             62      sell or distribute cigarettes to a consumer in the state.
             63          [(7)] (8) "Stamp" or "stamps" means the indicia required to be placed on a cigarette
             64      package that evidences payment of the tax on cigarettes required by Section [ 59-14-204 ]
             65      59-14-205 .
             66          [(8)] (9) "Tobacco products" means all products made of, or containing tobacco, except
             67      cigarettes.
             68          [(9)] (10) "Tribal lands" means land held by the United States in trust for a federally
             69      recognized Indian tribe.
             70          Section 2. Section 59-14-204 is amended to read:
             71           59-14-204. Tax basis -- Rate -- Future increase -- Restricted account -- Use of
             72      revenues.
             73          (1) Except for cigarettes described under Subsection 59-14-210 (3), there is levied a tax
             74      upon the sale, use, storage, or distribution of cigarettes in the state.
             75          (2) The rates of the tax levied under Subsection (1) are:
             76          (a) 3.475 cents on each cigarette, for all cigarettes weighing not more than three
             77      pounds per thousand cigarettes; and
             78          (b) 4.075 cents on each cigarette, for all cigarettes weighing in excess of three pounds
             79      per thousand cigarettes.
             80          (3) [The] Except as otherwise provided under this chapter, the tax levied under
             81      Subsection (1) shall be paid by any person who is the manufacturer, jobber, importer,
             82      distributor, wholesaler, retailer, user, or consumer.
             83          (4) The tax rates specified in this section shall be increased by the commission by the
             84      same amount as any future reduction in the federal excise tax on cigarettes.
             85          (5) (a) There is created within the General Fund a restricted account known as the
             86      "Cigarette Tax Restricted Account."
             87          (b) Beginning on July 1, 1998, $250,000 of the revenues generated by the increase in
             88      the cigarette tax under this section enacted during the 1997 Annual General Session shall be
             89      annually deposited into the account.


             90          (c) The Department of Health shall expend the funds deposited in the account under
             91      Subsection (5)(b) for a tobacco prevention and control media campaign targeted towards
             92      children.
             93          (d) The following revenue generated from the tax increase imposed under Subsection
             94      (1) during the 2002 General Session shall be deposited in the Cigarette Tax Restricted
             95      Account:
             96          (i) 22% of the revenue to be annually appropriated to the Department of Health for
             97      tobacco prevention, reduction, cessation, and control programs;
             98          (ii) 15% of the revenue to be annually appropriated to the University of Utah Health
             99      Sciences Center for the Huntsman Cancer Institute for cancer research; and
             100          (iii) 21% of the revenue to be annually appropriated to the University of Utah Health
             101      Sciences Center for medical education at the University of Utah School of Medicine.
             102          (e) Any balance remaining in the Cigarette Tax Restricted Account at the end of the
             103      fiscal year shall be appropriated during the next fiscal year for the purposes set forth in
             104      Subsections (5)(d)(i) through (5)(d)(iii) in proportion to the amount of revenue deposited into
             105      the account for each purpose.
             106          (f) The Legislature shall give particular consideration to appropriating any revenues
             107      resulting from the change in tax rates under Subsection (2) adopted during the 2002 Annual
             108      General Session and not otherwise appropriated pursuant to Subsection (5)(d) to enhance
             109      Medicaid provider reimbursement rates and medical coverage for the uninsured.
             110          (g) Any program or entity that receives funding under Subsection (5)(d) shall provide
             111      an annual report to the Health and Human Services Interim Committee no later that September
             112      1 of each year. The report shall include:
             113          (i) the amount funded;
             114          (ii) the amount expended;
             115          (iii) a description of the effectiveness of the program; and
             116          (iv) if the program is a tobacco cessation program, the report required in Section
             117      63-97-401 .
             118          Section 3. Section 59-14-205 is amended to read:
             119           59-14-205. Stamping procedure -- Rules -- Exceptions.
             120          (1) [The] In the case of manufacturers, jobbers, importers, distributors, wholesalers,


             121      and retailers, the taxes imposed on cigarettes by this chapter shall be paid by affixing stamps in
             122      the manner and at the time prescribed in this section.
             123          (2) All manufacturers, importers, distributors, wholesalers, and [retail dealers] retailers
             124      shall securely affix the stamps to each individual package or container of cigarettes sold in the
             125      state, and may not sell or provide cigarette stamps to any other person.
             126          (3) Stamps shall be securely affixed to each individual package of cigarettes within 72
             127      hours after [any of] the cigarettes are received [by any wholesaler, distributor, or retailer]
             128      within the state. All cigarettes shall be stamped before sale within the state. [If products
             129      subject to this chapter are] Cigarettes manufactured within the state [they] shall be stamped by
             130      the manufacturer when and as sold.
             131          (4) The commission may, where it is practical and reasonable for the enforcement of
             132      the collection of taxes, promulgate rules to permit [any of the articles taxable under this
             133      chapter] cigarettes to remain unstamped [in the hands of the wholesaler or distributor] until the
             134      original case or crate is broken, unpacked, or sold.
             135          (5) The commission may permit [any manufacturer, wholesaler, or distributor] a person
             136      to sell and export cigarettes to a regular dealer in [these articles] cigarettes outside the state[,
             137      any of the articles] without affixing [the] stamps. [Where the articles]
             138          (6) If cigarettes are allowed to remain unstamped [in the hands of the wholesaler or
             139      distributor] under Subsection (4) or (5), the commission may require the [wholesaler or
             140      distributor] person holding the unstamped cigarettes to secure a surety bond from a surety
             141      company authorized to do business in this state. The bond shall be conditioned to secure the
             142      payment of all taxes and penalties provided in this chapter.
             143          [(6)] (7) No manufacturer, jobber, importer, distributor, wholesaler, or [retail dealer]
             144      retailer may remove, conceal, or obscure a cigarette package:
             145          (a) notice described under Subsection 59-14-210 (1)(a)(i); or
             146          (b) warning label [not] that is placed on the package in compliance with 15 U.S.C.
             147      1333 of the Federal Cigarette Labeling and Advertising Act.
             148          [(7)] (8) Any person failing to properly affix and cancel stamps to the cigarettes, under
             149      this section and rules promulgated by the commission, may be required by the commission to
             150      pay as part of the tax, and in addition to any other penalty provided in this chapter, a penalty of
             151      $25 for each offense, to be assessed and collected by the commission as provided in Section


             152      59-14-405 . Each article, package, or container found not having proper stamps affixed to it
             153      shall be [deemed] considered a separate offense. The presence of any package or container in a
             154      place of business conducting retail sales shall be prima facie evidence that it is intended for
             155      sale and subject to taxes under this chapter.
             156          Section 4. Section 59-14-208.5 is enacted to read:
             157          59-14-208.5. Payment of cigarette tax by consumers.
             158          (1) Except as provided in Subsection (4), in the case of consumers, the taxes imposed
             159      on cigarettes by this part shall be paid in the manner and at the time prescribed in this section.
             160          (2) The payment shall be accompanied by a form prescribed by the commission.
             161          (3) The payment shall be paid on or before the last day of the month immediately
             162      following the month during which the cigarettes were purchased.
             163          (4) A consumer is not required to pay a cigarette tax under this section:
             164          (a) on cigarettes that are stamped pursuant to Section 59-14-205 ; or
             165          (b) if the consumer is a tourist who imports cigarettes for the tourist's own use or
             166      consumption while in the state.
             167          (5) A consumer shall maintain records necessary to determine the amount of tax the
             168      consumer is liable to pay under this part for a period of three years following the H. [ purchase ]
             168a      date the return required by this part was filed .H .
             169          (6) In addition to the tax required by this part, a consumer shall pay a penalty as
             170      provided in Section 59-1-401 , plus interest at the rate and in the manner prescribed in Section
             171      59-1-402 , if a consumer subject to this section fails to:
             172          (a) pay the tax prescribed by this part;
             173          (b) pay the tax on time; or
             174          (c) file a return required by this part.
             175          (7) An overpayment of a tax imposed by this part shall accrue interest at the rate and in
             176      the manner prescribed in Section 59-1-402 .
             177          Section 5. Section 59-14-303 is amended to read:
             178           59-14-303. Remittance of tax -- Returns -- Invoice required -- Filing requirements
             179      -- Reports -- Exceptions -- Penalties -- Overpayments.
             180          (1) The taxes imposed on all tobacco products shall be remitted to the commission
             181      together with quarterly returns as prescribed by the commission. These returns shall be due
             182      and payable to the commission quarterly on or before the last day of the month following each



             183      calendar quarterly period.
             184          (2) Every manufacturer, wholesaler, retailer, or any other person selling tobacco
             185      products to persons other than ultimate consumers shall furnish with each sale an itemized
             186      invoice showing the seller's name and address, the name and address of the purchaser, the date
             187      of sale, the name and price of the product, and the discount, if any. A notation should be made
             188      that the price includes or does not include the tax. Copies of this invoice shall be retained by
             189      the seller and the purchaser and shall be available for inspection by the commission or its agent
             190      for a period of three years following the sale.
             191          (3) (a) [Any person] A consumer who [causes] purchases untaxed products[,] subject to
             192      the tax imposed by this [chapter, to be brought into the state] part for use or other consumption,
             193      shall file with the commission, on forms prescribed by the commission, a statement showing
             194      the quantity and description of the products and pay the tax imposed by this [chapter] part on
             195      [all] those products. [This]
             196          (b) The statement described in Subsection (3)(a) shall be filed and the tax paid [no later
             197      than 15 days from the date of the import of the untaxed products. If any person regularly
             198      imports those products, the person may, upon applying to the commission, arrange to file
             199      reports on a monthly basis and pay the tax on all products imported during the previous
             200      calendar month on or before the 15th day of the following month] on or before the last day of
             201      the month immediately following the month during which the tobacco products were
             202      purchased.
             203          (c) A consumer shall maintain records necessary to determine the amount of tax the
             204      consumer is liable to pay under this part for a period of three years following the H. [ purchase ]
             204a      date the return required by this part was filed .H .
             205          (4) No report is required from [nonresidents or] tourists who import any products taxed
             206      by this [chapter] part if the products are for their own use or consumption while in this state.
             207      [No report is required of persons who are liable for the payment of taxes in the manner set forth
             208      in this section and Section 59-14-205 .]
             209          [(5) Any manufacturer, wholesaler, retailer, or any other person subject to this section
             210      who fails to pay the tax prescribed by this chapter, or fails to pay the tax on time, or fails to file
             211      a return required by this chapter, shall pay, in addition to the tax, a penalty as provided in
             212      Section 59-1-401 , plus interest at the rate and in the manner prescribed in Section 59-1-402 .
             213      The minimum penalty shall be $10 for each offense.]



             214          (5) In addition to the tax required by this part, a person shall pay a penalty as provided
             215      in Section 59-1-401 , plus interest at the rate and in the manner prescribed in Section 59-1-402 ,
             216      if a person subject to this section fails to:
             217          (a) pay the tax prescribed by this part;
             218          (b) pay the tax on time; or
             219          (c) file a return required by this part.
             220          (6) An overpayment of a tax imposed by this [chapter] part shall accrue interest at the
             221      rate and in the manner prescribed in Section 59-1-402 .
             222          Section 6. Section 59-14-410 is enacted to read:
             223          59-14-410. Action for collection of tax -- Action for refund or credit of tax.
             224          (1) (a) Except as provided in Subsections (2) through (5), the commission shall assess
             225      a tax under this chapter within three years after a taxpayer files a return.
             226          (b) Except as provided in Subsections (2) through (5), if the commission does not
             227      assess a tax under this chapter within the three-year period provided in Subsection (1)(a), the
             228      commission may not commence a proceeding to collect the tax.
             229          (2) The commission may assess a tax at any time if a taxpayer:
             230          (a) files a false or fraudulent return with intent to evade; or
             231          (b) does not file a return.
             232          (3) The commission may extend the period to make an assessment or to commence a
             233      proceeding to collect the tax under this chapter if:
             234          (a) the three-year period under Subsection (1) has not expired; and
             235          (b) the commission and the taxpayer sign a written agreement:
             236          (i) authorizing the extension; and
             237          (ii) providing for the length of the extension.
             238          (4) If the commission delays an audit at the request of a taxpayer, the commission may
             239      make an assessment as provided in Subsection (5) if:
             240          (a) the taxpayer subsequently refuses to agree to an extension request by the
             241      commission; and
             242          (b) the three-year period under Subsection (1) expires before the commission
             243      completes the audit.
             244          (5) An assessment under Subsection (4) shall be:


             245          (a) for the time period for which the commission could not make an assessment
             246      because of the expiration of the three-year period; and
             247          (b) in an amount equal to the difference between:
             248          (i) the commission's estimate of the amount of tax the taxpayer would have been
             249      assessed for the time period described in Subsection (5)(a); and
             250          (ii) the amount of tax the taxpayer actually paid for the time period described in
             251      Subsection (5)(a).
             252          (6) (a) Except as provided in Subsection (6)(b), the commission may not make a credit
             253      or refund unless the taxpayer files a claim with the commission within three years of the date of
             254      overpayment.
             255          (b) The commission shall extend the period for a taxpayer to file a claim under
             256      Subsection (6)(a) if:
             257          (i) the three-year period under Subsection (6)(a) has not expired; and
             258          (ii) the commission and the taxpayer sign a written agreement:
             259          (A) authorizing the extension; and
             260          (B) providing for the length of the extension.
             261          Section 7. Effective date.
             262          If approved by two-thirds of all the members elected to each house, this bill takes effect
             263      upon approval by the governor, or the day following the constitutional time limit of Utah
             264      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             265      the date of veto override.




Legislative Review Note
    as of 11-15-06 3:21 PM


Office of Legislative Research and General Counsel

Interim Committee Note
    as of 12-18-06 10:16 AM


The Revenue and Taxation Interim Committee recommended this bill.


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