H.B. No. 3536
 
 
 
 
AN ACT
  relating to imposing a fee on the sale of cigarettes and cigarette
  tobacco products manufactured by certain companies; providing
  penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 161, Health and Safety Code, is amended
  by adding Subchapter V to read as follows:
  SUBCHAPTER V. FEE ON CIGARETTES AND CIGARETTE TOBACCO PRODUCTS
  MANUFACTURED BY CERTAIN COMPANIES
         Sec. 161.601.  PURPOSE. The purpose of this subchapter is
  to:
               (1)  recover health care costs to the state imposed by
  non-settling manufacturers;
               (2)  prevent non-settling manufacturers from
  undermining this state's policy of reducing underage smoking by
  offering cigarettes and cigarette tobacco products at prices that
  are substantially below the prices of cigarettes and cigarette
  tobacco products of other manufacturers;
               (3)  protect the tobacco settlement agreement and
  funding, which has been reduced because of the growth of sales of
  non-settling manufacturer cigarettes and cigarette tobacco
  products, for programs that are funded wholly or partly by payments
  to this state under the tobacco settlement agreement and recoup for
  this state settlement payment revenue lost because of sales of
  non-settling manufacturer cigarettes and cigarette tobacco
  products;
               (4)  ensure evenhanded treatment of manufacturers and
  further protect the tobacco settlement agreement and funding by
  imposing a partial payment obligation on non-settling
  manufacturers that already make payments on Texas sales under the
  master settlement agreement until a credit amendment to that
  agreement that will provide those manufacturers with a credit for
  payments to Texas is effective; and
               (5)  provide funding for any purpose the legislature
  determines.
         Sec. 161.602.  DEFINITIONS. In this subchapter:
               (1)  "Brand family" means each style of cigarettes or
  cigarette tobacco products sold under the same trademark. The term
  includes any style of cigarettes or cigarette tobacco products that
  have a brand name, trademark, logo, symbol, motto, selling message,
  recognizable pattern of colors, or other indication of product
  identification that is identical to, similar to, or identifiable
  with a previously known brand of cigarettes or cigarette tobacco
  products.
               (2)  "Cigarette" means a roll for smoking that is:
                     (A)  made of tobacco or tobacco mixed with another
  ingredient and wrapped or covered with a material other than
  tobacco; and
                     (B)  not a cigar.
               (3)  "Cigarette tobacco product" means roll-your-own
  tobacco or tobacco that, because of the tobacco's appearance, type,
  packaging, or labeling, is suitable for use in making cigarettes
  and is likely to be offered to or purchased by a consumer for that
  purpose.
               (4)  "Credit amendment" means an amendment to the
  master settlement agreement that offers a credit to subsequent
  participating manufacturers for fees paid under this subchapter
  with respect to their products in a form agreed on by settling
  states, as defined in the master settlement agreement, with
  aggregate allocable shares, as defined in the master settlement
  agreement, equal to at least 99.937049 percent; by the original
  participating manufacturers, as defined in the master settlement
  agreement; and by subsequent participating manufacturers whose
  aggregate market share, expressed as a percentage of the total
  number of individual cigarettes sold in the United States, the
  District of Columbia, and Puerto Rico during the calendar year at
  issue, as measured by excise taxes collected by the federal
  government, and in the case of cigarettes sold in Puerto Rico, by
  arbitrios de cigarillos collected by the Puerto Rico taxing
  authority, is greater than 2.5 percent. For purposes of the
  calculation of subsequent participating manufacturer market share
  under this subchapter, 0.09 ounces of roll-your-own tobacco
  constitutes one cigarette.
               (5)  "Distributor" has the meaning assigned by Section
  154.001 or 155.001, Tax Code, as appropriate.
               (6)  "Fee" or "monthly fee" means the fee imposed under
  Section 161.603.
               (7)  "Manufacturer" means a person that manufactures,
  fabricates, or assembles cigarettes or cigarette tobacco products,
  or causes or arranges for the manufacture, fabrication, or assembly
  of cigarettes or cigarette tobacco products for sale or
  distribution. For purposes of this subchapter, the term includes a
  person that is the first importer into the United States of
  cigarettes or cigarette tobacco products manufactured, fabricated,
  or assembled outside the United States.
               (8)  "Master settlement agreement" means the
  settlement agreement entered into on November 23, 1998, by 46
  states and leading United States tobacco manufacturers, as amended
  as of September 1, 2013.
               (9)  "Non-settling manufacturer" means a manufacturer
  of cigarettes or cigarette tobacco products that did not sign a
  tobacco settlement agreement described by Subdivision (15).
               (10)  "Non-settling manufacturer cigarettes" means
  cigarettes of a non-settling manufacturer.
               (11)  "Non-settling manufacturer cigarette tobacco
  products" means cigarette tobacco products of a non-settling
  manufacturer.
               (12)  "Released claim" means:
                     (A)  "released claims" as that term is defined in
  the agreement described by Subdivision (15)(A); and
                     (B)  all claims encompassed in Paragraph 7 of the
  agreement described by Subdivision (15)(B).
               (13)  "Settling manufacturer" means a manufacturer of
  cigarettes or cigarette tobacco products that signed a tobacco
  settlement agreement described by Subdivision (15).
               (14)  "Subsequent participating manufacturer" has the
  same meaning provided for that term in the master settlement
  agreement, except that the term excludes any settling manufacturer
  under the tobacco settlement agreement described by Subdivision
  (15)(B). A manufacturer may not be treated as a subsequent
  participating manufacturer for purposes of Section 161.604(c)
  unless it has provided to the comptroller notice and proof, in the
  form and manner the comptroller may prescribe, that it is a
  subsequent participating manufacturer.
               (15)  "Tobacco settlement agreement" means either:
                     (A)  the Comprehensive Settlement Agreement and
  Release filed on January 16, 1998, in the United States District
  Court, Eastern District of Texas, in the case styled The State of
  Texas v. The American Tobacco Co., et al., No. 5-96CV-91, and all
  subsequent amendments; or
                     (B)  the settlement agreement entered into on
  March 20, 1997, regarding the matter described in Paragraph (A),
  but only as to companies that signed that agreement on that date.
         Sec. 161.603.  FEE IMPOSED. (a)  A fee is imposed on the
  sale, use, consumption, or distribution in this state of:
               (1)  non-settling manufacturer cigarettes if a stamp is
  required to be affixed to a package of those cigarettes under
  Section 154.041, Tax Code;
               (2)  non-settling manufacturer cigarettes that are
  sold, purchased, or distributed in this state but that are not
  required to have a stamp affixed to a package of those cigarettes
  under Chapter 154, Tax Code;
               (3)  non-settling manufacturer cigarette tobacco
  products that are subject to the tax imposed by Section 155.0211,
  Tax Code; and
               (4)  non-settling manufacturer cigarette tobacco
  products that are sold, purchased, or distributed in this state but
  that are not subject to the tax imposed by Section 155.0211, Tax
  Code.
         (b)  The fee imposed by this section does not apply to
  cigarettes or cigarette tobacco products that a settling
  manufacturer claims as its own, and that are included in computing
  payments to be made by that settling manufacturer, under the
  tobacco settlement agreement described by Section 161.602(15)(A).
         (c)  The fee imposed by this section does not apply to
  cigarettes or cigarette tobacco products that are sold into another
  state for resale to consumers outside of this state, provided that
  the sale is reported to the state into which the cigarettes are sold
  under 15 U.S.C. Section 376.
         (d)  The fee imposed by this section is in addition to any
  other privilege, license, fee, or tax required or imposed by state
  law.
         (e)  Except as otherwise provided by this subchapter, the fee
  imposed by this section is imposed, collected, paid, administered,
  and enforced in the same manner as the taxes imposed by Chapter 154
  or 155, Tax Code, as appropriate.
         (f)  The fee imposed by this section shall be collected only
  once on each cigarette or cigarette tobacco product on which it is
  due.
         Sec. 161.604.  RATE OF FEE. (a) For cigarettes or cigarette
  tobacco products sold, used, consumed, or distributed in this
  state, as provided by Section 161.603, during the 2013 calendar
  year, the fee is imposed at the rate of 2.75 cents for:
               (1)  each non-settling manufacturer cigarette; and
               (2)  each 0.09 ounces of non-settling manufacturer
  cigarette tobacco product described by Section 161.602(3).
         (b)  Beginning in January 2014, and in January of each
  subsequent year, the comptroller shall compute the rate of the fee
  applicable during that calendar year by increasing the rate for the
  preceding calendar year by the greater of:
               (1)  three percent; or
               (2)  the actual total percentage change in the Consumer
  Price Index for All Urban Consumers (CPI-U), as published by the
  Bureau of Labor Statistics of the United States Department of
  Labor, during the preceding calendar year, calculated by comparing
  the CPI-U for December of the preceding calendar year with the CPI-U
  for December a year earlier.
         (c)  Notwithstanding Subsection (a), the rate of the fee on
  the cigarettes and cigarette tobacco products of a subsequent
  participating manufacturer shall, for calendar months beginning
  before the effective date of a credit amendment, be calculated by
  substituting 0.75 cents for 2.75 cents in Subsection (a). For
  calendar months beginning on or after the effective date of a credit
  amendment, the rate of the fee on the cigarettes and cigarette
  tobacco products of subsequent participating manufacturers shall
  be the same as the rate that applies for those months to the
  cigarettes of non-settling manufacturers who are not subsequent
  participating manufacturers.
         Sec. 161.605.  DISTRIBUTOR'S REPORT AND PAYMENT OF MONTHLY
  FEE.  (a)  A distributor required to file a report under Section
  154.210 or 155.111, Tax Code, shall, in addition to the information
  required by those sections, include in that required report, as
  appropriate:
               (1)  the number and denominations of stamps affixed to
  individual packages of non-settling manufacturer cigarettes during
  the preceding month;
               (2)  the amount of non-settling manufacturer cigarette
  tobacco products subject to the tax imposed by Section 155.0211,
  Tax Code, during the preceding month;
               (3)  the number of individual packages of non-settling
  manufacturer cigarettes and the amount of non-settling
  manufacturer cigarette tobacco products not subject to the tax
  imposed by Chapter 154, Tax Code, or Section 155.0211, Tax Code,
  sold or purchased in this state or otherwise distributed in this
  state for sale in the United States;
               (4)  a calculation of the monthly fee required to be
  paid by the distributor; and
               (5)  any other information the comptroller considers
  necessary or appropriate to determine the amount of the fee imposed
  by this subchapter or to enforce this subchapter.
         (b)  A distributor shall include with the report required
  under this section the fee imposed under Section 161.603 based on
  the non-settling manufacturer cigarettes and cigarette tobacco
  products required to be included in the distributor's report under
  this section and calculated using the rate under Section 161.604.
         (c)  The information required by Subsections (a)(1), (2),
  and (3) must be itemized for each place of business and by
  manufacturer and brand family.
         (d)  The requirement to report information under this
  section shall be enforced in the same manner as the requirement to
  deliver to or file with the comptroller a report required under
  Section 154.210 or 155.111, Tax Code, as appropriate.
         (e)  Notwithstanding any other law, a distributor that
  remits a monthly fee under this section is, subject to Section
  154.051, Tax Code, entitled to a stamping allowance of three
  percent of the face value of all stamps purchased under Section
  154.041, Tax Code, for providing the service of affixing stamps to
  cigarette packages.
         (f)  Information obtained from a report provided under
  Subsection (a) regarding cigarettes or cigarette tobacco products
  sold, purchased, or otherwise distributed by a non-settling
  manufacturer may be disclosed by the comptroller to the
  manufacturer or to the authorized representative of the
  manufacturer.
         (g)  The comptroller shall, for the purpose of assisting
  distributors in calculating the monthly fee, publish and maintain
  on the comptroller's Internet website:
               (1)  a list of the names and brand families of settling
  manufacturers;
               (2)  a list of each non-settling manufacturer showing
  whether that manufacturer:
                     (A)  is a subsequent participating manufacturer;
  or
                     (B)  is not a subsequent participating
  manufacturer; and
               (3)  the effective date of any credit amendment.
         Sec. 161.606.  REPORT TO ATTORNEY GENERAL BEFORE OFFERING
  NON-SETTLING MANUFACTURER CIGARETTES OR CIGARETTE TOBACCO PRODUCTS
  FOR SALE OR DISTRIBUTION IN THIS STATE. (a)  If cigarettes or
  cigarette tobacco products of a non-settling manufacturer were not
  offered for sale or distribution in this state on September 1, 2013,
  the non-settling manufacturer shall, before the date the cigarettes
  or cigarette tobacco products are offered for sale or distribution
  in this state, provide to the attorney general on a form prescribed
  by the attorney general:
               (1)  the non-settling manufacturer's complete name,
  address, and telephone number;
               (2)  the date that the non-settling manufacturer will
  begin offering cigarettes or cigarette tobacco products for sale or
  distribution in this state;
               (3)  the names of the brand families of the cigarettes
  or cigarette tobacco products that the non-settling manufacturer
  will offer for sale or distribution in this state;
               (4)  a statement that the non-settling manufacturer
  intends to comply with this subchapter; and
               (5)  the name, address, telephone number, and signature
  of an officer of the non-settling manufacturer attesting to all of
  the included information.
         (b)  The attorney general shall make the information
  provided under this section available to the comptroller.
         Sec. 161.607.  PENALTIES FOR NONCOMPLIANCE. Cigarettes and
  cigarette tobacco products of a non-settling manufacturer that are
  sold, used, consumed, or distributed in this state in violation of
  this subchapter, including cigarettes and cigarette tobacco
  products for which full payment of the fee imposed under Section
  161.603 is not made, shall be treated as cigarettes or cigarette
  tobacco products for which the tax assessed by Chapter 154 or 155,
  Tax Code, as appropriate, has not been paid, and the distributor or
  non-settling manufacturer is subject to all penalties imposed by
  those chapters for violations of those chapters.
         Sec. 161.608.  APPOINTMENT OF AGENT FOR SERVICE OF PROCESS.
  A non-settling manufacturer shall appoint and engage a resident
  agent for service of process.
         Sec. 161.609.  AUDIT OR INSPECTION. The comptroller or
  attorney general is entitled to conduct reasonable periodic audits
  or inspections of the financial records of a non-settling
  manufacturer and its distributors to ensure compliance with this
  subchapter.
         Sec. 161.610.  COMPTROLLER INFORMATION SHARING. On request,
  the comptroller shall report annually to the independent auditor or
  other entities responsible for making calculations or other
  determinations under a tobacco settlement agreement or the master
  settlement agreement, as the master settlement agreement may be
  amended or supplemented by some or all of the parties thereto, the
  volume of cigarettes on which the fee required under Section
  161.603 is paid, itemized by cigarette manufacturer and brand
  family.
         Sec. 161.611.  REVENUE DEPOSITED IN GENERAL REVENUE FUND.
  The revenue from the fees imposed by this subchapter shall be
  deposited in the state treasury to the credit of the general revenue
  fund.
         Sec. 161.612.  RELEASED CLAIMS. All fees paid by a
  manufacturer under this subchapter shall apply on a dollar for
  dollar basis to reduce any judgment or settlement on a released
  claim brought against the manufacturer that made the payment.
         Sec. 161.613.  APPLICATION OF SUBCHAPTER. (a)  This
  subchapter applies without regard to Section 154.022, Tax Code, or
  any other law that might be read to crea
  te an exemption for
  interstate sales.
         (b)  This subchapter does not apply to a tobacco product
  described by Section 155.001(15)(C), Tax Code.
         Sec. 161.614.  RULES.  The comptroller may issue rules and
  regulations as necessary to carry out or enforce this subchapter.
         SECTION 2.  (a)  Not later than September 30, 2013, a
  non-settling manufacturer, as that term is defined by Section
  161.602, Health and Safety Code, as added by this Act, that is
  offering cigarettes or cigarette tobacco products for sale or
  distribution in this state on September 1, 2013, shall provide to
  the attorney general on a form prescribed by the attorney general:
               (1)  the non-settling manufacturer's complete name,
  address, and telephone number;
               (2)  the date that the non-settling manufacturer began
  offering cigarettes or cigarette tobacco products for sale or
  distribution in this state;
               (3)  the names of the brand families of the cigarettes
  or cigarette tobacco products that the non-settling manufacturer
  offers for sale or distribution in this state;
               (4)  a statement that the non-settling manufacturer
  intends to comply with Subchapter V, Chapter 161, Health and Safety
  Code, as added by this Act; and
               (5)  the name, address, telephone number, and signature
  of an officer of the non-settling manufacturer attesting to all of
  the included information.
         (b)  The attorney general shall make the information
  provided under Subsection (a) of this section available to the
  comptroller.
         SECTION 3.  This Act takes effect September 1, 2013.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 3536 was passed by the House on May 7,
  2013, by the following vote:  Yeas 74, Nays 66, 2 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 3536 on May 23, 2013, by the following vote:  Yeas 79, Nays 58,
  2 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 3536 was passed by the Senate, with
  amendments, on May 21, 2013, by the following vote:  Yeas 23, Nays
  8.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor