Bill Text: MI SB0648 | 2023-2024 | 102nd Legislature | Introduced

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Bill Title: Taxation: tobacco; excise tax on e-cigarettes and certain other tobacco products; create. Amends title & secs. 2, 3, 6, 7, 8, 11 & 12 of 1993 PA 327 (MCL 205.422 et seq.).

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced) 2023-11-09 - Referred To Committee On Regulatory Affairs [SB0648 Detail]

Download: Michigan-2023-SB0648-Introduced.html

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SENATE BILL NO. 648

A bill to amend 1993 PA 327, entitled

"Tobacco products tax act,"

by amending the title and sections 2, 3, 6, 7, 8, 11, and 12 (MCL 205.422, 205.423, 205.426, 205.427, 205.428, 205.431, and 205.432), the title as amended by 2012 PA 188 and sections 2, 3, 6, 7, 8, 11, and 12 as amended by 2022 PA 171.

the people of the state of michigan enact:

TITLE

An act to provide for a tax upon on the sale and distribution of tobacco, other nicotine, and similar products; to regulate and license manufacturers, wholesalers, secondary wholesalers, vending machine operators, unclassified acquirers, transportation companies, transporters, and retailers of tobacco, other nicotine, and similar products; to prescribe the powers and duties of the revenue division and the department of treasury in regard to tobacco, other nicotine, and similar products; to provide for the administration, collection, and disposition of the tax; to levy an assessment; to provide for the administration, collection, defense, and disposition of the assessment; to provide for the enforcement of this act; to provide for the appointment of special investigators as peace officers for the enforcement of this act; to prescribe penalties and provide remedies for the violation of this act; to make and supplement appropriations; and to repeal acts and parts of acts.

Sec. 2. As used in this act:

(a) "Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco. Cigar does not include a cigarette.

(b) "Cigarette" means a roll for smoking or heating that is 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.

(c) "Cigarette making machine" means any machine or other mechanical device that meets all of the following criteria:

(i) Is capable of being loaded with loose tobacco, cigarette tubes or cigarette papers, and any other components related to the production of cigarettes, including, but not limited to, cigarette filters.

(ii) Is designed to automatically or mechanically produce, roll, fill, dispense, or otherwise generate cigarettes.

(iii) Is commercial-grade or otherwise designed or suitable for commercial use.

(iv) Is designed to be powered or otherwise operated by a main or primary power source other than human power.

(d) "Container" or "shipping case" means an individual receptacle within which a tobacco product or group of tobacco products is placed for shipment, storage, or distribution, such as a box, case, or tote. A container or shipping case does not include any of the following:

(i) An individual package of cigarettes or cigarette carton containing cigarettes that are not counterfeit cigarettes.

(ii) Except for counterfeit cigarettes, the package or other article containing the tobacco product that is sold or transferred directly to the ultimate consumer.

(iii) A bag or similar package containing bulk or loose hookah tobacco, pipe tobacco, or roll-your-own cigarette tobacco that a retailer uses to fill bins, barrels, or tubs located at the retailer's place of business from which either the retailer sells a specified quantity of those tobacco products or a blend or mixture of those tobacco products to the consumer, or the consumer removes or draws a specified quantity of those tobacco products or a blend or mixture of those tobacco products for purchase at retail from the retailer.

(iv) A pallet or similar article or device upon on which an individual receptacle or group of receptacles, containing the tobacco products, is placed for shipment, storage, or distribution.

(v) Property used as a protective covering for, or to keep together during shipment, storage, or distribution, a receptacle or group of receptacles within which the tobacco product is placed for shipment, storage, or distribution including shrink wrap or other wrapping materials, but excluding the protective covering that forms, gives shape to, or otherwise constitutes the receptacle within which the tobacco product is placed for shipment, storage, or distribution.

(e) "Counterfeit cigarette" means a cigarette in an individual 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.

(f) "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.

(g) "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.

(h) "Department" means the department of treasury.

(i) "Electronic smoking device" means, except as otherwise provided in subdivision (j), any device that can be used to deliver any aerosolized or vaporized nicotine to the person inhaling from the device, including, but not limited to, an e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah. Electronic smoking device includes all of the following, whether or not sold separately:

(i) Any substance intended to be aerosolized or vaporized during the use of the device, except marihuana, whether or not the substance contains nicotine derived from any source.

(ii) Mixing kits that contain component parts necessary to produce a substance that can be aerosolized or vaporized using the device.

(j) Electronic smoking device does not include drugs, devices, or combination products authorized for sale as tobacco cessation products by the United States Food and Drug Administration, as those terms are defined for purposes of subchapter V of the federal food, drug, and cosmetic act, 21 USC 351 to 360fff-8.

(k) (i) "Financially sound" means a determination by the department that the wholesaler or unclassified acquirer is able to pay the tax due on the tobacco products it sells, imports, or acquires, as applicable, 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.

(v) Ability to pay for its stamps, if required under this act.

(l) (j) "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.

(m) (k) "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.

(n) (l) "Hookah tobacco" means tobacco that is designed, manufactured, or otherwise intended for consumption by smoking in a hookah and that is flavored with honey, molasses, fruit, or other natural or artificial flavors. Hookah tobacco includes those products commonly known or referred to as narghile, argileh, shisha, hubble-bubble, molasses tobacco, waterpipe tobacco, maassel, or goza.

(o) (m) "Hookah" means a device, including a waterpipe, used for smoking hookah tobacco that consists of a tube connected to a chamber where the smoke is cooled passing through water.

(p) (n) "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.

(q) (o) "Licensee" means a person licensed under this act.

(r) (p) "Manufacturer" means, except as otherwise provided in subdivision (q), (s), any of the following:

(i) A person who that manufactures or produces a tobacco product.

(ii) A person who that operates or who that permits any other person to operate a cigarette making machine in this state for the purpose of producing, filling, rolling, dispensing, or otherwise generating cigarettes. A person who that is a manufacturer under this subparagraph constitutes a nonparticipating manufacturer for purposes of sections 6c and 6d.

(iii) Beginning October 1, 2024, mixes or blends 2 or more different components to create a custom mix or blend of a substance that can be aerosolized or vaporized for use in an electronic smoking device if either of the components is not a finished tobacco product. As used in this subparagraph, "finished tobacco product" means a tobacco product that the person could or does otherwise sell to consumers and on which the tax under this act has been paid.

(s) (q) Manufacturer does not include any of the following:

(i) A person who that operates or otherwise uses a machine or other mechanical device, other than a cigarette making machine, to produce, roll, fill, dispense, or otherwise generate cigarettes as long as if the cigarettes are produced or otherwise generated in that person's dwelling and for that person's self-consumption. As used in this subparagraph and subparagraph (ii), "self-consumption" means production for personal consumption or use and not for sale, resale, or any other profit-making endeavor.

(ii) A person who that does any of the following:

(A) Mixes or blends 2 or more different tobacco products to create a custom mix or blend of those products if each of the constituent tobacco products mixed or blended together is a finished tobacco product that the person could or does otherwise sell to consumers and upon on which the tax under this act has been paid.

(B) Creates or produces, by filling a fruit with hookah tobacco, what is commonly known as a fruit bowl or fruit head for use in a hookah.

(C) Rolls a cigar for his or her the person's own self-consumption.

(t) "Marihuana" means that term as defined in section 3 of the Michigan Regulation and Taxation of Marihuana Act, 2018 IL 1, MCL 333.27953. For purposes of this act, "marihuana" and "marijuana" are synonymous.

(u) (r) "Noncigarette smoking tobacco" means tobacco sold in loose or bulk form that is intended for consumption by smoking and also includes roll-your-own cigarette tobacco, hookah tobacco, pipe tobacco, or a wrap.

(v) (s) "Person" means an individual, partnership, fiduciary, association, limited liability company, corporation, or other legal entity.

(w) (t) "Pipe tobacco" means any tobacco that, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco to smoke in a pipe.

(x) (u) "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.

(y) (v) "Remote retail sale" means a sale of a tobacco product to a consumer in this state if either of the following applies:

(i) The consumer submits the order for the sale by means of a telephone or other method of voice transmission, the mail, or the internet or other online service, or the seller is otherwise not in the physical presence of the purchaser when the request for purchase or order is made.

(ii) The tobacco product is delivered to the purchaser by common carrier, private delivery service, or other method of remote delivery, or the seller is not in the physical presence of the purchaser when the purchaser obtains possession of the tobacco product.

(z) (w) "Retailer" means a person other than a transportation company who that operates a place of business in this state, or who that directs, manages, or has control over the day-to-day operations of a place of business in this state, for the purpose of making, or who that does make, sales of a tobacco product at retail. other than a remote retail sale. A person described in this subdivision qualifies as a retailer regardless of whether that person owns the place of business.

(aa) (x) "Roll-your-own cigarette tobacco" means any tobacco that, because of its appearance, type, packaging, or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes.

(bb) (y) "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.

(cc) (z) "Secondary wholesaler" means either of the following:

(i) A person, other than a manufacturer or a person licensed under this act as a vending machine operator, wholesaler, or unclassified acquirer, who that engages in the sale of a tobacco product for resale.

(ii) A retailer, not otherwise licensed under this act, who that transfers or exchanges a tobacco product from one place of business of the retailer to another place of business of the retailer.

(dd) (aa) "Smokeless tobacco" means snuff, snus, chewing tobacco, moist snuff, and any other tobacco that is intended to be used or consumed, whether chewed, absorbed, dissolved, inhaled, snorted, sniffed, or ingested, by any means other than smoking or combustion.

(ee) (bb) "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.

(ff) (cc) "Stamping agent" means a wholesaler or unclassified acquirer who that 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.

(gg) (dd) "Tobacco product" means, a product containing any amount of tobacco regardless of form except as otherwise provided in subdivision (hh), any of the following:

(i) Any product containing, made of, or derived from tobacco or nicotine from any source that is intended for human consumption or is likely to be consumed, whether inhaled, absorbed, or ingested by any other means, including, but not limited to, cigarettes, cigars, noncigarette smoking tobacco, or smokeless tobacco.

(ii) Beginning October 1, 2024, any electronic smoking device.

(hh) A tobacco product does not include drugs, devices, or combination products authorized for sale as tobacco cessation products by the United States Food and Drug Administration, as those terms are defined in for purposes of subchapter V of the federal food, drug, and cosmetic act, 21 USC 351 to 360fff-8.

(ii) (ee) "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.

(jj) (ff) "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, or its successor federal agency, Federal Motor Carrier Safety Administration 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.

(kk) (gg) "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 that 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 in this state. Unclassified acquirer also means a person who that purchases or receives tobacco products 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 also includes a person not located in this state that sells a tobacco product, through a mail order, catalog sale, telephone order, internet sale, or any other means, to a retailer or other person in this state that is not licensed under this act as a wholesaler, unclassified acquirer, or secondary wholesaler. Unclassified acquirer also includes a person located within or outside of this state that makes a remote retail sale of a tobacco product to a consumer in this state. An unclassified acquirer does not include a wholesaler.

(ll) (hh) "Vending machine operator" means a person who that operates 1 or more vending machines in this state for the sale of a tobacco product.

(mm) (ii) "Wholesale price" means the actual price paid to a seller for a tobacco product, by a wholesaler or unclassified acquirer to acquire that tobacco product from the seller. The wholesale price includes any tax, fee, licensing, or other charge, except as otherwise provided in this subdivision, reflected on the invoice, bill of sale, purchase order, or other document evidencing the sale or purchase of the tobacco product. Wholesale price does not include, if separately stated on the invoice, bill of sale, purchase order, or other document evidencing the sale of the tobacco product, shipping or handling charges for cigarettes, and reasonable shipping or handling charges for tobacco products other than cigarettes such as transportation, shipping, postage, handling, crating, or packing. If Except as otherwise provided in this subdivision, if items or products, other than tobacco products, are included in a transaction for the purchase of tobacco products by a wholesaler or unclassified acquirer, charges for those products or items that are not tobacco products, including shipping and handling charges, may be excluded from the wholesale price if separately stated on the invoice, bill of sale, purchase order, or other document evidencing the sale or purchase. If a component, part, or accessory is included in the same package as an electronic smoking device or is intended to be sold at retail with an electronic smoking device as a single unit, the charge for the component, part, or accessory may not be excluded from the wholesale price. The wholesale price shall is not be reduced due to any rebate, trade allowance, licensing or exclusivity agreement, volume or other discount, or any other reduction given by the seller or passed on to or otherwise received by the wholesaler or unclassified acquirer from the seller. If the wholesaler or unclassified acquirer fails to keep or maintain the records as required under section 6, or has a relationship as described in section 267(b) of the internal revenue code of 1986, 26 USC 267, with the seller, the department may establish the wholesale price for the tobacco products based on the best available information or any other reasonable proxy for the wholesale price including, but not limited to, the wholesale price paid by other taxpayers for those tobacco products within the past 4 years. If an unclassified acquirer makes a remote retail sale and fails to keep or maintain the records required under section 6 for the remote retail sale, the department may determine the wholesale price of the tobacco product sold to the consumer in that remote retail sale based on the average price paid, during the immediately preceding calendar year, by the unclassified acquirer to acquire or purchase the same type of tobacco product if that information is made available to the department by the unclassified acquirer.

(nn) (jj) "Wholesaler" means a person who that purchases all or part of its tobacco products from a manufacturer and who that sells 75% or more of those tobacco products to others 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.

(oo) (kk) "Wrap" means an individual tobacco wrapper that is made wholly or in part from tobacco, including reconstituted tobacco, whether in the form of tobacco leaf, sheet, or tube, if the wrap is designed to be offered, or is offered, for sale to consumers to create or to use as a component part of a tobacco product.

Sec. 3. (1) Except as otherwise provided in section 3a, and section 6(15), a person shall not purchase, possess, acquire for resale, import, or sell a tobacco product as a manufacturer, wholesaler, secondary wholesaler, vending machine operator, unclassified acquirer, transportation company, or transporter in or into this state unless licensed to do so. A person shall not make a remote retail sale to a consumer in this state unless that person is licensed under this act as an unclassified acquirer. A license granted under this act is not assignable.

(2) Upon On proper application and the payment of the applicable fee, and subject to subsection (6), the department shall issue a license to each manufacturer, wholesaler, secondary wholesaler, vending machine operator, unclassified acquirer, transportation company, or transporter. The application must be on a form prescribed by the department and signed under penalty of perjury. The application must state the applicant's regular business hours. Except for transportation companies, each place of business must be separately licensed. If a person acts in more than 1 capacity at any 1 place of business, a license must be procured for each capacity. Each machine for vending tobacco products is considered a place of retail business. Each license or a duplicate copy must be prominently displayed on the premises covered by the license. In the case of vending machines, a disc or marker furnished by the department showing it to be licensed must be attached to the front of the machine in a place clearly visible to the public. For unclassified acquirers that do not maintain a place of business where tobacco products are sold, brought, or kept, the department may issue a license based on the physical address of the applicant's nonresidential building, office, or other facility where the records required under this act are to be kept and maintained.

(3) The fees for licenses are as follows:

(a) A wholesaler's license, $100.00.

(b) A secondary wholesaler's license, $25.00.

(c) A license for vending machine operators, $25.00.

(d) An unclassified acquirer's license, as follows:

(i) State of Michigan, no fee.

(ii) Retail importer of tobacco products other than cigarettes, $10.00.

(iii) Retail importer of cigarettes, $100.00.

(iv) Vending machine operator buying direct from a manufacturer, $100.00.

(v) Any other importer, $100.00.

(e) A transportation company's license, $5.00.

(f) A transporter's license, $50.00.

(g) A manufacturer's license, $100.00.

(4) If a manufacturer, wholesaler, secondary wholesaler, or vending machine operator maintains more than 1 place of business, the fee for each additional place of business is 1/4 of the fee otherwise prescribed in subsection (3). A fee, or a part of a fee, shall not be refunded by reason of relinquishment, suspension, or revocation of the license, or, except under order of a court of competent jurisdiction, for any other reason or cause.

(5) A person shall not possess a machine for vending tobacco products for a period in excess of 72 hours, or operate a machine for vending tobacco products, unless there is a disc or marker attached as provided by this section. This requirement does not apply to a machine not containing or used in selling a tobacco product. If a person possesses or operates a vending machine containing or used in selling a tobacco product that is not properly licensed or identified as required by this section, the department may seal or seize the machine, together with any tobacco products contained in the machine. The provisions of section 9 govern Section 9 governs the seizure and subsequent disposition of a machine or tobacco product seized.

(6) Applications from persons applying for an initial license under this act must be accompanied by satisfactory proof, as determined by the department, of all of the following:

(a) The applicant's financial responsibility, including but not limited to, satisfactory proof of a minimum net worth of $25,000.00.

(b) That the applicant owns, or has an executed lease for, a secure nonresidential facility for the purpose of receiving, storing, and distributing tobacco products, if applicable, and conducting its business in accordance with this act if the applicant owns or has an executed lease for such a facility. If the applicant carries on another business in conjunction with the secure nonresidential facility, the other business must also be identified.

(c) United States citizenship or eligibility to obtain employment within the United States if not a citizen. If the applicant is not an individual, the controlling shareholders, partners, directors, and principal officers shall must be United States citizens or eligible to obtain employment within the United States if not a citizen.

(7) The department may require an applicant who that is purchasing the business of a licensee to file a copy of the contract of sale and any related documents with its application. The department may require a licensee under this section to furnish a surety bond with a surety company authorized to do business in this state in an amount the department may fix, conditioned upon the payment of the tax provided by this act. The department may also require a licensee under this section to file a financial statement with the department showing all assets and liabilities and any other information the department may prescribe, to be filed within 30 days after the date requested. If there is a change of more than 50% of ownership or control or a change in the general partnership of a licensee, the department may require that licensee to file a new application for a license or an updated financial statement.

(8) Each place of business of a retailer, and any place of business or other nonresidential building, office, or facility licensed under this section, must display the name and address of the retailer or licensee in a manner that is readily visible to the general public from outside the place of business, nonresidential building, office, or facility, as applicable.

(9) Notwithstanding anything in this act to the contrary, the following requirements apply to a secondary wholesaler, vending machine operator, or wholesaler, as applicable:

(a) A secondary wholesaler may purchase or acquire a tobacco product for resale in this state only if that purchase or acquisition is directly from a wholesaler or unclassified acquirer that is licensed under this act and the tax imposed under this act has been paid on that tobacco product.

(b) Except for a secondary wholesaler described in section 2(z)(ii), 2(cc)(ii), a secondary wholesaler shall maintain 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 for sale to retailers for resale.

(c) A wholesaler shall maintain an established place of business in this state where substantially all 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 for sale to retailers for resale.

(d) A vending machine operator may purchase a tobacco product only from a secondary wholesaler, a wholesaler, or an unclassified acquirer that is licensed under this act.

Sec. 6. (1) A manufacturer, wholesaler, secondary wholesaler, vending machine operator, transportation company, unclassified acquirer, or retailer shall keep a complete and accurate record of each tobacco product manufactured, purchased, or otherwise acquired. Except for a manufacturer, the records must include a written statement containing the name and address of both the seller and the purchaser, the date of delivery, the quantity, the trade name or brand, and the price paid for each tobacco product purchased or otherwise acquired. Except as otherwise provided in this section, a licensee shall keep as part of the records a true copy of all purchase orders, invoices, bills of lading, and other written matter substantiating the purchase or acquisition of each tobacco product at the location where the tobacco product is stored or offered for sale. For an unclassified acquirer that does not maintain a place of business where tobacco products are sold, brought, or kept, the records required by this section must be kept at the physical address licensed under section 3. A retailer shall keep as part of the records a true copy of all purchase orders, invoices, bills of lading, and other written matter substantiating the purchase or acquisition of each tobacco product and related to any tobacco products subject to subsection (15), if applicable, at the location where the tobacco product is offered for sale for a period of 4 months from the date of purchase or acquisition. The department may, by giving prior written approval, authorize a person licensed under this act or a retailer to maintain records in a manner other than that required by this subsection. Other records shall be kept by these persons as the department reasonably prescribes.

(2) A manufacturer, wholesaler, unclassified acquirer, and secondary wholesaler shall deliver with each sale or consignment of a tobacco product a written statement containing the name or trade name and address of both the seller and the purchaser, the date of delivery, the quantity, and the trade name or brand of the tobacco product, correctly itemizing the prices paid for each brand purchased, and shall retain a duplicate of each statement.

(3) A vending machine operator shall keep a detailed record of each vending machine owned for the sale of tobacco products showing the location of the machine, the date of placing the machine on the location, the quantity of each tobacco product placed in the machine, the date when placed there, and the amount of the commission paid or earned on sales through the vending machine. When filling or refilling the vending machine, the operator shall deliver to the owner or tenant occupying the premises where the machine is located a written statement containing the operator's own name and address, the name and address of the owner or the tenant, the date when the machine was filled, and the quantity of each brand of tobacco product sold from the machine since the date when tobacco products were last placed in the machine. A person in possession of premises where a vending machine is located shall keep a record of each tobacco product sold through the vending machine located on the premises and the amount of commission paid by the person operating the vending machine. The records must consist of written statements required to be given by each person operating a vending machine for the sale of tobacco products as provided in this section.

(4) A licensee under this act shall not issue or accept a written statement or invoice that is known to the licensee to contain a statement or omission that falsely indicates the name of the customer, the type, trade name, or brand of merchandise, the quantity of each type, trade name, or brand of merchandise, the prices, the discounts, the date of the transaction, or the terms of sale. A person shall not use a device or game of chance to aid, promote, or induce sales or purchases of a tobacco product, or give a tobacco product in connection with a device or game of chance.

(5) Except as otherwise provided in subsection (6), all statements and other records required by this section must be in a form prescribed by the department and must be preserved for a period of 4 years from the date of purchase or acquisition of the tobacco product and offered for inspection at any time upon oral or written demand by the department or its authorized agent by every wholesaler, secondary wholesaler, vending machine operator, unclassified acquirer, and retailer.

(6) A licensee or retailer in possession or control of a tobacco product that has not preserved the statements and records required by this section because the licensee or retailer claims the tobacco product was purchased or acquired more than 4 years ago has the burden of proving that the tobacco product was purchased or acquired more than 4 years ago. A licensee or retailer that fails to preserve documentation sufficient to meet this burden of proof is in violation of the record-keeping requirements under this section for that tobacco product.

(7) A shipping case or container of a tobacco product other than cigarettes received or acquired within this state by a wholesaler or unclassified acquirer from a manufacturer or any person located outside this state must bear either the name and address of the wholesaler or unclassified acquirer that made the first purchase of that shipping case or container or any other markings the department prescribes. The point at which a shipping case or container is considered to be received or acquired in this state is to be determined based on the facts and circumstances including, but not limited to, all of the following:

(a) Ownership of the shipping case or container when it enters this state's borders or when it is delivered to the wholesaler or unclassified acquirer.

(b) The risk of loss.

(c) The use of a common carrier or a vehicle owned or leased by the wholesaler or unclassified acquirer to import or transport the shipping case or container into this state or deliver the shipping case or container to the wholesaler or unclassified acquirer.

(8) A wholesaler or unclassified acquirer, licensed under this act, shall place or otherwise affix the markings prescribed by the department on every shipping case or container of a tobacco product other than cigarettes that is sold, transferred, shipped, or delivered by the wholesaler or unclassified acquirer to a retailer or another licensee, in this state.

(9) If a marking prescribed by the department is to be affixed to a shipping case or container of tobacco products other than cigarettes by means of a mechanical or other device that applies the marking, the wholesaler or unclassified acquirer must obtain prior approval from the department to purchase, possess, or otherwise be permitted to use such a device. A wholesaler or unclassified acquirer whose license is revoked, is terminated, or has expired shall return all such devices in its possession to the department within 60 days of the revocation, termination, or expiration of its license. In addition to any other fine or any civil or criminal penalty or charge allowed by law, a wholesaler or unclassified acquirer that fails to return each device in its possession as required by this subsection is liable for a fine of $500.00 for each device not timely returned.

(10) The markings required by this section on shipping cases and containers of tobacco products other than cigarettes must not be affixed in a manner that makes the markings illegible or that covers up, in whole or in part, or that otherwise obstructs or makes illegible the information or markings described in subsection (7).

(11) If a tobacco product other than cigarettes is found in a place of business or otherwise in the possession of a wholesaler, secondary wholesaler, vending machine operator, unclassified acquirer, transporter, or retailer without the markings prescribed by the department or the information required by this section on the shipping case or container of the tobacco product, if required by this section, or if an individual package of cigarettes is found without a stamp affixed as provided under this act or if a tobacco product is found, or was acquired, imported, transferred, or sold, without proper substantiation by invoices or other records as required by this section, the presumption shall be that the tobacco product is kept in violation of this act and constitutes contraband subject to seizure and forfeiture under section 9. Notwithstanding anything in this act to the contrary, if any tobacco product is adjudicated by a court of competent jurisdiction to have been lawfully seized under this act, and if the adjudication of lawful seizure survives the exhaustion or lapse of any appeal rights, the tobacco product shall be automatically forfeited to this state and the person from whom that tobacco product was seized shall be liable for the tax imposed under this act on that tobacco product.

(12) If a tobacco product is to be or is being transported on a public highway, road, or street in this state for shipment outside this state, as indicated by the bills of lading, invoices, packing slips, or other documentation related to that shipment, the licensee shipping the tobacco product shall cause to be placed on every shipping case or container in which the tobacco product is shipped the name and address of the consignee or purchaser to whom the shipment is made outside of the state and, for tobacco products other than cigarettes, the marking prescribed by the department unless the shipping case or other container already bears that marking from the licensee. A tobacco product that was located in this state is considered to have been shipped outside this state for purposes of this subsection if the tobacco product crosses the border of this state regardless of whether the tobacco product is delivered to or accepted by the consignee or purchaser to whom the shipment is made outside this state.

(13) The department may require reports from a common carrier who transports a tobacco product to a point within this state from another person who, under contract, transports a tobacco product, or from a bonded warehouseperson or bailee who has in his or her that person's possession a tobacco product. A carrier, bailee, warehouseperson, or other person shall permit the inspection of the tobacco products and examination by the department or its duly authorized agent of any records relating to the shipment of a tobacco product into, from, or within this state.

(14) Except as otherwise provided in subsection (15), any Any person transporting, possessing, or acquiring for the purpose of transporting a tobacco product upon a public highway, road, or street of this state shall be licensed under this act as a transporter, unless that person is licensed under this act as an unclassified acquirer, wholesaler, transportation company, vending machine operator, or secondary wholesaler, and shall have in the person's actual possession invoices or bills of lading containing the name and address of both the seller and the purchaser, the actual or estimated date of delivery, the person's name and address, the quantity and trade name or brand of each tobacco product, the price paid for each trade name or brand in the person's possession or custody, and a copy of the license as prescribed under this act.

(15) Notwithstanding anything in this act to the contrary, a retailer in this state, or other person acting on behalf of a retailer in this state, is not required to be licensed under this act to transport a tobacco product upon a public highway, road, or street of this state for the purpose of delivering a tobacco product to a consumer in this state if all of the following conditions are met:

(a) The tobacco product was purchased by the consumer from the retailer at retail.

(b) The consumer has paid for the tobacco product in full before the shipment and delivery of the tobacco product to the consumer.

(c) The retailer or other person making the delivery has in its possession, at all times during which the tobacco product is being transported on a public highway, road, or street of this state, an invoice, receipt, or other documentation substantiating the sale to the consumer that states the name and address of the retailer, the name and address of the consumer, the delivery date, the trade name or brand of the tobacco product, the quantity, and the price paid for the tobacco product.

Sec. 7. (1) Subject to subsection (2), a tax is levied on the sale of tobacco products sold in this state or sold for consumption in this state, which consumption is presumed when if sold to a retailer or consumer in this state, as follows:

(a) For cigarettes, as follows:

(i) 100 mills per cigarette.

(ii) Beginning October 1, 2024, in addition to the tax levied under subparagraph (i), an additional 75 mills per cigarette.

(b) For cigars, noncigarette smoking tobacco, smokeless tobacco, and any tobacco product other than cigarettes or electronic smoking devices, as follows:

(i) Through September 30, 2024, except as otherwise provided in subparagraph (iii), 32% of the wholesale price. However, beginning

(ii) Beginning October 1, 2024, except as otherwise provided in subparagraph (iii), 57% of the wholesale price.

(iii) Beginning November 1, 2012, the amount of tax levied under this subdivision on cigars shall not exceed 50 cents per individual cigar.

(c) Beginning October 1, 2024, for electronic smoking devices, 57% of the wholesale price.

(2) Notwithstanding any other provision of law and beginning 180 days after the effective date of the amendatory act that added this subsection, January 17, 2023, if the Secretary of the United States Department of Health and Human Services has issued an order for a product under 21 USC 387k(g) and the manufacturer has notified the department of that order on a form and in a manner prescribed by the department, subject to subsections (3), (4), and (5), the tax imposed on the sale of that product under this section is as follows:

(a) If the order is a modified risk tobacco product order issued under 21 USC 387k(g)(1), reduced by 50% of the otherwise applicable rate under subsection (1).

(b) If the order is issued under 21 USC 387k(g)(2), reduced by 25% of the otherwise applicable rate under subsection (1).

(3) A rate under subsection (2) shall does not take effect unless the department has received notice of the modified risk tobacco order by the manufacturer of the tobacco product, in the form and manner prescribed by the department, and the department has published notice of the rate for the tobacco product. The department shall publish notice of the rate not later than 10 days after receipt of the notice from the manufacturer. The effective date of a rate under subsection (2) for a tobacco product shall be is the first day of the month following the month in which the department publishes notice of the rate as provided in this subsection.

(4) If a modified risk tobacco product order described in subsection (2) is renewed by the United States Food and Drug Administration, the manufacturer of the tobacco product subject to that order must provide notice of the renewal to the department not later than 10 days after issuance of the order or determination of renewal by the United States Food and Drug Administration, for the rate provided under subsection (2) to remain in effect for that tobacco product. If a modified risk tobacco product order described in subsection (2) is rescinded or withdrawn by the United States Food and Drug Administration or otherwise expires, the manufacturer of the tobacco product subject to that order shall notify the department of the rescission, withdrawal, or expiration of the order not later than 10 days after the issuance of the rescission or withdrawal order or determination by the United States Food and Drug Administration or the date of expiration, as applicable. The department shall publish notice of the rescission, withdrawal, or expiration of the modified risk tobacco product order not later than 10 days after receipt of the notice from the manufacturer or, if the manufacturer fails to provide the notice as required under this subsection, 10 days after the department becomes aware of the rescission, withdrawal, or expiration of the order. Except as otherwise provided in subsection (5), beginning on the first day of the month following the month in which the department publishes a notice of rescission, withdrawal, or expiration of a modified risk tobacco product order for a tobacco product, the rate under subsection (2) shall no longer apply applies to that tobacco product. Notices required to be made by a manufacturer to the department under this subsection shall must be made in the form and manner prescribed by the department.

(5) Except as otherwise provided in this subsection, a tobacco product subject to the rate provided under subsection (2) that was purchased or otherwise acquired before the date a rescission, withdrawal, or expiration of a modified risk tobacco product order for that tobacco product becomes effective remains eligible for the rate provided under subsection (2). The tax rate provided in subsection (2) does not apply, and the otherwise applicable tax rate applies, to any of the following:

(a) A tobacco product purchased or otherwise acquired before the effective date of the rate provided under subsection (2) for that tobacco product.

(b) A tobacco product that is seized and forfeited as contraband as provided under this act.

(c) A person described in section 8(1) for purposes of determining the amount of tax and penalty under section 8(1).

(6) On or before the twentieth day of each calendar month, every licensee under section 3 other than a manufacturer or vending machine operator shall file a return with the department stating the wholesale price of each tobacco product other than cigarettes purchased, the quantity of cigarettes purchased, the wholesale price charged for all tobacco products other than cigarettes sold, the number of individual packages of cigarettes and the number of cigarettes in those individual packages, and the number and denominations of stamps affixed to individual packages of cigarettes sold by the licensee for each place of business in the preceding calendar month. The return must also include the number and denomination of unaffixed stamps in the possession of the licensee at the end of the preceding calendar month and any other reasonable information the department requires to ensure compliance with this act. Wholesalers shall also report accurate inventories of cigarettes, both stamped and unstamped at the end of the preceding calendar month. Wholesalers and unclassified acquirers shall also report accurate inventories of affixed and unaffixed stamps by denomination at the beginning and end of each calendar month and all stamps acquired during the preceding calendar month. The return must be signed under penalty of perjury. The return must be on a form, and filed in the manner, prescribed by the department and must contain or be accompanied by any further information the department requires. The department may also require licensees to report tobacco product acquisition, purchase, and sales information in other formats and frequency.

(7) To cover the cost of expenses incurred in the administration of this act, at the time of the filing of the return, the licensee shall pay to the department the tax levied in this section for tobacco products sold during the calendar month covered by the return, less compensation equal to the following:

(a) 1% of the total amount of the tax due on tobacco products sold other than cigarettes.

(b) 1.5% of the total amount of the tax due on cigarettes sold and, for sales of untaxed cigarettes to Indian tribes in this state, an amount equal to 1.5% of the total amount of the tax due on those cigarettes sold as if those cigarette sales were taxable sales under this act.

(c) For licensees who that are stamping agents, 0.5% of the total amount of the tax due on cigarettes sold and, for sales of untaxed cigarettes to Indian tribes in this state, 0.5% of the total amount of the tax due on those cigarettes sold as if those cigarette sales were taxable sales under this act, until the stamping agent is compensated in an amount equal to the direct cost actually incurred by the stamping agent for the purchase of upgrades to technology and equipment, excluding the equipment reimbursed under subdivision (d), that are necessary to affix the digital stamp as determined by the department. Compensation under this subdivision may also be claimed by a stamping agent for the direct costs actually incurred by the stamping agent, as determined by the department and reflected in the net purchase price, for the initial and 1-time purchase of case packers or similar machines or conveyors as follows:

(i) Case packers or similar machines to be used exclusively to repack cigarette cartons into case boxes after digital stamps have been applied by eligible equipment to the individual packages of cigarettes contained within those cigarette cartons. Compensation under this subparagraph may only be claimed by a stamping agent if the case packers or similar machines are in addition to, and not a replacement for, 1 or more case packers or similar machines used in connection with cigarette stamping machines that do not use the digital stamp authorized under this act.

(ii) Conveyors to be used exclusively for that portion of a cigarette stamping line that is necessary for and dedicated to cigarette stamping operations using eligible equipment to affix digital stamps to individual packages of cigarettes to be sold in this state. Compensation under this subparagraph may only be claimed by a stamping agent if the cigarette stamping line served by the conveyors is in addition to 1 or more distinct and existing cigarette stamping lines using stamping machines that do not use the digital stamp authorized under this act and that compensation shall not exceed a total of 50% of the amount reimbursed under subdivision (d) for any particular stamping agent.

(iii) Compensation under subparagraphs (i) and (ii) shall also include any applicable sales or use taxes paid, and shipping and crating charges actually incurred, by the stamping agent in connection with the purchase, but shall exclude any other costs incurred by the stamping agent not otherwise expressly provided for in this subdivision, including, but not limited to, charges for installation and ongoing maintenance.

(d) Beginning in the first calendar month following the implementation of the use of digital stamps as provided in section 5a(2) and continuing for the immediately succeeding 17 months, for licensees who that are stamping agents, reimbursement of direct costs actually incurred by the stamping agent, as determined by the department, for the initial purchase of eligible equipment in an amount equal to 5.55% of the total net purchase price of the eligible equipment necessary to affix the digital stamp. The reimbursement provided under this subdivision shall also include reimbursement for any applicable sales or use taxes paid and shipping and crating charges actually incurred by the stamping agent for the initial purchase of eligible equipment, but shall exclude reimbursement for any other costs incurred by the stamping agent not otherwise expressly provided for in this subdivision, including, but not limited to, charges for installation and ongoing maintenance related to eligible equipment. A stamping agent may only receive reimbursement under this subdivision to the extent that the eligible equipment purchased by the stamping agent does not exceed the total number of the stamping agent's existing equipment as certified by the stamping agent on a form prescribed by the department.

(e) For licensees who that are stamping agents, reimbursement of qualified equipment costs actually incurred by the stamping agent, not otherwise compensated or reimbursed under subdivision (c) or (d), as determined by the department. The reimbursement provided under this subdivision shall not exceed $60,000.00 for all stamping agents combined.

(8) Every licensee and retailer that, on October 1, 2024, has on hand for sale any electronic smoking devices shall report to the department in the form and manner prescribed by the department all electronic smoking devices in the inventory of the licensee or retailer. A tax is levied on all electronic smoking devices required to be reported to the department under this section equal to 57% of the wholesale price of the electronic smoking devices. The report and tax described in this subsection are due by November 1, 2024. An electronic smoking device for which the tax under this act has once been imposed and has not been refunded if paid is not subject on a subsequent sale to the tax imposed by this act.

(9) (8) The department may require the payment of the tax imposed by this act upon the importation or acquisition of a tobacco product in or into this state. A tobacco product for which the tax under this act has once been imposed and that has not been refunded if paid is not subject upon on a subsequent sale to the tax imposed by this act.

(10) (9) An abatement or refund of the tax provided by this act may be made by the department for causes the department considers expedient. The department shall certify the amount and the state treasurer shall pay that amount out of the proceeds of the tax.

(11) (10) A person liable for the tax may reimburse itself by adding to the price of the tobacco products an amount equal to the tax levied under this act.

(12) (11) A wholesaler, unclassified acquirer, or other person shall not sell or transfer any unaffixed stamps acquired by the wholesaler or unclassified acquirer from the department. A wholesaler or unclassified acquirer who that has any unaffixed stamps on hand when its license is revoked or expires, or when it discontinues the business of selling cigarettes, shall return those stamps to the department. The department shall refund the value of the stamps, less the appropriate discount paid.

(13) (12) If the wholesaler or unclassified acquirer has unsalable packs returned from a retailer, secondary wholesaler, vending machine operator, wholesaler, or unclassified acquirer with stamps affixed, the department shall refund the amount of the tax less the appropriate discount paid. If the wholesaler or unclassified acquirer has unaffixed unsalable stamps, the department shall exchange with the wholesaler or unclassified acquirer new stamps in the same quantity as the unaffixed unsalable stamps. An application for refund of the tax must be filed on a form and in the manner prescribed by the department for that purpose, within 4 years from the date the stamps were originally acquired from the department. A wholesaler or unclassified acquirer shall make available for inspection by the department the unused or spoiled stamps and the stamps affixed to unsalable individual packages of cigarettes. The department may, at its own discretion, witness and certify the destruction of the unused or spoiled stamps and unsalable individual packages of cigarettes that are not returnable to the manufacturer. The wholesaler or unclassified acquirer shall provide certification from the manufacturer for any unsalable individual packages of cigarettes that are returned to the manufacturer.

(14) (13) On or before the twentieth of each month, each manufacturer shall file a report with the department listing all sales of tobacco products to wholesalers and unclassified acquirers during the preceding calendar month and any other information the department finds necessary for the administration of this act. This report must be in the form and manner specified by the department.

(15) (14) Each wholesaler or unclassified acquirer shall submit to the department an unstamped cigarette sales report on or before the twentieth day of each month covering the sale, delivery, or distribution of unstamped cigarettes during the preceding calendar month to points outside of this state. A separate schedule must be filed for each state, country, or province into which shipments are made. For purposes of the report described in this subsection, "unstamped cigarettes" means individual packages of cigarettes that do not bear a Michigan stamp. The department may provide the information contained in this report to a proper officer of another state, country, or province reciprocating in this privilege.

(16) (15) As used in subsection (7):

(a) "Eligible equipment" means a cigarette tax stamping machine that meets all of the following conditions:

(i) Was purchased by a stamping agent who that was licensed as a stamping agent as of December 31, 2011.

(ii) Enables the stamping agent to affix digital stamps to individual packages of cigarettes in accordance with the requirements under section 6a(2) and (3).

(iii) Was purchased to be used for the primary purpose of permitting the stamping agent to affix digital stamps to individual packages of cigarettes to be sold in this state following the implementation of the use of digital stamps as provided in section 5a(2).

(b) "Existing equipment" means a cigarette tax stamping machine that meets all of the following conditions:

(i) Was owned by a person who that was licensed as a stamping agent as of December 31, 2011.

(ii) Was a cigarette tax stamping machine used prior to before January 1, 2012 by the stamping agent to apply stamps using stamp rolls of 30,000 stamps.

(c) "Qualified equipment" means equipment that was placed in service by a stamping agent that included conveyors and additional associated electrical line and compressed air line before August 15, 2014 in connection with the implementation of a digital stamping line under a pilot program with the department as determined by the department. Qualified equipment does not include the cost of installation of a conveyor.

Sec. 8. (1) A person, other than a licensee, is personally liable for the tax imposed by this act, plus a penalty of 500% of the amount of that tax, under any of the following circumstances:

(a) The person is in control or in possession of a tobacco product contrary to this act or is in control or in possession of an individual package of cigarettes without a stamp in violation of this act.

(b) The person offers to sell or does sell a tobacco product to another for purposes of resale without being licensed to do so under this act.

(c) The person offers to sell at retail, or does sell at retail, an individual package of cigarettes without a stamp or any tobacco product purchased or acquired from a person that was not licensed under this act as secondary wholesaler, wholesaler, or unclassified acquirer, at the time of purchase or acquisition.

(d) Beginning October 1, 2024, the person offers to sell at retail, or does sell at retail, an electronic smoking device purchased or acquired from a person that was not licensed under this act as a secondary wholesaler, wholesaler, or unclassified acquirer, at the time of purchase or acquisition. This subdivision does not apply to an electronic smoking device the person purchased or acquired before October 1, 2024 if the person discloses the electronic smoking device in the inventory reported under section 7(8) and pays the tax due on the electronic smoking device under section 7(8).

(e) Beginning October 1, 2024, the person mixes or blends 2 or more different components to manufacture a substance that can be aerosolized or vaporized for use in an electronic smoking device if the tax under this act has not been paid on 1 or more of the components and the person offers to sell at retail, or does sell at retail, the finished substance.

(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 must identify the quantity and identity of the tobacco products, detail whether exchanged, received, removed, or otherwise disposed of, and identify 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, 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. This subsection does not apply to conduct described in subsection (12).

(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, 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 prosecuting attorneys of this state to enforce this act.

(9) At the request of the department or its duly authorized agent, the state police and all local police authorities shall enforce the provisions of this act.

(10) The department does not have the authority to enforce the provisions of this section regarding gray market cigarette papers or counterfeit cigarette papers.

(11) A person who knowingly possesses, acquires, transports, or offers for sale contrary to this act 600 or more, but not more than 1,199, cigarettes, tobacco products other than cigarettes with an aggregate wholesale value of $50.00 or more but less than $100.00, or 600 or more, but not more than 1,199, 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 $1,000.00 or imprisonment of not more than 90 days, or both.

(12) A person shall not possess, acquire, transport, or offer for sale contrary to this act less than 600 cigarettes, tobacco products other than cigarettes with an aggregate wholesale value of less than $50.00, or less than 600 counterfeit cigarettes, counterfeit cigarette papers, gray market cigarettes, or gray market cigarette papers. A person who possesses, acquires, transports, or offers for sale contrary to this act 180 or more, but not more than 599, cigarettes, tobacco products other than cigarettes with an aggregate wholesale value of $25.00 or more but less than $50.00, or 180 or more, but not more than 599, counterfeit cigarettes, counterfeit cigarette papers, gray market cigarettes, or gray market cigarette papers is responsible for a state civil infraction and may be ordered to pay a civil fine of not more than $100.00.

Sec. 11. (1) A person, not licensed under this act as either a wholesaler or unclassified acquirer, shall not sell or solicit a sale of a tobacco product to be shipped, mailed, or otherwise imported, sent or brought into this state, to a person in this state that is not licensed under this act, unless the tobacco product is to be sold through a wholesaler or unclassified acquirer, licensed under this act.

(2) A person, in this state, that is not licensed under this act, shall not order, purchase, or otherwise engage in a transaction to acquire a tobacco product that is to be shipped, mailed, imported, sent, or brought into this state unless that tobacco product is to be sold through a wholesaler or unclassified acquirer, licensed under this act. A consumer in this state shall not purchase or otherwise acquire a tobacco product through a remote retail sale unless the seller is licensed under this act as an unclassified acquirer. A tobacco product ordered, purchased, or acquired by a person in violation of this subsection is contraband subject to seizure and forfeiture under section 9. A person who violates this subsection is considered to be in control or possession of a tobacco product in violation of this act for purposes of section 8(1), regardless of whether that tobacco product has been sold, consumed, or otherwise disposed of. Any limitation on the tax applicable to cigars under section 7(1)(b) shall not apply, or otherwise be taken into account, for purposes of determining the liability for taxes and penalties under section 8(1) arising from a violation of this subsection.

(3) Except as provided in section 8(2) regarding representatives of a licensed manufacturer, a retailer in this state shall not purchase, possess, acquire for resale at retail, or sell a tobacco product in this state unless that tobacco product was purchased or otherwise acquired directly from a wholesaler, unclassified acquirer, or secondary wholesaler, licensed under this act. A retailer who violates this subsection is considered to be in control or possession of a tobacco product in violation of this act for purposes of section 8(1), regardless of whether that tobacco product has been sold, consumed, or otherwise disposed of. Any limitation on the tax applicable to cigars under section 7(1)(b) shall not apply, or otherwise be taken into account, for purposes of determining the liability for taxes and penalties under section 8(1) arising from a violation of this subsection.

(4) A retailer is considered to have purchased or otherwise acquired a tobacco product in compliance with subsection (3) if all of the following conditions are met:

(a) The retailer obtains a copy of the license of the wholesaler, secondary wholesaler, or unclassified acquirer at the time of purchase or acquisition.

(b) The license described in subdivision (a) was not expired when the tobacco product was purchased or otherwise acquired by the retailer.

(c) The copy of the license is preserved by the retailer in the same manner, for the same period of time, and offered for inspection as required of other statements and records under section 6.

(5) Notwithstanding anything in this act to the contrary, a licensee may provide a copy of its license to a retailer for purposes of this section. A retailer that obtains a copy of the license for a particular licensee under this section is not required to obtain another copy of the license for subsequent purchases or acquisitions of tobacco products from that licensee that are made during the active license year and before the expiration of that license.

(6) Subject to subsection (1), all sales conducted through the internet, by telephone, or in a mail-order transaction must not be completed unless, before each delivery of tobacco products is made, whether through the mail, through a transportation company, or through any other delivery system, the seller has obtained from the purchaser an affirmation that includes a copy of a valid government-issued document that confirms the purchaser's name, address, and date of birth showing that the purchaser is at least the legal minimum age to purchase tobacco products; that the tobacco products purchased are not intended for consumption by an individual who is younger than the legal minimum age to purchase tobacco products; and a written statement signed by the purchaser that affirms the purchaser's address and that the purchaser is at least the minimum legal age to purchase tobacco products. The statement must also confirm that the purchaser understands that signing another person's name to the affirmation is illegal; that the sale of tobacco products to individuals under the legal minimum purchase age is illegal; and that the purchase of tobacco products by individuals under the legal minimum purchase age is illegal under the laws of the state of Michigan. The seller shall verify the information contained in the affirmation provided by the purchaser against a commercially available database of governmental records, or obtain a photocopy, fax copy, or other image of the valid, government-issued identification stating the date of birth or age of the purchaser.

(7) Subject to subsection (1), all invoices, bills of lading, sales receipts, or other documents related to tobacco product sales conducted through the internet, by telephone, or in a mail-order transaction must contain the current seller's valid Michigan sales tax license number or use tax registration number, business name and address of the seller, and a statement as to whether all sales taxes or use taxes, as applicable, and taxes levied under this act have been paid. All packages of tobacco products shipped from a tobacco product seller to purchasers who reside in Michigan, including consumers in a remote retail sale, must be clearly printed or stamped with the word "TOBACCO PRODUCTS" on the outside of all sides of the package so it is clearly visible to the shipper. If an order is made as a result of advertisement over the internet, the tobacco retailer, and an unclassified acquirer making a remote retail sale, shall request the email address of the purchaser and shall receive payment by credit card or check before completing the sale. This subsection does not apply to sales by wholesalers and unclassified acquirers licensed under this act other than remote retail sales.

(8) The deliverer of the tobacco products shall obtain proof from a valid government-issued document that the person signing for the tobacco products is the purchaser.

(9) A retailer not otherwise licensed or required to be licensed under this act shall post a sign, visible to the public inside the retail establishment that informs purchasers of cigars through catalog sales, telephone or mail orders, or internet sales of their liability for any applicable unpaid state taxes on those cigars and that cigars purchased in violation of this act are contraband.

(10) As used in this section:

(a) "Computer" means any connected, directly interoperable or interactive device, equipment, or facility that uses a computer program or other instructions to perform specific operations, including logical, arithmetic, or memory functions with or on computer data or a computer program, and that can store, retrieve, alter, or communicate the results of the operations to a person, computer program, computer, computer system, or computer network.

(b) "Computer network" means the interconnection of hardwire or wireless communication lines with a computer through remote terminals or a complex consisting of 2 or more interconnected computers.

(c) "Computer program" means a series of internal or external instructions communicated in a form acceptable to a computer that directs the functioning of a computer, computer system, or computer network in a manner designed to provide or produce products or results from the computer, computer system, or computer network.

(d) "Computer system" means related, connected or unconnected, computer equipment, devices, software, or hardware.

(e) "Credit card" means a card or device issued by a person licensed under 1984 PA 379, MCL 493.101 to 493.114, or under the consumer financial services act, 1988 PA 161, MCL 487.2051 to 487.2072, or issued by a depository financial institution as defined in section 1a of the mortgage brokers, lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651a, under a credit card arrangement.

(f) "Device" includes, but is not limited to, an electronic, magnetic, electrochemical, biochemical, hydraulic, optical, or organic object that performs input, output, or storage functions by the manipulation of electronic, magnetic, or other impulses.

(g) "Internet" means the connection to the World Wide Web through the use of a computer, a computer network, or a computer system.

(h) "Sale conducted through the internet" means a sale of, a solicitation to sell, a purchase of, or an offer to purchase tobacco products conducted all or in part by accessing an internet website and includes a remote retail sale.

(6) Notwithstanding anything in this act to the contrary, this act does not allow remote retail sales in violation of the nicotine and tobacco act, 1915 PA 31, MCL 722.641 to 722.645.

Sec. 12. (1) The proceeds derived from the payment of taxes, fees, and penalties provided for under this act and the license fees received by the department shall be deposited with the state treasurer and disbursed only as provided in this section. However, before a distribution of funds is made under this section, subject to appropriation, the funds described in this section may be used by the department, the attorney general, and the department of state police for enforcement and administration of this act.

(2) The tax imposed on cigarettes under section 7(1)(a) 7(1)(a)(i) must be disbursed as follows:

(a) 2.4375% of the proceeds must be credited to the health and safety fund created in the health and safety fund act, 1987 PA 264, MCL 141.471 to 141.479.

(b) 41.6200% of the proceeds must be credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.

(c) 3.7500% of the proceeds shall must be credited to the healthy Michigan fund created under section 5953 of the public health code, 1978 PA 368, MCL 333.5953. Fifty percent of the proceeds described in this subdivision that are used for smoking prevention programs shall must be used by the department of health and human services to expand the free smokers quit kit program to include the nicotine patch or nicotine gum.

(d) 19.7625% of the proceeds must be disbursed as follows:

(i) For each fiscal year, $3,000,000.00 to the Michigan state capitol historic site fund created in section 7 of the Michigan state capitol historic site act, 2013 PA 240, MCL 4.1947. For each fiscal year, the state treasurer shall adjust the figure described in this subparagraph by an amount determined by the state treasurer at the end of each calendar year to reflect the cumulative annual percentage change in the Consumer Price Index. For each fiscal year, if the cumulative annual percentage change in the Consumer Price Index is negative, then the adjustment for that fiscal year is zero. As used in this subsection, "Consumer Price Index" means the most comprehensive index of consumer prices available for this state from the Bureau of Labor Statistics of the United States Department of Labor. From the funds described in this subparagraph, not later than February 1 of each year, the Michigan state capitol commission created in section 5 of the Michigan state capitol historic site act, 2013 PA 240, MCL 4.1945, shall report to the chairpersons of the house and senate appropriations committees. The report must contain all of the following:

(A) The proposed maintenance plan for the Michigan State Capitol Historical Site for the immediately following fiscal year.

(B) The projected 5-year maintenance plan for the Michigan State Capitol Historical Site for the immediately following 5 fiscal years.

(C) Projected large-scale projects for the Michigan State Capitol Historical Site that exceed $1,000,000.00.

(ii) The remaining proceeds must be credited to the general fund of this state.

(e) 0.5550% of the proceeds must be paid to counties with a 2000 population of more than 2,000,000, to be used only for indigent health care.

(f) 31.8750% of the proceeds must be credited to the Michigan Medicaid benefits trust fund created under section 5 of the Michigan trust fund act, 2000 PA 489, MCL 12.255.

(3) Beginning October 1, 2024, the tax imposed on cigarettes under section 7(1)(a)(ii) must be allocated to the department of health and human services for tobacco prevention and cessation programs, including, but not limited to, distributions to local health departments and community-based organizations for tobacco prevention and cessation services.

(4) (3) The tax imposed under section 7(1)(b) must be disbursed as follows:

(a) 75.0% of the proceeds must be credited to the Michigan Medicaid benefits trust fund created under section 5 of the Michigan trust fund act, 2000 PA 489, MCL 12.255.

(b) 25.0% of the proceeds must be credited to the general fund of this state.

(5) Beginning October 1, 2024, the tax imposed under section 7(1)(c) must be disbursed as follows:

(a) 59% must be allocated to the department of health and human services for tobacco prevention and cessation programs, including, but not limited to, distributions to local health departments and community-based organizations for tobacco prevention and cessation services.

(b) 1% must be allocated to the department for enforcement of this act.

(c) 40% must be allocated to the department of health and human services for enforcement of part 126 and section 12905 of the public health code, 1978 PA 368, MCL 333.12601 to 333.12616 and 333.12905.

(6) (4) The proceeds of the fees and penalties provided for in this act shall must be used for the administration of this act.

(7) As used in this section:

(a) "Community-based organization" means a public or private organization that provides health or human services to meet the needs of a community, including, but not limited to, a nonprofit organization, a social service provider, or an organization providing tobacco prevention and cessation services.

(b) "Local health department" means that term as defined in section 1105 of the public health code, 1978 PA 368, MCL 333.1105.