SB-0476, As Passed House, March 24, 2016

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE SUBSTITUTE FOR

 

SENATE BILL NO. 476

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1993 PA 327, entitled

 

"Tobacco products tax act,"

 

by amending sections 7 and 11 (MCL 205.427 and 205.431), section 7

 

as amended by 2014 PA 298 and section 11 as amended by 2012 PA 325.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 7. (1) Beginning May 1, 1994, a tax is levied on the sale

 

of tobacco products sold in this state as follows:

 

     (a) Through July 31, 2002, for cigars, noncigarette smoking

 

tobacco, and smokeless tobacco, 16% of the wholesale price.

 

     (b) For cigarettes, 37.5 mills per cigarette.

 

     (c) Beginning August 1, 2002, for cigarettes, in addition to

 

the tax levied in subdivision (b), an additional 15 mills per

 

cigarette.

 

     (d) Beginning August 1, 2002, for cigarettes, in addition to

 

the tax levied in subdivisions (b) and (c), an additional 10 mills

 

per cigarette.

 

     (e) Beginning July 1, 2004, for cigarettes, in addition to the

 

tax levied in subdivisions (b), (c), and (d), an additional 37.5

 

mills per cigarette.

 

     (f) Beginning August 1, 2002 and through June 30, 2004, for

 

cigars, noncigarette smoking tobacco, and smokeless tobacco, 20% of

 

the wholesale price.

 

     (g) Beginning July 1, 2004, for cigars, noncigarette smoking

 

tobacco, and smokeless tobacco, 32% of the wholesale price.

 

However, beginning November 1, 2012 and through October 31, 2016,

 

2021, the amount of tax levied under this subdivision on cigars

 

shall not exceed 50 cents per individual cigar.

 

     (2) On or before the twentieth day of each calendar month,

 

every licensee under section 3 other than a retailer, unclassified

 

acquirer licensed as 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 shall also include the number and denomination of

 

unaffixed stamps in the possession of the licensee at the end of

 

the preceding calendar month. 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 shall be signed under penalty

 

of perjury. The return shall be on a form prescribed by the

 

department and shall contain or be accompanied by any further

 

information the department requires. The department may also

 

require licensees to report cigarette acquisition, purchase, and

 

sales information in other formats and frequency.

 

     (3) 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

 

subsection (1) for tobacco products sold during the calendar month

 

covered by the return, less compensation equal to the following:

 

     (a) One percent of the total amount of the tax due on tobacco

 

products sold other than cigarettes.

 

     (b) Through July 31, 2002, 1.25% of the total amount of the

 

tax due on cigarettes sold.

 

     (c) Beginning August 1, 2002, 1.5% of the total amount of the

 

tax due on cigarettes sold and, beginning on June 20, 2012, 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.

 

     (d) Beginning on the first calendar month following the

 

implementation of the use of digital stamps as provided in section

 

5a(2), for licensees who 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

 

(e), 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 which 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 which 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 (e) 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.

 

     (e) 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 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.

 

     (f) Beginning in the first calendar month following the

 

implementation of the use of digital stamps as provided in section

 

5a(2), for licensees who are stamping agents, reimbursement of

 

qualified equipment costs actually incurred by the stamping agent,

 

not otherwise compensated or reimbursed under subdivision (d) or

 

(e), as determined by the department. The reimbursement provided

 

under this subdivision shall not exceed $60,000.00 for all stamping

 

agents combined.

 

     (4) Every licensee and retailer who, on August 1, 2002, has on

 

hand for sale any cigarettes upon which a tax has been paid

 

pursuant to subsection (1)(b) shall file a complete inventory of

 

those cigarettes before September 1, 2002 and shall pay to the

 

department at the time of filing this inventory a tax equal to the

 

difference between the tax imposed in subsection (1)(b), (c), and

 

(d) and the tax that has been paid under subsection (1)(b). Every

 

licensee and retailer who, on August 1, 2002, has on hand for sale

 

any cigars, noncigarette smoking tobacco, or smokeless tobacco upon

 

which a tax has been paid pursuant to subsection (1)(a) shall file

 

a complete inventory of those cigars, noncigarette smoking tobacco,

 

and smokeless tobacco before September 1, 2002 and shall pay to the

 

department at the time of filing this inventory a tax equal to the

 

difference between the tax imposed in subsection (1)(f) and the tax

 

that has been paid under subsection (1)(a).

 

     (5) Every licensee and retailer who, on July 1, 2004, has on

 

hand for sale any cigarettes upon which a tax has been paid

 

pursuant to subsection (1)(b), (c), and (d) shall file a complete

 

inventory of those cigarettes before August 1, 2004 and shall pay

 

to the department at the time of filing this inventory a tax equal

 

to the difference between the tax imposed in subsection (1)(b),

 

(c), (d), and (e) and the tax that has been paid under subsection

 

(1)(b), (c), and (d). Every licensee and retailer who, on July 1,

 

2004, has on hand for sale any cigars, noncigarette smoking

 

tobacco, or smokeless tobacco upon which a tax has been paid

 

pursuant to subsection (1)(f) shall file a complete inventory of

 

those cigars, noncigarette smoking tobacco, and smokeless tobacco

 

before August 1, 2004 and shall pay to the department at the time

 

of filing this inventory a tax equal to the difference between the

 

tax imposed in subsection (1)(g) and the tax that has been paid

 

under subsection (1)(f). The proceeds derived under this subsection

 

shall be credited to the Michigan medicaid Medicaid benefits trust

 

fund created under section 5 of the Michigan trust fund act, 2000

 

PA 489, MCL 12.255.

 

     (6) The department may require the payment of the tax imposed

 

by this act upon the importation or acquisition of a tobacco

 

product. 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 a subsequent sale to the tax imposed by this act.

 

     (7) 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.

 

     (8) 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.

 

     (9) 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 has any unaffixed stamps on

 

hand at the time its license is revoked or expires, or at the time

 

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.

 

     (10) 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 shall be filed on a form 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.

 

     (11) 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 shall be in the form and manner specified by the department.

 

     (12) 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 shall 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.

 

     (13) As used in subsection (3):

 

     (a) "Eligible equipment" means a cigarette tax stamping

 

machine that meets all of the following conditions:

 

     (i) Was purchased by a stamping agent who 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).

 

     (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 was licensed as a stamping agent

 

as of December 31, 2011.

 

     (ii) Was a cigarette tax stamping machine used prior to

 

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. 11. (1) A person, either as principal or agent, shall not

 

sell or solicit a sale of a tobacco product to be shipped, mailed,

 

or otherwise sent or brought into the state, to a person not a

 

licensed manufacturer, licensed wholesaler, licensed secondary

 

wholesaler, licensed vending machine operator, licensed

 

unclassified acquirer, licensed transporter, or licensed

 

transportation company, unless the tobacco product is to be sold to

 

or through a licensed wholesaler.

 

     (2) All sales conducted through the internet, Internet, by

 

telephone, or in a mail-order transaction shall not be completed

 

unless, before each delivery of cigarettes 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 cigarettes; that the cigarettes purchased are not

 

intended for consumption by an individual who is younger than the

 

legal minimum age to purchase cigarettes; 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

 

cigarettes. The statement shall also confirm that the purchaser

 

understands that signing another person's name to the affirmation

 

is illegal; that the sale of cigarettes to individuals under the

 

legal minimum purchase age is illegal; and that the purchase of

 

cigarettes 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.

 

     (3) All invoices, bills of lading, sales receipts, or other

 

documents related to cigarette sales conducted through the

 

internet, by telephone, or in a mail-order transaction shall

 

contain the current seller's valid Michigan sales tax registration

 

number, business name and address of the seller, and a statement as

 

to whether all sales taxes and taxes levied under this act have

 

been paid. All packages of cigarettes shipped from a cigarette

 

seller to purchasers who reside in Michigan shall clearly print or

 

stamp the package with the word "CIGARETTES" on the outside of all

 

sides of the package so it is clearly visible to the shipper. In

 

addition, the package shall contain an externally visible and

 

clearly legible notice located on the same side of the package as

 

the address to which the package is delivered, as follows:

 

     "IF THESE CIGARETTES HAVE BEEN SHIPPED TO YOU FROM A SELLER

 

LOCATED OUTSIDE OF THE STATE IN WHICH YOU RESIDE, THE SELLER HAS

 

REPORTED UNDER FEDERAL LAW THE SALE OF THESE CIGARETTES TO OUR

 

STATE TAX COLLECTION AGENCY, INCLUDING YOUR NAME AND ADDRESS. YOU

 

ARE LEGALLY RESPONSIBLE FOR ALL APPLICABLE UNPAID STATE TAXES ON

 

THESE CIGARETTES."

 

     If an order is made as a result of advertisement over the

 

internet, Internet, the tobacco retailer shall request the

 

electronic mail address of the purchaser and shall receive payment

 

by credit card or check before shipping. This subsection and

 

subsection (2) do not apply to sales by wholesalers and

 

unclassified acquirers.

 

     (4) The deliverer of the cigarettes is required to obtain

 

proof from a valid government-issued document that the person

 

signing for the cigarettes is the purchaser.

 

     (5) Beginning November 1, 2012, a retailer that is not

 

licensed as an unclassified acquirer, retail importer of tobacco

 

products other than cigarettes, shall post a sign, visible to the

 

public inside the retail establishment that informs purchasers of

 

cigars through catalog sales or internet Internet sales of their

 

responsibility to pay all applicable unpaid state taxes on those

 

cigars.

 

     (6) 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

 

services 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

 

World Wide Web through the use of a computer, a computer network,

 

or a computer system.

 

     (h) "Sale conducted through the internet" Internet" means a

 

sale of, a solicitation to sell, a purchase of, or an offer to

 

purchase cigarettes conducted all or in part by accessing an

 

internet Internet website.