Bill Text: MI SB0572 | 2021-2022 | 101st Legislature | Introduced
Bill Title: Taxation: tobacco; excise tax on certain electronic smoking devices; provide for. Amends secs. 2, 6, 7 & 12 of 1993 PA 327 (MCL 205.422 et seq.). TIE BAR WITH: SB 0576'21, SB 0575'21, SB 0574'21, SB 0573'21, SB 0577'21
Spectrum: Slight Partisan Bill (Democrat 4-2)
Status: (Introduced - Dead) 2021-06-24 - Referred To Committee On Regulatory Reform [SB0572 Detail]
Download: Michigan-2021-SB0572-Introduced.html
SENATE BILL NO. 572
A bill to amend 1993 PA 327, entitled
"Tobacco products tax act,"
by amending sections 2, 6, 7, and 12 (MCL 205.422, 205.426, 205.427, and 205.432), section 2 as amended by 2020 PA 326, section 6 as amended by 1997 PA 187, section 7 as amended by 2016 PA 86, and section 12 as amended by 2018 PA 639.
the people of the state of michigan enact:
(a) "Alternative nicotine product" means a noncombustible product containing nicotine that is intended for human consumption, whether chewed, absorbed, dissolved, or ingested by any other means. Alternative nicotine product does not include a product regulated as a drug or device by the United States Food and Drug Administration under 21 USC 351 to 360fff-8.
(b) (a) "Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco. Cigar does not include a cigarette.
(c) (b) "Cigarette" means a roll for smoking 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.
(d) (c) "Cigarette making machine" means any machine or other mechanical device which 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.
(e) "Closed system cartridge" means a sealed, prefilled, and disposable container of consumable material in which the container is inserted directly into an electronic smoking device, and is not intended to be opened or accessible through customary or reasonably foreseeable handling or use.
(f) (d) "Commissioner" means the state treasurer.
(g) "Consumable material" means any volume of liquid nicotine solution, other than marihuana, that is depleted as an electronic smoking device is used.
(h) (e) "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 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 which forms, gives shape to, or otherwise constitutes the receptacle within which the tobacco product is placed for shipment, storage, or distribution.
(i) (f) "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.
(j) (g) "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.
(k) (h) "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.
(l) (i) "Department" means the department of treasury.
(m) "Electronic smoking device" means any device that can be used to deliver aerosolized or vaporized consumable material 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 any component, part, or accessory of the device, whether or not sold separately, and includes any consumable material intended to be aerosolized or vaporized during the use of the device. Electronic smoking device does not include any battery or battery charger when sold separately. In addition, 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 under subchapter V of the federal food, drug, and cosmetic act, 21 USC 351 to 360fff-8.
(n) (j) "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.
(o) (k) "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.
(p) (l) "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.
(q) (m) "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.
(r) (n) "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.
(s) (o) "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.
(t) (p) "Licensee" means a person licensed under this act.
(u) "Liquid nicotine solution" means any solution that contains the chemical substance named 3(1 Methyl-2-pyrrolidinyl) pyridine or C(10)H(14)N(2), including any salt or complex of nicotine, that is derived from the tobacco plant.
(v) (q) "Manufacturer" means any of the following:
(i) Except as otherwise provided in this subdivision, a person who manufactures or produces a tobacco product.
(ii) A person who operates or who 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 is a manufacturer under this subparagraph shall constitute a nonparticipating manufacturer for purposes of sections 6c and 6d. A person who 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 shall not be considered a manufacturer as long as the cigarettes are produced or otherwise generated in that person's dwelling and for that person's self-consumption. For purposes of this act, "self-consumption" means production for personal consumption or use and not for sale, resale, or any other profit-making endeavor.
(iii) A person who does any of the following shall not be considered a manufacturer:
(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 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 own self-consumption.
(w) "Marihuana" means that term as defined in section 7106 of the public health code, 1976 PA 368, MCL 333.7106. For purposes of this act, "marihuana" and "marijuana" are synonymous.
(x) (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.
(y) "Open vapor system" means all containers of consumable material for intended use in an electronic smoking device and for which the container is intended. Open vapor system does not include consumable materials contained in a closed system cartridge.
(z) (s) "Person" means an individual, partnership, fiduciary, association, limited liability company, corporation, or other legal entity.
(aa) (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.
(bb) (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.
(cc) (v) "Retailer" means a person other than a transportation company who operates a place of business in this state, or who directs, manages, or has control over the day-to-day operations of a place of business in this state, for the purpose of making sales of a tobacco product at retail. A person described in this subdivision qualifies as a retailer regardless of whether that person owns the place of business.
(dd) (w) "Roll-your-own cigarette tobacco" means any tobacco which, 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.
(ee) (x) "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.
(ff) (y) "Secondary wholesaler" means a person who sells a tobacco product for resale, who purchases a tobacco product from a wholesaler or unclassified acquirer licensed under this act, and who maintains 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 to retailers for resale.
(gg) (z) "Smokeless tobacco" means snuff, snus, chewing tobacco, moist snuff, and any other tobacco that is intended to be used or consumed, whether heated, chewed, absorbed, dissolved, inhaled, snorted, sniffed, or ingested, by any means other than smoking or combustion.
(hh) (aa) "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.
(ii) (bb) "Stamping agent" means a wholesaler or unclassified acquirer other than a manufacturer who 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 other than manufacturers.
(jj) (cc) "Tobacco product" means a product containing any amount of tobacco regardless of form including, but not limited to, cigarettes, cigars, noncigarette smoking tobacco, or smokeless tobacco. Beginning January 1, 2022, tobacco product includes alternative nicotine products and consumable material. A tobacco product does not include drugs, devices, or combination products authorized for sale by the United States Food and Drug Administration, as those terms are defined in the federal food, drug, and cosmetic act, 21 USC 351 to 360fff-7.360fff-8.
(kk) (dd) "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.
(ll) (ee) "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, 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.
(mm) (ff) "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 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 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 other than a manufacturer, or secondary wholesaler. An unclassified acquirer does not include a wholesaler.
(nn) (gg) "Vending machine operator" means a person who operates 1 or more vending machines in this state for the sale of a tobacco product and who purchases a tobacco product from a manufacturer, licensed wholesaler, or secondary wholesaler.
(oo) (hh) "Wholesale price" means the actual price paid to a seller for a tobacco product, by a wholesaler or unclassified acquirer in order 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. When 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. The wholesale price shall 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 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.
(pp) (ii) "Wholesaler" means a person who purchases all or part of its tobacco products from a manufacturer and who 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.
(qq) (jj) "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. 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 shall 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. If the consumable material is sold in the same package as an electronic smoking device, the record required under this subsection must segregate the price paid for the consumable material from the price paid for the electronic smoking device. The record required under this subsection must also indicate the amount of consumable material that is contained in a closed system cartridge. 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. 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 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, if the consumable material is sold in the same package as an electronic smoking device, the statement must segregate the price paid for the consumable material from the price paid for the electronic smoking device. The statement required under this subsection must also indicate the amount of consumable material that is contained in a closed system cartridge. The manufacturer, wholesaler, unclassified acquirer, and secondary wholesaler 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 his or her 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 shall 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) All statements and other records required by this section shall be in a form prescribed by the department and shall be preserved for a period of 4 years 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) If a tobacco product other than cigarettes is received or acquired within this state by a wholesaler, secondary wholesaler, vending machine operator, unclassified acquirer, or retailer, each original manufacturer's shipping case shall bear the name and address of the person making the first purchase or any other markings the department prescribes. 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 proper markings on the shipping case, box, or container of the tobacco product 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 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. If a tobacco product is shipped outside the state, the licensee shipping the tobacco product shall cause to be placed on every shipping case or other 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. 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 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 the state.
(7) A transporter or other licensee transporting, possessing, or acquiring for the purpose of transporting a tobacco product upon a public highway, road, or street of this state shall have in his or her actual possession invoices or bills of lading containing the name and address of both the seller and the purchaser, the date of delivery, the name and address of the transporter, the quantity and trade name or brand of each tobacco product, the price paid for each trade name or brand in the transporter's possession or custody, and the license as prescribed under this act. If consumable material is transported in the same package as an electronic smoking device, the invoices or bills of lading must segregate the price paid for the consumable material from the price paid for the electronic smoking device. The invoices or bills of lading described under this subsection must also indicate the amount of consumable material that is contained in a closed system cartridge.
(8) A transporter desiring to possess or acquire for transportation or transport a tobacco product upon a highway, road, or street of this state shall obtain a permit from the department authorizing the transporter to possess or acquire for transportation or transport tobacco products and shall have the permit in his or her possession while the tobacco product is in his or her possession. This permit shall be obtained for each load being transported and shall contain a statement setting forth the name and address of the purchaser, seller, and transporter, the license number of the purchaser, the date of the delivery of the tobacco product or date of importation into this state, the route to be followed if a tobacco product is being transported from an out-of-state source, and any other information the department requires. The department shall provide a permit on a form prescribed by it upon the application of a transporter with the remittance of a fee of $1.00. If a transporter transports a tobacco product into this state, the transporter shall stop at the nearest state police post within this state on the route authorized by the permit and disclose the tobacco products in his or her possession and the papers required by this section to be in his or her possession.
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, except as otherwise provided in this subdivision, for cigars, noncigarette smoking tobacco, and smokeless tobacco, excluding consumable material, 32% of the wholesale price. However, beginning November 1, 2012 and through October 31, 2021, the amount of tax levied under this subdivision on cigars shall not exceed 50 cents per individual cigar. Beginning November 1, 2021 through October 31, 2022, the amount of the tax levied under this subdivision shall not exceed 65 cents per individual cigar. Beginning November 1, 2022, the amount of the tax levied under this subdivision shall not exceed 75 cents per individual cigar.
(h) Beginning January 1, 2022, for consumable materials as follows:
(i) That are part of an open vapor system, 18% of the wholesale price.
(ii) That are contained in a closed system cartridge, $0.60 per milliliter.
(i) Beginning January 1, 2022, for alternative nicotine products, 50 cents per ounce of alternative nicotine product on the basis of net weight of the alternative nicotine product as listed by the manufacturer.
(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 must 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 must be signed under penalty of perjury. The return shall must 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 benefits trust fund created under section 5 of the Michigan trust fund act, 2000 PA 489, MCL 12.255.
(6) Every licensee and retailer who, on January 1, 2022, has on hand for sale any consumable materials shall file a complete inventory of those consumable materials before February 1, 2022 to the department. A tax is not imposed on the consumable materials described in the complete inventory filed with the department.
(7) (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.
(8) (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.
(9) (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.
(10) (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.
(11) (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.
(12) (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.
(13) (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.
(14) (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. 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 and section 7(5). 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 under section 7(1)(a) shall be disbursed as follows:
(a) 94% of the proceeds shall be credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.
(b) 6% of the proceeds shall 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 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.
(3) The tax imposed on cigarettes under section 7(1)(b) shall be disbursed as follows:
(a) Beginning May 1, 1994 and through June 30, 2004, 5.3% of the proceeds shall 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) Beginning July 1, 2004, 6.5% of the proceeds shall 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.
(c) Through June 30, 2004, 25.3% of the proceeds shall be credited to the general fund of this state.
(d) Beginning July 1, 2004 and through September 30, 2014, 24.1% of the proceeds shall be credited to the general fund of this state.
(e) 63.4% of the proceeds shall be credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.
(f) 6% of the proceeds shall 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 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.
(g) Beginning October 1, 2014, 24.1% of the proceeds shall be disbursed as follows:
(i) For the 2014-2015 fiscal year and each subsequent 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 the 2015-2016 fiscal year and each subsequent 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. Consumer Price Index. Beginning for the 2015-2016 fiscal year and each subsequent fiscal year, if the cumulative annual percentage change in the consumer price index Consumer Price Index is negative, then the adjustment for that fiscal year is zero. As used in this subsection, "consumer price index" "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 shall must contain all of the following:
(A) The proposed maintenance plan for the Michigan State Capitol Historical Historic Site for the immediately following fiscal year.
(B) The projected 5-year maintenance plan for the Michigan State Capitol Historical Historic Site for the immediately following 5 fiscal years.
(C) Projected large-scale projects for the Michigan State Capitol Historical Historic Site that exceed $1,000,000.00.
(ii) The remaining proceeds shall be credited to the general fund of this state.
(4) Beginning August 1, 2002, the tax imposed on cigarettes under section 7(1)(c) shall be disbursed as follows:
(a) Through June 30, 2004, 74.2%, and beginning July 1, 2004, 9.0% of the proceeds shall be credited to the general fund of this state.
(b) Through June 30, 2004, 4.6%, and beginning July 1, 2004, 56.3% of the proceeds shall be credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.
(c) 6.0% of the proceeds shall 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 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) Through June 30, 2004, 3.0%, and beginning July 1, 2004, 3.7% of the proceeds shall be paid to counties with a 2000 population of more than 2,000,000, to be used only for indigent health care.
(e) Through June 30, 2004, 12.2%, and beginning July 1, 2004, 25.0% of the proceeds shall be credited to the Medicaid benefits trust fund created under section 5 of the Michigan trust fund act, 2000 PA 489, MCL 12.255.
(5) Beginning August 1, 2002, the tax imposed under section 7(1)(f) shall be disbursed as follows:
(a) 75.6% of the proceeds shall be credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.
(b) 6.0% of the proceeds shall 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 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.
(c) 18.4% of the proceeds shall be credited to the general fund of this state.
(6) Beginning August 1, 2002, the tax imposed on cigarettes under section 7(1)(d) shall be disbursed as follows:
(a) 94.0% of the proceeds shall be credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.
(b) 6.0% of the proceeds shall 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 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.
(7) Beginning July 1, 2004, the tax imposed on cigarettes under section 7(1)(e) shall be disbursed as follows:
(a) Beginning July 1, 2004 and through September 30, 2005, 100% of the proceeds shall 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) Beginning October 1, 2005, 75.0% of the proceeds shall 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.
(c) Beginning October 1, 2005, 25.0% of the proceeds shall be credited to the general fund of this state.
(8) Beginning July 1, 2004, the tax imposed under section 7(1)(g) shall be disbursed as follows:
(a) Beginning July 1, 2004 and through September 30, 2005, 100% of the proceeds shall 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) Beginning October 1, 2005, 75.0% of the proceeds shall 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.
(c) Beginning October 1, 2005, 25.0% of the proceeds shall be credited to the general fund of this state.
(9) Beginning October 1, 2022 and each fiscal year thereafter, the tax imposed under section 7(1)(h) shall be distributed as follows:
(a) The first $250,000.00 shall be credited to the department of treasury for tax enforcement purposes.
(b) The next $2,500,000.00 shall be distributed to local health departments for local public health programs.
(c) The remainder shall be credited to the general fund of this state.
(10) (9) The proceeds of the fees and penalties provided for in this act shall be used for the administration of this act.
Enacting section 1. This amendatory act does not take effect unless all of the following bills of the 101st Legislature are enacted into law:
(a) Senate Bill No. 575.
(b) Senate Bill No. 573.
(c) Senate Bill No. 574.
(d) Senate Bill No. 576.
(e) Senate Bill No. 577.
(f) Senate Bill No.____ or House Bill No.____ (request no. 01404'21).
