SENATE BILL 219
49th legislature - STATE OF NEW MEXICO - first session, 2009
INTRODUCED BY
Howie Morales
FOR THE REVENUE STABILIZATION AND TAX POLICY COMMITTEE
AN ACT
RELATING TO TAXATION; AMENDING THE CIGARETTE TAX ACT TO EXPAND THE DEFINITION OF CIGARETTE, DECLARE AS CONTRABAND CIGARETTES NOT IN THE DIRECTORY, ALLOW DISTRIBUTORS TO SELL UNSTAMPED CIGARETTES TO OTHER DISTRIBUTORS, LIMIT THE WAIVER OF STAMPING REQUIREMENTS AND ALLOW THE DEPARTMENT TO DENY STAMPS TO VIOLATORS OR TO RENEW LICENSES; AMENDING PENALTIES; AMENDING THE TOBACCO PRODUCTS TAX ACT TO EXEMPT SALES TO CERTAIN TRIBAL GOVERNMENTS AND TO TAX FREE SAMPLES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 7-12-2 NMSA 1978 (being Laws 1971, Chapter 77, Section 2, as amended) is amended to read:
"7-12-2. DEFINITIONS.--As used in the Cigarette Tax Act:
A. "cigarette" means:
(1) any roll of tobacco or any substitute for tobacco wrapped in paper or in any substance not containing tobacco; [or]
(2) any roll of tobacco that is wrapped in any substance containing tobacco, other than one hundred percent natural leaf tobacco, which, because of its appearance, the type of tobacco used in the filler, its packaging and labeling, or its marketing and advertising, is likely to be offered to, or purchased by, consumers as a cigarette, as described in Paragraph (1) of this subsection [and "cigarette" includes];
(3) bidis and kreteks; or
(4) any other roll of tobacco that is defined as a "cigarette" in Subsection D of Section 6-4-12 NMSA 1978;
B. "contraband cigarettes" means cigarette packages with counterfeit stamps, counterfeit cigarettes, cigarettes that have false or fraudulent manufacturing labels, cigarettes not sold in packages of five, ten, twenty or twenty-five, [and] cigarette packages without the tax or tax-exempt stamps required by the Cigarette Tax Act and cigarettes produced by a manufacturer or in a brand family not included in the directory;
C. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee;
D. "directory" means a listing of tobacco product manufacturers and brand families that is developed, maintained and published by the attorney general under the Tobacco Escrow Fund Act;
[D.] E. "distributor" means a person licensed pursuant to the Cigarette Tax Act to sell or distribute cigarettes in New Mexico. "Distributor" does not include:
(1) a retailer;
(2) a cigarette manufacturer, export warehouse proprietor or importer with a valid permit pursuant to 26 U.S.C. 5713, if that person sells cigarettes in New Mexico only to distributors that hold valid licenses under the laws of a state or sells to an export warehouse proprietor or to another manufacturer; or
(3) a common or contract carrier transporting cigarettes pursuant to a bill of lading or freight bill, or a person who ships cigarettes through the state by a common or contract carrier pursuant to a bill of lading or freight bill;
[E.] F. "license" means a license granted pursuant to the Cigarette Tax Act that authorizes the holder to conduct business as a manufacturer or distributor of cigarettes;
[F.] G. "manufacturer" means a person that manufactures, fabricates, assembles, processes or labels a cigarette or that imports from outside the United States, directly or indirectly, a finished cigarette for sale or distribution in the United States;
[G.] H. "master settlement agreement" means the settlement agreement and related documents entered into on November 23, 1998 by the state and leading United States tobacco product manufacturers;
[H.] I. "package" means an individual pack, box or other container; "package" does not include a container that itself contains other containers, such as a carton of cigarettes;
[I.] J. "retailer" means a person, whether located within or outside of New Mexico, that sells cigarettes at retail to a consumer in New Mexico and the sale is not for resale;
[J.] K. "stamp" means an adhesive label issued and authorized by the department to be affixed to cigarette packages for excise tax purposes and upon which is printed a serial number and the words "State of New Mexico" and "tobacco tax";
[K.] L. "tax stamp" means a stamp that has a specific cigarette tax value pursuant to the Cigarette Tax Act; and
[L.] M. "tax-exempt stamp" means a stamp that indicates a tax-exempt status pursuant to the Cigarette Tax Act."
Section 2. Section 7-12-5 NMSA 1978 (being Laws 1971, Chapter 77, Section 5, as amended) is amended to read:
"7-12-5. AFFIXING STAMPS.--
A. Except as provided in Section 7-12-6 NMSA 1978, all cigarettes shall be placed in packages or containers to which a stamp shall be affixed. Only a distributor with a valid license issued pursuant to the Cigarette Tax Act may purchase or obtain unaffixed tax-exempt stamps or tax stamps. A distributor shall not sell or provide unaffixed stamps to another distributor, manufacturer, export warehouse proprietor or importer with a valid permit pursuant to 26 U.S.C. 5713 or any other person.
B. Stamps shall be affixed by the distributor to
each package of cigarettes to be sold or distributed in New Mexico within [ten] thirty days of receipt of those packages.
C. A distributor shall apply stamps only to packages of cigarettes that [it] the distributor has received directly from another distributor or from a manufacturer or importer of cigarettes that possesses a valid and current permit pursuant to 26 U.S.C. 5713.
D. A distributor shall not affix a stamp to a package of cigarettes of a manufacturer or a brand family that is not included in the directory or sell, offer or possess for sale cigarettes of a manufacturer or brand family that is not included in the directory.
[D.] E. Packages shall contain cigarettes in lots of five, ten, twenty or twenty-five.
[E.] F. Unless the requirements of this section are waived pursuant to Section 7-12-6 NMSA 1978, a tax stamp shall be affixed to each package of cigarettes subject to the cigarette tax and a tax-exempt stamp shall be affixed to each package of cigarettes not subject to the cigarette tax pursuant to Section 7-12-4 NMSA 1978.
[F.] G. A tax-exempt stamp is not an excise tax stamp for purposes of determining units sold pursuant to Section 6-4-12 NMSA 1978.
[G.] H. Stamps shall be affixed inside the boundaries of New Mexico, unless the department has granted a license allowing a person to affix stamps outside New Mexico."
Section 3. Section 7-12-6 NMSA 1978 (being Laws 1971, Chapter 77, Section 6, as amended) is amended to read:
"7-12-6. WAIVER OF REQUIREMENT THAT STAMPS BE AFFIXED.--
The requirement imposed in Section 7-12-5 NMSA 1978 that stamps be affixed to packages or containers of cigarettes is waived if the cigarettes are:
A. distributed by a manufacturer pursuant to federal regulations and are exempt from tax pursuant to 26 U.S.C. 5704; and
B. not subsequently imported into New Mexico."
Section 4. Section 7-12-9.1 NMSA 1978 (being Laws 2006, Chapter 91, Section 7) is amended to read:
"7-12-9.1. LICENSING--GENERAL LICENSING PROVISIONS.--
A. A person shall not engage in the manufacture or distribution of cigarettes in New Mexico without a license issued by the department.
B. The department shall issue or renew a license for a term not to exceed one year.
C. The department may charge a license fee of up to one hundred dollars ($100) for each manufacturer's or distributor's license issued or renewed.
D. An application for a license or renewal of a license shall be submitted on a form determined by the department and shall include:
(1) the name and address of the applicant and:
(a) if the applicant is a firm, partnership or association, the name and address of each of its members; or
(b) if the applicant is a corporation, the name and address of each of its officers;
(2) the address of the applicant's principal place of business and every location where the applicant's business is conducted; and
(3) any other information the department may require.
E. The department may issue a distributor's license and a manufacturer's license to the same person.
F. Persons licensed as manufacturers or distributors may sell stamped cigarettes at retail.
G. A license may not be granted, maintained or renewed if one or more of the following conditions applies to an applicant:
(1) the applicant owes five hundred dollars ($500) or more in delinquent cigarette taxes;
(2) the applicant has had a manufacturer's or distributor's license revoked by the department or any other state within the past two years;
(3) the applicant is convicted of a crime related to contraband cigarettes, stolen cigarettes or counterfeit stamps;
(4) the applicant is a manufacturer but not a participating manufacturer as defined in Section II(jj) of the master settlement agreement and the applicant is not in compliance with the provisions of Section 6-4-13 NMSA 1978 or the Tobacco Escrow Fund Act; or
(5) the applicant is a manufacturer and imports cigarettes into the United States that are in violation of 19 U.S.C. 1681a or manufactures cigarettes that do not comply with the Federal Cigarette Labeling and Advertising Act.
H. In addition to a civil or criminal penalty provided by law, upon a finding that a licensee has violated a provision of the Cigarette Tax Act or the Tobacco Escrow Fund Act or a rule adopted pursuant to [that] either act, the department may revoke or suspend the license or licenses of the licensee.
I. As used in this section, "applicant" includes a person or persons owning, directly or indirectly, in the aggregate, more than ten percent of the ownership interest in the business holding or applying for a license pursuant to the Cigarette Tax Act."
Section 5. Section 7-12-9.2 NMSA 1978 (being Laws 2006, Chapter 91, Section 8) is amended to read:
"7-12-9.2. DISTRIBUTOR'S LICENSE.--
A. A person shall not distribute stamped packages of cigarettes for resale or sell stamped packages of cigarettes at wholesale without first obtaining a distributor's license from the department.
B. A person licensed to distribute cigarettes is authorized to:
(1) receive unstamped packages of cigarettes from a manufacturer or a distributor;
(2) purchase tax stamps and receive tax-exempt stamps from the department;
(3) affix tax stamps or tax-exempt stamps to unstamped packages of cigarettes;
(4) sell stamped packages of cigarettes to a retailer for resale or to a distributor; and
(5) sell unstamped packages of cigarettes to a person licensed to distribute cigarettes outside of New Mexico or to a distributor."
Section 6. Section 7-12-10.1 NMSA 1978 (being Laws 2006, Chapter 91, Section 11) is amended to read:
"7-12-10.1. RETENTION OF INVOICES AND RECORDS--INSPECTION BY DEPARTMENT.--
A. A manufacturer, [or] distributor or retailer shall maintain copies of invoices for each of its facilities for every transaction involving a cigarette sale, purchase, transfer, receipt or consignment, except that a retailer need not retain copies of invoices for sales of cigarettes to consumers. An invoice shall show:
(1) the names and addresses of all persons involved in the transaction, including the seller, purchaser, consignor and consignee. If a transaction involves an additional facility of the same manufacturer, distributor or retailer, the invoice shall also show the address of the additional facility;
(2) the date;
(3) the price; and
(4) the quantity of each brand of cigarettes involved in each transaction.
B. Records required to be maintained pursuant to Subsection A of this section shall be preserved on the premises described in the license in a manner that ensures permanency and accessibility for inspection at reasonable hours by the department.
C. The records required to be maintained pursuant to Subsection A of this section shall be retained for a period of three years from the end of the year in which the transaction occurred, unless otherwise required by law to be retained for a longer period of time.
D. The department and the secretary of the United States department of the treasury, or a designee, may inspect the reports and records required pursuant to the Cigarette Tax Act along with any stock of cigarettes in the possession of the manufacturer, distributor or retailer. The department, at its sole discretion, may share those records and reports with law enforcement officials of the federal government, other states and international authorities."
Section 7. Section 7-12-13.2 NMSA 1978 (being Laws 2006, Chapter 91, Section 17) is amended to read:
"7-12-13.2. CRIMINAL OFFENSES--CRIMINAL PENALTIES--SEIZURE AND DESTRUCTION OF EVIDENCE.--
A. Whoever violates a provision of the Cigarette Tax Act or a rule adopted pursuant to that act is guilty of a misdemeanor and shall be sentenced in accordance with the provisions of Section 31-19-1 NMSA 1978.
B. Whoever, with intent to defraud, fails to comply with a licensing, reporting or stamping requirement of the Cigarette Tax Act or with a licensing, reporting or stamping rule adopted pursuant to that act is guilty of a fourth degree felony and upon conviction shall be sentenced pursuant to the provisions of Section 31-18-15 NMSA 1978.
C. Whoever packages cigarettes for sale in New Mexico or whoever sells cigarettes in New Mexico, in packages of other than five, ten, twenty or twenty-five cigarettes is:
(1) for the first offense, guilty of a misdemeanor and when convicted shall be sentenced pursuant to Section 31-19-1 NMSA 1978; and
(2) for the second or subsequent offense, guilty of a fourth degree felony and when convicted shall be sentenced pursuant to Section 31-18-15 NMSA 1978.
D. Whoever purchases or otherwise knowingly obtains counterfeit stamps or whoever produces, uses or causes counterfeit stamps to be used is guilty of a fourth degree felony and upon conviction shall be sentenced pursuant to the provisions of Section 31-18-15 NMSA 1978.
E. Whoever sells or possesses for the purpose of sale contraband cigarettes is in violation of the Cigarette Tax Act and shall have the product and related equipment seized. If convicted of selling or possessing for sale contraband cigarettes, the person shall be sentenced as follows:
(1) a violation with a quantity of fewer than two cartons of contraband cigarettes, or the equivalent, is a petty misdemeanor and is punishable in accordance with the provisions of Section 31-19-1 NMSA 1978;
(2) a first violation with a quantity of two cartons or more of contraband cigarettes, or the equivalent, is a misdemeanor and is punishable in accordance with the provisions of Section 31-19-1 NMSA 1978; and
(3) a second or subsequent violation with a quantity of two cartons or more of contraband cigarettes, or the equivalent, is a fourth degree felony and is punishable by a fine not to exceed fifty thousand dollars ($50,000) or imprisonment for a definite term not to exceed eighteen months, or both, and shall also result in the revocation by the department of the manufacturer's or distributor's license, if any.
F. Contraband cigarettes or counterfeit stamps seized by the department or by a law enforcement agency shall be retained as evidence to the extent necessary. Contraband cigarettes or counterfeit stamps no longer needed as evidence shall be destroyed.
G. Prosecution for a violation of a provision of this section does not preclude prosecution under other applicable laws."
Section 8. Section 7-12-18 NMSA 1978 (being Laws 2006, Chapter 91, Section 14) is amended to read:
"7-12-18. REPORTS.--
A. A distributor shall submit periodic reports to the department, in the manner and on the form prescribed by the department. A distributor shall submit a separate report for each of its facilities. The information in the report shall be itemized and shall clearly disclose cigarette brands, quantities and the type of stamp applied to the packages of cigarettes. A report shall include:
(1) an inventory of stamped and unstamped packages of cigarettes held for sale or distribution within New Mexico at the beginning of the reporting period;
(2) the quantity of stamped packages of cigarettes held for sale or distribution within New Mexico that were received from another person during the reporting period and the name and address of each person from whom each quantity was received;
(3) the quantity of New Mexico stamped packages of cigarettes that were distributed or shipped to another distributor or retailer within New Mexico during the reporting period and the name and address of each person to whom each quantity was distributed or shipped;
(4) the quantity of unstamped packages of cigarettes that were distributed or shipped to another distributor within New Mexico during the reporting period and the name and address of each person to whom each quantity was distributed or shipped;
[(4)] (5) the quantity of New Mexico stamped packages of cigarettes that were distributed or shipped to another facility of the same distributor within New Mexico during the reporting period and the address of that facility;
[(5)] (6) the quantity of stamped cigarette packages that were distributed or shipped within New Mexico to an Indian nation, tribe or pueblo or to a person located on the land of an Indian nation, tribe or pueblo or to instrumentalities of the federal government during the reporting period and the name and address of each person, entity or instrumentality to whom each quantity was distributed or shipped;
[(6)] (7) an inventory of stamped and unstamped packages of cigarettes held for sale or distribution within New Mexico at the end of the reporting period;
[(7)] (8) an inventory of stamped and unstamped packages of cigarettes for sale or distribution outside of New Mexico at the beginning of the reporting period;
[(8)] (9) the quantity of packages of cigarettes held for sale or distribution outside of New Mexico that were received from another person during the reporting period and the name and address of each person from whom each quantity was received;
[(9)] (10) the quantity of packages of cigarettes that were distributed or shipped outside New Mexico during the reporting period;
[(10)] (11) an inventory of packages of cigarettes held for sale or distribution outside of New Mexico at the end of the reporting period;
[(11)] (12) the number of each type of stamp on hand at the beginning of the reporting period;
[(12)] (13) the number of each type of stamp purchased or received during the reporting period;
[(13)] (14) the number of each type of stamp applied during the reporting period; and
[(14)] (15) the number of each type of stamp on hand at the end of the reporting period.
B. A manufacturer shall submit periodic reports in the manner and on the form prescribed by the department. The information in the report shall be itemized to clearly disclose cigarette brands and quantities. The reports shall be provided separately with respect to each of the facilities operated by the manufacturer. A report shall contain the quantity of packages of cigarettes that were distributed or shipped:
(1) to a manufacturer, distributor or retailer within New Mexico during the reporting period and the name and address of each person to whom each quantity was distributed or shipped;
(2) to another facility within New Mexico of the same manufacturer during the reporting period and the address of the facility; and
(3) within New Mexico to an Indian nation, tribe or pueblo or to a person located on the land of an Indian nation, tribe or pueblo or to instrumentalities of the federal government during the reporting period and the name and address of each person, entity or instrumentality to whom each quantity was distributed or shipped.
C. The department may require additional information to be submitted. The department shall establish the reporting period, which shall be no longer than three calendar months and no shorter than one calendar month."
Section 9. Section 7-12A-2 NMSA 1978 (being Laws 1986, Chapter 112, Section 3, as amended) is amended to read:
"7-12A-2. DEFINITIONS.--As used in the Tobacco Products Tax Act:
A. "department" means the taxation and revenue department, the secretary or any employee of the department exercising authority lawfully delegated to that employee by the secretary;
B. "distribute" means to sell or to give;
[B.] C. "engaging in business" means carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit;
[C.] D. "first purchaser" means a person engaging in business in New Mexico who manufactures tobacco products or who purchases or receives on consignment tobacco products from any person outside of New Mexico, which tobacco products are to be [sold] distributed in New Mexico in the ordinary course of business;
[D.] E. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, joint venture, syndicate, limited liability company, limited liability partnership, other association or gas, water or electric utility owned or operated by a county or municipality or other entity [or] of the state [of New Mexico or any political subdivision thereof]; "person" also means, to the extent permitted by law, a federal, state or other governmental unit or subdivision or an agency, department or instrumentality;
[E.] F. "product value" means the amount paid, net of any discounts taken and allowed, for tobacco products or, in the case of tobacco products received on consignment, the value of the tobacco products received or, in the case of tobacco products manufactured and sold in New Mexico, the proceeds from the sale by the manufacturer of the tobacco products; and
[F.] G. "tobacco product" means any product, other than cigarettes, made from or containing tobacco."
Section 10. Section 7-12A-3 NMSA 1978 (being Laws 1986, Chapter 112, Section 4, as amended) is amended to read:
"7-12A-3. IMPOSITION AND RATE OF TAX--DENOMINATION AS "TOBACCO PRODUCTS TAX"--DATE PAYMENT OF TAX DUE.--
A. For the manufacture or acquisition of tobacco products in New Mexico [for sale] to be distributed in the ordinary course of business and for the consumption of tobacco products in New Mexico, there is imposed an excise tax at the rate of twenty-five percent of the product value of the tobacco products.
B. The tax imposed by Subsection A of this section may be referred to as the "tobacco products tax".
C. The tobacco products tax shall be paid by the first purchaser on or before the twenty-fifth day of the month following the month in which the taxable event occurs."
Section 11. Section 7-12A-4 NMSA 1978 (being Laws 1986, Chapter 112, Section 5) is amended to read:
"7-12A-4. EXEMPTION--TOBACCO PRODUCTS TAX.--
A. Exempted from the tobacco products tax is the product value of tobacco products sold:
(1) to or by the United States or any agency or instrumentality thereof; [or]
(2) to the governing body or any enrolled tribal member licensed by the governing body of an Indian nation, tribe or pueblo to be distributed on the reservation or pueblo grant of that Indian nation, tribe or pueblo; or
(3) the state of New Mexico or any political subdivision thereof.
B. As used in this section, the term "agency or instrumentality" does not include persons who are agents or instrumentalities of the United States for a particular purpose or only when acting in a particular capacity or corporate agencies or instrumentalities."
Section 12. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2009.
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