HOUSE BILL 86
46th legislature - STATE OF NEW MEXICO - second session, 2004
INTRODUCED BY
Gail C. Beam
FOR THE TOBACCO SETTLEMENT REVENUE OVERSIGHT COMMITTEE
AN ACT
RELATING TO TOBACCO; ENHANCING CIGARETTE STAMP PROCEDURES; PROVIDING FOR TAX-EXEMPT STAMPS; EXPANDING REPORTING AND LICENSING REQUIREMENTS; PROVIDING CIVIL AND CRIMINAL PENALTIES; AMENDING, REPEALING AND ENACTING SECTIONS OF THE CIGARETTE TAX ACT; MAKING AN APPROPRIATION.
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 [any] a roll of tobacco [or any substitute therefor] wrapped in paper or [any] in a substance [other than] not containing tobacco, and "cigarette" includes bidis and kreteks;
[B. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, joint venture, syndicate or other entity;
C.] B. "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; [by the secretary
D. "secretary" means the secretary of taxation and revenue;]
C. "distributor" means a person, other than a retailer, that sells or distributes cigarettes in New Mexico. "Distributor" does not include:
(1) a cigarette manufacturer, export warehouse proprietor or an importer with a valid permit pursuant to 26 U.S.C. 5713 if such a 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
(2) a common or contract carrier transporting cigarettes under a bill of lading or freight bill, or a person who ships cigarettes through the state by a common or contract carrier under a bill of lading or freight bill;
D. "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;
E. "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;
F. "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;
G. "package" means the individual pack, box or other container that contains cigarettes, but "package" does not include a container that itself contains other containers, such as a carton of cigarettes;
H. "retailer" means a person, whether located within or outside New Mexico, that sells or distributes cigarettes to a consumer in New Mexico;
[E.] I. "stamp" means [any authorized label which is issued to cover the tax in multiples of five cigarettes] 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" [and which is coated with an adhesive to affix the stamp to a package so that the stamp, once affixed, cannot be removed without destroying it;
F. "stamped" means a package or container of cigarettes to which a cigarette tax stamp has been affixed as provided in the Cigarette Tax Act; and
G. "unstamped" means a package or container of cigarettes to which the cigarette tax stamp provided for in the Cigarette Tax Act has not been affixed];
J. "tax stamp" means a stamp that has a specific excise tax value pursuant to Section 7-12-3 NMSA 1978; and
K. "tax-exempt stamp" means a stamp that indicates a tax-exempt status pursuant to Section 7-12-4 NMSA 1978."
Section 2. Section 7-12-3.1 NMSA 1978 (being Laws 1986, Chapter 13, Section 3, as amended) is amended to read:
"7-12-3.1. CIGARETTE INVENTORY TAX--IMPOSITION OF TAX--DATE PAYMENT OF TAX DUE.--
A. A cigarette inventory tax is imposed, measured by the quantity of cigarette stamps, whether or not affixed to packages of cigarettes, in the possession of a person who is required by Subsection [C] A of Section 7-12-5 NMSA 1978 to affix stamps on the date on which an increase in the excise tax imposed by Section 7-12-3 NMSA 1978 is effective. The taxable event is the existence of an inventory of cigarette stamps, whether or not affixed to packages of cigarettes, in the possession of a person who is required by Subsection [C] A of Section 7-12-5 NMSA 1978 to affix stamps on the date on which an increase in the excise tax imposed by Section 7-12-3 NMSA 1978 is effective. The rate of the cigarette inventory tax to apply to cigarette stamps held in inventory shall be the amount of the increase in the cigarette tax imposed by Section 7-12-3 NMSA 1978.
B. The cigarette inventory tax is to be paid to the department on or before the twenty-fifth day of the month following the month in which the taxable event occurs."
Section 3. Section 7-12-3.2 NMSA 1978 (being Laws 1986, Chapter 13, Section 4) is amended to read:
"7-12-3.2. CIGARETTE INVENTORIES.--
A. On any date on which the excise tax imposed by Section 7-12-3 NMSA 1978 is increased, each person who is required by Subsection [C] A of Section 7-12-5 NMSA 1978 to affix stamps shall take inventory of cigarette stamps on hand, including stamps affixed to packages of cigarettes.
B. Each person required to take an inventory by Subsection A of this section shall report the total number of cigarette stamps in inventory on the date on which the tax imposed by Section 7-12-3 NMSA 1978 changes and pay any tax due imposed by Section 7-12-3.1 NMSA 1978."
Section 4. 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 [the sale, gift or consumption of which is subject to the cigarette tax] shall be placed in packages [or containers] to which a stamp [may] shall be affixed. Only a distributor with a valid license issued pursuant to the Cigarette Tax Act may purchase or obtain stamps. Stamps shall be applied by the licensed distributor to each package of cigarettes to be sold or distributed in New Mexico within seventy-two hours of receipt of those packages. A distributor shall not sell or provide stamps to another distributor or person.
B. A distributor shall apply stamps only to cigarette packages that it has received directly from a manufacturer or importer of cigarettes that possesses a valid and current permit pursuant to 26 U.S.C. 5713.
[B.] C. Packages [or containers to which a stamp is required to be affixed and which] that contain cigarettes that are not in multiples of five cigarettes shall have affixed a stamp of the next higher multiple of five cigarettes.
[C.] D. 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 [or container of cigarettes, the sale, gift or consumption of which is subject to the cigarette tax. The stamp shall be affixed by any person who sells in New Mexico cigarettes manufactured by that person or who receives on consignment or buys unstamped cigarettes for sale, gift or consumption in New Mexico] of cigarettes subject to the cigarette tax pursuant to Section 7-12-3 NMSA 1978, 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.
[D.] E. 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 5. 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
[A. the cigarettes are sold on railroad passenger trains in New Mexico. When unstamped cigarettes are sold on railroad passenger trains in New Mexico, the seller shall remit to the department the tax imposed in Section 7-12-3 NMSA 1978 on or before the twenty-fifth day of the month following the month in which sales of unstamped cigarettes are made on railroad passenger trains in New Mexico; or
B. the cigarettes are distributed by a cigarette manufacturer to consumers within the state of New Mexico as free samples. When unstamped cigarettes are distributed by a cigarette manufacturer in New Mexico as free samples, the manufacturer shall remit to the department the tax imposed in Section 7-12-3 NMSA 1978 on or before the twenty-fifth day of the month following the month in which distributions of unstamped cigarettes are made] the cigarettes are distributed by a manufacturer pursuant to federal regulations and are exempt from tax pursuant to 26 U.S.C. 5704."
Section 6. Section 7-12-7 NMSA 1978 (being Laws 1971, Chapter 77, Section 7, as amended) is amended to read:
"7-12-7. SALE OF STAMPS--[PRICES] NUMBERING--DISCOUNTS.--
A. The department shall sell stamps [to any person who sells in New Mexico cigarettes manufactured by that person and to any person who receives on consignment or buys unstamped cigarettes for sale, gift or consumption in New Mexico, provided such persons are registered with the department under the provisions of Section 7-1-12 NMSA 1978] only to distributors licensed pursuant to the Cigarette Tax Act.
B. Each roll or group of sheets of stamps shall have a separate serial number, which shall be legible at the point of sale. The department shall keep records of which distributor purchases each roll or group of sheets. Stamps bearing the same serial number shall not be sold to more than one distributor.
C. Tax stamps shall be sold at their face value with the following discounts:
(1) [four] nine-tenths percent less than the face value of the first thirty thousand dollars ($30,000) of stamps purchased in one calendar month;
(2) [three] seven-tenths percent less than the face value of the second thirty thousand dollars ($30,000) of stamps purchased in one calendar month; and
(3) [two] five-tenths percent less than the face value of all stamps purchased in excess of sixty thousand dollars ($60,000) in one calendar month.
[B.] D. If the face value of tax stamps sold in a single sale is less than one thousand dollars ($1,000), the discount provided for in this section shall not be allowed.
[C.] E. Payment for tax stamps shall be made on or before the twenty-fifth day of the month following the month in which the sale of stamps by the department is made.
F. Tax-exempt stamps shall be provided only to licensed distributors and shall be free of charge; provided that the distributor is in full compliance with the reporting requirements of the Cigarette Tax Act and rules promulgated pursuant to that act."
Section 7. Section 7-12-9 NMSA 1978 (being Laws 1971, Chapter 77, Section 9, as amended) is amended to read:
"7-12-9. LICENSE NECESSARY TO ENGAGE IN BUSINESS OF SELLING CIGARETTES IN NEW MEXICO.--[Each]
A. A person shall not engage in business as a manufacturer or distributor without first obtaining a license from the department.
B. A manufacturer or distributor shall sell or distribute cigarettes within New Mexico only to a distributor with a valid current license or to a retailer. A distributor or retailer shall obtain cigarettes within New Mexico only from a manufacturer or distributor with a valid current license.
C. The department shall, by rule, specify the length of time for which a license remains in effect, except that a license issued pursuant to this section shall not remain in effect for longer than two years.
D. An application for a license shall be submitted on a form established by the department and shall provide:
(1) the name and address of the applicant and, if the applicant is a firm, partnership or association, the name and address of each of its members and, 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. A person engaging in business as a distributor or manufacturer or a combination of these activities shall obtain a separate license for each activity.
F. A license may not be granted, maintained or renewed if any of the following conditions applies to the applicant:
(1) the applicant owes five hundred dollars ($500) or more in delinquent cigarette taxes;
(2) the applicant had a manufacturer or distributor license revoked by the department within the past two years;
(3) the applicant was convicted of a crime relating to cigarettes;
(4) the applicant was convicted of a felony;
(5) 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
(6) 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, as amended.
G. In addition to any civil or criminal penalty provided by law, upon a finding that a licensee has violated a provision of the Cigarette Tax Act, the department may revoke or suspend the license or licenses of the licensee.
H. The department shall create and maintain a web site listing all current licensees and the licenses they hold pursuant to the Cigarette Tax Act.
I. A person engaged in the business of selling cigarettes in New Mexico shall register and comply with the provisions of Section 7-1-12 NMSA 1978. [Every]
J. A person selling cigarettes in New Mexico shall furnish [such] information [as may be] requested by the department concerning that person's vending machines or other places of business where cigarettes are sold.
K. 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."
Section 8. Section 7-12-10 NMSA 1978 (being Laws 1971, Chapter 77, Section 10, as amended) is repealed and a new Section 7-12-10 NMSA 1978 is enacted to read:
"7-12-10. [NEW MATERIAL] RETENTION OF INVOICES AND RECORDS--INSPECTION BY DEPARTMENT.--
A. A distributor, retailer or manufacturer shall maintain copies of invoices for each of its facilities for every transaction involving a cigarette sale, purchase, transfer, receipt or consignment; provided 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 sellers, purchasers, consignors and consignees; provided that if a transaction involves another facility of the same distributor, retailer or manufacturer, the invoice shall show the address of that facility;
(2) the date;
(3) the price; and
(4) the quantity of each brand of cigarettes involved in each transaction.
B. Records required pursuant to Subsection A of this section shall be preserved on the premises described in the license in such a manner as to ensure permanency and accessibility for inspection at reasonable hours by the department. With the department's permission, manufacturers, distributors and retailers with multiple places of business may retain centralized records, but shall transmit duplicates of the records to each place of business within twenty-four hours upon the request of the department.
C. The records required 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 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.
E. The department shall have authority to enter and inspect, without a warrant during normal business hours and with a warrant during non-business hours, the facilities and records of a manufacturer, distributor or retailer.
F. If the department or a law enforcement officer has reasonable grounds to believe that a vehicle is transporting cigarettes in violation of the Cigarette Tax Act, the department or the law enforcement officer is authorized to stop the vehicle and to inspect it for contraband cigarettes or cigarettes in violation of the provisions of the Cigarette Tax Act."
Section 9. Section 7-12-11 NMSA 1978 (being Laws 1971, Chapter 77, Section 11) is amended to read:
"7-12-11. EXPORT SELLERS--PHYSICAL SEGREGATION OF CIGARETTES TO BE EXPORTED.--[Any person]
A. A distributor selling and shipping cigarettes outside New Mexico may maintain unstamped [cigarettes] cigarette packages on [his] the distributor's premises if the unstamped [cigarettes] packages to be shipped outside the state are kept in a separate part of [his] the distributor's place of business, physically segregated from cigarettes to be sold inside New Mexico and clearly identified as cigarettes for shipment outside the state. Unstamped cigarette packages shall not be transferred by a distributor to another facility of the distributor or to another person within New Mexico. If cigarettes to be sold outside New Mexico are intermingled with cigarettes to be sold inside New Mexico, they shall be stamped and treated for purposes of the Cigarette Tax Act as cigarettes to be sold inside New Mexico.
B. A person doing business as both a distributor and a retailer shall maintain separate areas for stamped and unstamped cigarette packages."
Section 10. Section 7-12-12 NMSA 1978 (being Laws 1971, Chapter 77, Section 12, as amended) is amended to read:
"7-12-12. SHIPMENT OF UNSTAMPED CIGARETTES IN NEW MEXICO.--
A. A person that ships unstamped cigarette packages into New Mexico other than to a licensed distributor shall first file a notice of the shipment with the department.
B. A person that transports unstamped cigarette packages into or within New Mexico shall carry, in the transporting vehicle, invoices or equivalent documents applicable to all cigarettes in the shipment. The invoices or documents shall show the name and address of the consignor or seller, the name and address of the consignee or purchaser and the quantity of each brand of cigarettes transported.
C. The provisions of Subsections A and B of this section shall not apply to a common or contract carrier transporting cigarettes through New Mexico to another location under a proper bill of lading or freight bill that states the quantity, source and destination of the cigarettes.
D. The [secretary] department may, by regulation, require and prescribe the contents of reports to be filed with the department by persons transporting unstamped [cigarettes] cigarette packages in New Mexico."
Section 11. Section 7-12-13 NMSA 1978 (being Laws 1971, Chapter 77, Section 13, as amended) is repealed and a new Section 7-12-13 NMSA 1978 is enacted to read:
"7-12-13. [NEW MATERIAL] CIVIL PENALTIES.--
A. Whoever knowingly omits, neglects or refuses to comply with the provisions of the Cigarette Tax Act shall, in addition to any other penalty provided in that act, be liable for a penalty up to one thousand dollars ($1,000).
B. Whoever fails to pay a tax imposed pursuant to the Cigarette Tax Act at the time due shall, in addition to any other penalty provided in that act, be liable for a penalty of five hundred percent of the tax due but unpaid.
C. Cigarettes held for sale or distribution within New Mexico in violation of the provisions of the Cigarette Tax Act, and the machinery used to manufacture them, shall be subject to seizure, forfeiture and destruction."
Section 12. A new section of the Cigarette Tax Act is enacted to read:
"[NEW MATERIAL] 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 cigarette packages. A report shall include:
(1) an inventory of stamped and unstamped cigarette packages held for sale or distribution within New Mexico at the beginning of the reporting period;
(2) the quantity of stamped cigarette packages 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 cigarette packages 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 New Mexico stamped cigarette packages that were distributed or shipped to another facility of the same distributor within New Mexico during the reporting period and the address of the facility;
(5) the quantity of stamped cigarette packages that were distributed or shipped within New Mexico to Indian tribal entities, pueblos or smoke shops 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) an inventory of stamped and unstamped cigarette packages held for sale or distribution within New Mexico at the end of the reporting period;
(7) an inventory of cigarette packages held for sale or distribution outside of New Mexico at the beginning of the reporting period;
(8) the quantity of cigarette packages held for sale or distribution outside 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) the quantity of cigarette packages that were distributed or shipped outside New Mexico during the reporting period;
(10) an inventory of cigarette packages held for sale or distribution outside New Mexico at the end of the reporting period;
(11) the number of each type of stamp on hand at the beginning of the reporting period;
(12) the number of each type of stamp purchased or received during the reporting period;
(13) the number of each type of stamp applied during the reporting period; and
(14) 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 cigarette packages 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 Indian tribal entities, pueblos or smoke shops or instrumentalities of the federal government during the reporting period and the name and address of each person 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 13. A new section of the Cigarette Tax Act is enacted to read:
"[NEW MATERIAL] CRIMINAL PENALTIES.--
A. Whoever violates a provision of the Cigarette Tax Act or a rule promulgated 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 requirement of the Cigarette Tax Act or with a rule promulgated pursuant to that act is guilty of a fourth degree felony and shall be sentenced in accordance with the provisions of Section 31-18-15 NMSA 1978.
C. Notwithstanding any other provision of law, the sale or possession for sale of counterfeit cigarettes is unlawful and shall result in the seizure of the product and related machinery and be punishable as follows:
(1) a violation with a quantity of fewer than two cartons of counterfeit cigarettes, or the equivalent, is a petty misdemeanor 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 counterfeit cigarettes, or the equivalent, is a misdemeanor 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 counterfeit cigarettes, or the equivalent, is a fourth degree felony 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 or distributor license, if any.
D. A counterfeit cigarette seized by the department or by a law enforcement agency shall be destroyed.
E. Prosecution for a violation of a provision of this section does not preclude prosecution under other applicable laws.
F. As used in this section, "counterfeit cigarettes" means cigarette packages with counterfeit stamps, cigarettes that have false or fraudulent manufacturing labels and cigarette packages without the tax or tax-exempt stamps required under the Cigarette Tax Act."
Section 14. APPROPRIATION.--Four hundred thousand dollars ($400,000) is appropriated from the general fund to the taxation and revenue department for expenditure in fiscal year 2005 to implement the provisions of this act. Any unexpended or unencumbered balance remaining at the end of the fiscal year 2005 shall revert to the general fund.
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