SENATE BILL 264

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Clinton D. Harden

AN ACT

RELATING TO TAXATION; PROVIDING FOR CIGARETTE EXCISE TAX TO BE PAID BY A CIGARETTE VENDOR ON TRIBAL LAND ON SALES OF CIGARETTES TO PERSONS WHO ARE NOT TRIBAL MEMBERS; LIMITING TAX-CREDIT STAMPS TO SALES TO TRIBAL MEMBERS; ELIMINATING THE REQUIREMENT FOR A TRIBE TO IMPOSE A TRIBAL CIGARETTE TAX; COUNTING TRIBAL MEMBER SALES AS "UNITS SOLD" FOR TOBACCO ESCROW PAYMENTS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. Section 6-4-12 NMSA 1978 (being Laws 1999, Chapter 208, Section 1, as amended) is amended to read:

     "6-4-12. DEFINITIONS.--As used in Sections 6-4-12 [and 6-4-13] through 6-4-13.2 NMSA 1978:

          A. "adjusted for inflation" means increased in accordance with the formula for inflation adjustment set forth in Exhibit C to the Master Settlement Agreement;

          B. "affiliate" means a person who directly or indirectly owns or controls, is owned or controlled by or is under common ownership or control with another person. Solely for purposes of this definition, the terms "owns", "is owned" and "ownership" mean ownership of an equity interest, or the equivalent thereof, of ten percent or more, and the term "person" means an individual, partnership, committee, association, corporation or any other organization or group of persons;

          C. "allocable share" means "Allocable Share" as that term is defined in the Master Settlement Agreement;

          D. "cigarette" means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use and consists of or contains:

                (1) any roll of tobacco wrapped in paper or in any substance not containing tobacco;

                (2) tobacco, in any form, that is functional in the product [which] and that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette; or

                (3) any roll of tobacco wrapped in any substance containing tobacco [which] that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in Paragraph (1) of this subsection. The term "cigarette" includes "roll-your-own" (i.e., any tobacco [which] that, because of its appearance, type, packaging or labeling, is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes). For purposes of this definition of "cigarette", 0.09 ounces of "roll-your-own" tobacco shall constitute one individual "cigarette";

          E. "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;

          F. "qualified escrow fund" means an escrow arrangement with a federally or state-chartered financial institution having no affiliation with any tobacco product manufacturer and having assets of at least one billion dollars ($1,000,000,000) where such arrangement requires that such financial institution hold the escrowed funds' principal for the benefit of releasing parties and prohibits the tobacco product manufacturer placing the funds into escrow from using, accessing or directing the use of the funds' principal except as consistent with Subsection B of Section 6-4-13 NMSA 1978;

          G. "released claims" means "Released Claims" as that term is defined in the Master Settlement Agreement;

          H. "releasing parties" means "Releasing Parties" as that term is defined in the Master Settlement Agreement;

          I. "tobacco product manufacturer" means an entity that, after the date of enactment of this act, directly (and not exclusively through any affiliate):

                (1) manufactures cigarettes anywhere that such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer (except where such importer is an original participating manufacturer (as that term is defined in the Master Settlement Agreement) that will be responsible for the payments under the Master Settlement Agreement with respect to such cigarettes as a result of the provisions of Subsection II(mm) of the Master Settlement Agreement and that pays the taxes specified in Subsection II(z) of the Master Settlement Agreement, and provided that the manufacturer of such cigarettes does not market or advertise such cigarettes in the United States);

                (2) is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States; or

                (3) becomes a successor of an entity described in Paragraph (1) or (2) of this subsection.

     The term "tobacco product manufacturer" shall not include an affiliate of a tobacco product manufacturer unless such affiliate itself falls within Paragraph (1), (2) or (3) of this subsection; and

          J. "units sold" means the number of individual cigarettes sold in the state by the applicable tobacco product manufacturer (whether directly or through a distributor, retailer or similar intermediary or intermediaries) during the year in question, as measured by [excise taxes collected, ounces of "roll-your-own" tobacco sold and sales of products bearing tax-exempt stamps on packs or "roll-your-own" tobacco containers. The secretary of taxation and revenue shall promulgate such rules as are necessary to ascertain the amount of state excise tax paid on the cigarettes of such tobacco product manufacturer for each year]:

                (1) the excise tax due from cigarettes sold bearing tax stamps pursuant to the Cigarette Tax Act;

                (2) ounces of "roll-your-own" tobacco sold on which the tobacco products tax is due pursuant to the Tobacco Products Tax Act; or

                (3) cigarettes sold bearing tax-exempt or tax-credit stamps pursuant to the Cigarette Tax Act."

     SECTION 2. A new Section 6-4-13.2 NMSA 1978 is enacted to read:

     "6-4-13.2. [NEW MATERIAL] RULES--AMOUNT OF STATE EXCISE TAX PAID ON CIGARETTES OF TOBACCO PRODUCT MANUFACTURER.--The secretary of taxation and revenue shall adopt rules regarding how to determine:

          A. the amount of state excise tax paid each year on the cigarettes of a tobacco product manufacturer and on the number of ounces of "roll-your-own" tobacco sold; and

          B. the number of cigarettes bearing tax-exempt or tax-credit stamps that are sold."

     SECTION 3. 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;

                (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;

                (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. "close of business" means that time when a business ceases to operate for the remainder of the day or 12:00 a.m., if the business is open and conducting business at 12:00 a.m.;

          C. "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, cigarette packages without the tax, tax-credit 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;

          D. "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;

          E. "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;

          F. "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;

          G. "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;

          H. "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;

          I. "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;

          J. "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;

          [K. "qualifying tribal cigarette tax" means an excise, privilege or similar tax at a minimum rate of:

                (1) three and seventy-five hundredths cents ($.0375) per cigarette if the cigarettes are packaged in lots of twenty or twenty-five;

                (2) seven and one-half cents ($.075) per cigarette if the cigarettes are packaged in lots of ten; or

                (3) fifteen cents ($.15) per cigarette if the cigarettes are packaged in lots of five;

          L.] K. "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;

          [M.] L. "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";

          [N.] M. "tax stamp" means a stamp that has a specific cigarette tax value pursuant to the Cigarette Tax Act;

          [O.] N. "tax-credit stamp" means a stamp that indicates the cigarette package bearing the stamp is to be or has been sold to a tribal member by a retailer located on a tribe's land; [of a tribe that has imposed a qualifying tribal cigarette tax;

          P.] O. "tax-exempt stamp" means a stamp that indicates a tax-exempt status pursuant to the Cigarette Tax Act;

          [Q.] P. "tribal member" means a person who is recognized by the governing body of an Indian tribe to be an enrolled member of that Indian tribe;

          [R.] Q. "tribe" means a federally recognized Indian nation, tribe or pueblo located wholly or partially in New Mexico, including:

                (1) a political subdivision, agency or department of a tribe;

                (2) an incorporated or unincorporated enterprise of a tribe, one or more tribes or a political subdivision of a tribe; or

                (3) a corporation considered to be an Indian or a tribe by the federal government or the state; and

          [S.] R. "tribe's land" means the reservation, pueblo grant or trust land of a tribe and property held by the United States in trust jointly for the nineteen New Mexico Indian pueblos pursuant to Public Law 95-232."

     SECTION 4. Section 7-12-4 NMSA 1978 (being Laws 1971, Chapter 77, Section 4, as amended) is amended to read:

     "7-12-4. EXEMPTION.--

          A. Exempted from the cigarette tax are sales of cigarettes:

                (1) to the United States or any agency or instrumentality thereof or the state of New Mexico or any political subdivision thereof;

                (2) to a tribe, or to a tribal member licensed by the governing body of a tribe for [use or] sale to a tribal member on that tribe's land [if the tribe has in place a qualifying tribal cigarette tax]; and

                 (3) sales that the state is prohibited from taxing by a provision of the United States constitution or the constitution of [the state of] New Mexico.

          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 5. Section 7-12-4.1 NMSA 1978 (being Laws 2010 (2nd S.S.), Chapter 5, Section 7) is amended to read:

     "7-12-4.1. CIGARETTE TAX--TRIBAL SALES--TAX-CREDIT STAMPS.--

          A. A distributor shall obtain from the department tax-credit stamps to affix to packages of cigarettes sold to a tribe or a tribal member licensed or otherwise approved by a tribe to sell cigarettes under the authority of the tribe on that tribe's land [provided that the tribe has certified to the department that the tribe has in effect a qualifying tribal cigarette tax] for resale to a tribal member.

          B. Cigarettes bearing a tax-credit stamp sold to a tribal member by a retailer of cigarettes licensed or otherwise approved to sell cigarettes by a tribe [or tribal member bearing a tax-credit stamp] shall be sold for use or sale on that tribe's land or on the land of another tribe or for use but not for resale in the state or at a location off any tribe's land."

     SECTION 6. 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, tax-credit 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 thirty days of receipt of those packages.

          C. A distributor shall apply stamps only to packages of cigarettes that 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.

          E. Packages shall contain cigarettes in lots of five, ten, twenty or twenty-five.

          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, a tax-credit stamp shall be affixed to each package of cigarettes [subject to a qualifying tribal cigarette tax] intended for sale to tribal members by a person licensed or otherwise authorized by a tribe to sell cigarettes on that tribe's land 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 and not intended for sale to a tribal member on the tribal member's tribe's land.

          G. A tax-exempt stamp [or tax-credit stamp] is not an excise tax stamp for purposes of determining units sold pursuant to Section 6-4-12 NMSA 1978. Cigarettes bearing a tax-credit stamp shall be included in the determination of units sold pursuant to Section 6-4-12 NMSA 1978.

          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 7. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2011.

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