SENATE BILL 516
51st legislature - STATE OF NEW MEXICO - first session, 2013
INTRODUCED BY
Linda M. Lopez
AN ACT
RELATING TO TOBACCO SALES; REQUIRING THAT CIGARETTE PACKS STAMPED WITH TAX-CREDIT STAMPS ARE "UNITS SOLD" FOR THE PURPOSE OF DETERMINING ESCROW PAYMENTS DUE PURSUANT TO THE MASTER SETTLEMENT AGREEMENT; AMENDING THE CIGARETTE TAX ACT; INCREASING CIVIL AND CRIMINAL PENALTIES FOR VIOLATIONS OF THE CIGARETTE TAX ACT AND THE TOBACCO ESCROW FUND ACT.
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 6-4-13.1 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 chartered 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] owed, ounces of "roll-your-own" tobacco sold and sales of products bearing tax-exempt or tax-credit 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."
SECTION 2. Section 6-4-22 NMSA 1978 (being Laws 2003, Chapter 114, Section 9, as amended) is amended to read:
"6-4-22. PENALTIES AND OTHER REMEDIES.--
A. It is unlawful for a person to:
(1) affix a tax stamp, a tax-exempt stamp or a tax-credit stamp or otherwise pay the tax due on a package or other container of cigarettes of a tobacco product manufacturer or a brand family that is not included in the directory; or
(2) sell, offer for sale or possess for any purpose other than personal use cigarettes of a tobacco product manufacturer or a brand family that is not included in the directory.
B. The secretary may revoke or suspend the registration or license of a person licensed or registered pursuant to Section 7-12-9.1 or 7-12A-7 NMSA 1978 that violates Subsection A of this section.
C. Each stamp affixed, payment of tobacco tax, offer to sell, possession for any purpose other than personal use or sale of cigarettes in violation of Subsection A of this section constitutes a separate violation. For each violation, the secretary may impose a civil penalty in an amount not to exceed the greater of [five thousand dollars ($5,000)] ten thousand dollars ($10,000) or [five hundred] one thousand percent of the retail value of the cigarettes sold, offered for sale or possessed for any purpose other than personal use.
D. Cigarettes that have been sold, offered for sale or possessed for any purpose other than personal use in this state in violation of Subsection A of this section are contraband, are subject to seizure and forfeiture and shall be destroyed.
E. It is unlawful for a person to sell, distribute, acquire, hold, own, possess, transport, import or cause to be imported cigarettes that the person knows or should know are intended for distribution or sale in violation of Subsection A of this section. A person who violates this subsection is guilty of a [misdemeanor] fourth degree felony and shall be sentenced in accordance with Section [31-19-1] 31-18-15 NMSA 1978.
F. A tobacco product manufacturer, stamping agent or importer of cigarettes, or any officer, employee or agent of any such entity, who knowingly makes any materially false statement in any record required by the Tobacco Escrow Fund Act or Section 6-4-13 NMSA 1978 to be filed with the attorney general is guilty of a [fourth] third degree felony and upon conviction shall be sentenced pursuant to the provisions of Section 31-18-15 NMSA 1978.
G. The attorney general or the department may seek an injunction to compel compliance with or to restrain a threatened or actual violation of Subsection A of this section. In any action brought pursuant to this subsection, the state shall be entitled to recover the costs of investigation, costs of the action and reasonable attorney fees, if the state prevails.
H. The attorney general may issue a civil investigative demand based on reasonable belief that any person may be in possession, custody or control of an original or copy of any book, record, report, memorandum, paper, communication, tabulation, map, chart, photograph, mechanical transcription or other document or recording relevant to the subject matter of an investigation of a probable violation of the Tobacco Escrow Fund Act. The attorney general may, prior to the institution of a civil proceeding, execute in writing and cause to be served upon the person a civil investigative demand requiring the person to produce documentary material and permit the inspection and copying of the material.
I. For the purposes of this section, fewer than one thousand cigarettes shall be presumed to be for personal use."
SECTION 3. 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 tax stamp, a tax-exempt stamp or a tax-credit 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 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.
[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.
H.] G. 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 4. 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 packages of cigarettes into New Mexico other than to a distributor shall first file a notice of the shipment with the department. The requirements of this subsection apply to a person that uses the services of a common or contract carrier to deliver unstamped packages of cigarettes to other than a licensed distributor in New Mexico.
B. A person that transports unstamped packages of cigarettes 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:
(1) the name and address of the consignor or seller;
(2) the name and address of the consignee or purchaser; and
(3) the quantity [of each], manufacturer and brand of all cigarettes transported.
C. The provisions of Subsections A and B of this section shall not apply to shipments using a common or contract carrier transporting cigarettes through New Mexico for delivery to [another] a location outside of New Mexico pursuant to a proper bill of lading or freight bill that states the quantity, source and destination of the cigarettes.
D. A common or contract carrier transporting cigarettes to a distributor pursuant to a proper bill of lading or freight bill that states the quantity of cigarettes, the name and address of the consignor or seller of the cigarettes and the name and address of the consignee or purchaser of the cigarettes shall not be in violation of the provisions of Subsection A of this section.
[D.] E. The department may, by regulation, require and prescribe the contents of reports to be filed with the department by persons transporting unstamped packages of cigarettes in New Mexico."
SECTION 5. Section 7-12-13.1 NMSA 1978 (being Laws 2006, Chapter 91, Section 16) is amended to read:
"7-12-13.1. CIVIL PENALTIES.--
A. Whoever [knowingly] fails, neglects or refuses to comply with the provisions of the Cigarette Tax Act shall be liable for, in addition to any other penalty provided in that act:
(1) for a first offense, a penalty of up to [one thousand dollars ($1,000)] two thousand dollars ($2,000);
(2) for a second offense, a penalty of not less than [one thousand five hundred dollars ($1,500)] three thousand dollars ($3,000) and no more than [two thousand five hundred dollars ($2,500)] five thousand dollars ($5,000); and
(3) for a third or subsequent offense, a penalty of not less than [five thousand dollars ($5,000)] ten thousand dollars ($10,000).
B. Whoever fails to pay a tax imposed pursuant to the Cigarette Tax Act at the time the tax is 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. Contraband cigarettes in New Mexico and the equipment used to manufacture, package or stamp them are subject to seizure, forfeiture and destruction by the department, its revenue officers or its agents or by other state or local peace officers.
D. Counterfeit stamps for use in New Mexico in the possession of any person and the equipment used to produce them are subject to seizure by the department, its revenue officers or its agents or by other state or local peace officers."
SECTION 6. Section 7-12-13.2 NMSA 1978 (being Laws 2006, Chapter 91, Section 17, as amended) 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] fourth degree felony and shall be sentenced in accordance with the provisions of Section [31-19-1] 31-18-15 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] third 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] fourth degree felony and when convicted shall be sentenced pursuant to Section [31-19-1] 31-18-15 NMSA 1978; and
(2) for the second or subsequent offense, guilty of a [fourth] third 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] third 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] fourth degree felony and is punishable in accordance with the provisions of Section [31-19-1] 31-18-15 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] third degree felony and is punishable by a fine not to exceed [fifty thousand dollars ($50,000)] one hundred thousand dollars ($100,000) 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."
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