HB139 By Representative McMillan RFD Ways and Means General Fund Rd 1 05-MAR-15

SYNOPSIS: Currently, the State of Alabama levies a tax on various tobacco products. This bill would increase the tax on cigarettes and other tobacco products, and adjust the discount allowed on tobacco stamp purchases.

This bill also provides for the distribution of the proceeds from the tax increase on tobacco products.

A BILL TO BE ENTITLED AN ACT

To amend Sections 40-25-2, 40-25-2.1, 40-25-5, and 40-25-23, Code of Alabama 1975, relating to the state tax on cigarettes and other tobacco products; to increase the state tax on cigarettes and other tobacco products; to adjust the discount allowed on tobacco stamp purchases; and to provide for the distribution of the proceeds from the increase in tax on cigarettes and other tobacco products.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. Sections 40-25-2, 40-25-2.1, 40-25-5, and 40-25-23, Code of Alabama 1975, are amended to read as follows:Section 2.

§40-25-2.

(a) In addition to all other taxes of every kind now imposed by law, every person, firm, corporation, club, or association, within the State of Alabama, who sells or stores or receives for the purpose of distribution to any person, firm, corporation, club, or association within the State of Alabama, cigars, cheroots, stogies, cigarettes, smoking tobacco, chewing tobacco, snuff, or any substitute therefor, either or all, shall pay to the State of Alabama for state purposes only a license or privilege tax which shall be measured by and graduated in accordance with the volume of sales of such person, firm, corporation, club, or association in Alabama. There is hereby levied license or privilege taxes on articles containing tobacco enumerated in this article in the following amounts:

(1) LITTLE CIGARS. Upon cigars of all descriptions, including filtered cigars, made of tobacco, or any substitute therefor, and weighing not more than three pounds per 1,000, $.04 $0.12 for each ten cigars, or fractional part thereof.

(2) FILTERED CIGARS. Upon filtered cigars that have a cellulose acetate or similar integrated filter, made of tobacco, or any substitute therefor, and weighing more than three pounds per 1,000, $0.015 $0.045 for each filtered cigar.

(3) CHEROOTS, STOGIES, CIGARS, ETC. Upon all other cigars of any descriptions made of tobacco, or any substitute therefor, $40.50 $121.50 per thousand cigars, or $0.0405 $0.1215 each.

(4) CIGARETTES. Upon all cigarettes made of tobacco, or any substitute therefor, 21.25 62.50 mills on each such cigarette.

(5) SMOKING TOBACCO. Upon all smoking tobacco, including granulated, plug cut, crimp cut, ready rubbed, and other kinds and forms of tobacco prepared in such manner as to be suitable for smoking in a pipe or cigarette, upon each package: Weighing not more than one and one-eighth ounces, tax $.04 $0.12; over one and one-eighth ounces, not exceeding two ounces, tax $.10 $0.30; over two ounces, not exceeding three ounces, tax $.16 $0.48; over three ounces, not exceeding four ounces, tax $.21 $0.63; $.06 $0.18 additional tax for each ounce or fractional part thereof over four ounces.

(6) CHEWING TOBACCO. Upon all chewing tobacco prepared in such manner as to be suitable for chewing only and not suitable for smoking as described and taxed in subdivision (9 5) of this subsection: $.015 $0.045 per ounce or fractional part thereof.

(7) SNUFF. Upon each can or package of snuff weighing not more than five-eighths ounces, one cent $0.03 tax; over five-eighths ounces and not exceeding one and five-eighths ounces, $.02 $0.06 tax; over one and five-eighths ounces and not exceeding two and one-half ounces, $.04 $0.12 tax; over two and one-half ounces and not exceeding five ounces (cans, packages, gullets), $.06 $0.18 tax; over three ounces and not exceeding five ounces (glasses, tumblers, bottles), seven cents $0.21 tax; over five ounces and not exceeding six ounces, $.08 $0.24 tax; weighing over six ounces, an additional $.12 $0.36 for each ounce or fractional part thereof.

(b) Whenever in this article reference is made to any manufactured tobacco products on which the tax is based on weight, the weight as shown by the manufacturer or the federal internal revenue stamp shall apply.

(c) When any articles or commodities subject to tax in this article are given as prizes on punch boards, shooting galleries, premiums, etc., the tax shall be based on the tax rates in subsection (a) of such articles.

(d) The tax herein levied shall be paid to the state through the use of stamps as herein provided. However, every wholesaler, distributor, jobber, semijobber, or retail dealer shall add the amount of the tax levied herein to the price of the tobacco or tobacco products sold, it being the purpose and intent of this provision that the tax levied is in fact a levy on the ultimate consumer or user with the wholesaler, distributor, jobber, semijobber, or retail dealer acting merely as an agent of the state for the collection and payment of the tax to the state. Therefore, notwithstanding any exemptions from taxes which any such seller may now or hereafter enjoy under the Constitution or laws of this or any other state, or of the United States, he or she shall collect the tax imposed hereunder from the purchaser or consumer, and the amount of the tax shall constitute a debt from the purchaser or consumer to the seller until paid. It shall be unlawful for any person, firm, corporation, association, or copartnership to fail or refuse to add to the sales price and collect from the purchaser the amount of the tax to be added to the sales price and collected from the purchaser hereunder. Stamps in denominations to the amount of the tax or in denominations specified pursuant to subsection (e) of this section shall be affixed to the box or other container from or in which tobacco products taxed by this section are normally sold at retail. The stamps shall be affixed in such a manner that their removal will require continued application of water, steam, or heat; and in case of cigars, cheroots, chewing tobacco and like manufactured tobacco products, where sales are made from the original container, the stamps shall be affixed to the box or container in such a way that the stamps shall be torn in two or mutilated when such containers or boxes are opened for the sale of the tobacco products. In the case of cigarettes, smoking tobacco, snuff, and like products sold at retail in packages, the required amount of stamps to cover the tax shall be affixed to each individual package or container. All taxable tobaccos herein enumerated, when offered for sale, either at wholesale or retail, without having stamps affixed in the manner set out by this article, or without payment of the tax by return by the wholesaler, jobber, semijobber, or registered retailer, shall be subject to confiscation, in the manner provided for contraband goods as set out in this article.

(e) The Commissioner of Revenue shall prepare and issue stamps in denominations for the amount of the tax imposed by this article provided that if the commissioner determines that it is not economical for the state to have a stamp prepared and issued for one or more particular types of packages of tobacco products, then the commissioner may by regulation prescribe the use of a stamp in a denomination other than for the amount of the tax imposed with the difference between the amount of tax actually imposed and the amount of tax denominated by the stamp paid with the use of a monthly report; or may require a monthly report without use of a stamp to report the amount of taxes due.

(f) The increases levied by this section shall be exclusive and shall be in lieu of any other or additional local taxes and/or license fees, county or municipal, imposed on the sale or use of cigarettes and/or other tobacco products. Notwithstanding the foregoing, an act of the Legislature or an ordinance or resolution by a taxing authority passed or enacted on or before May 18, 2004, imposing a local tax and/or license fee shall remain operative, but no additional local tax and/or license fee may thereafter be levied on the sale of cigarettes and/or other tobacco products.

(g) Local taxes and/or license fees, county or municipal, imposed on the sale or use of cigarettes shall be paid to the local government through the use of stamps affixed to the product as provided herein for the state tax. Provided, however, this requirement shall not be interpreted to require the Department of Revenue to prepare all stamps or to collect all local taxes. Local governments may contract with another entity to collect their local cigarette tax but all local taxes must be collected as provided herein.

§40-25-2.1.

(a) For the purposes of this section, the following terms shall have the respective meanings ascribed to them by this section:

(1) CIGAR WRAP. 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 to or purchased by a consumer.

(2) COMMISSIONER. The Commissioner of the Department of Revenue of the State of Alabama.

(3) DEPARTMENT. The Department of Revenue of the State of Alabama.

(4) NET TAX PROCEEDS. The entire proceeds from the tax herein levied less costs of collection, refunds, grants, and credits as may be authorized by law.

(5) PERSON. Individuals, firms, corporations, partnerships, companies, or other agencies, associations, incorporated or otherwise, singular or plural.

(6) STATE. The State of Alabama.

(7) WHOLESALE SALE. A sale of tangible personal property by wholesalers to licensed retail merchants, jobbers, dealers, or other wholesalers for resale and shall not include a sale by wholesalers to users or consumers, not for resale.

(b) There is hereby levied a tax upon all cigar wrappers manufactured using tobacco sold at wholesale in this state or imported into this state for use, consumption, or sale at retail. The tax shall be levied upon each package in the following amounts: Weighing not more than one and one-eighth ounces, four twelve cents ($.04 $0.12); over one and one-eighth ounces, not exceeding two ounces, ten thirty cents ($.10 $0.30); over two ounces, not exceeding three ounces, sixteen forty-eight cents ($.16 $0.48); over three ounces, not exceeding four ounces, twenty-one sixty-three cents ($.21 $0.63); and six eighteen cents ($.06 $0.18) additional tax for each ounce or fractional part thereof over four ounces.

(c) Notwithstanding subsection (b), nothing in this section shall be construed to apply to a cigar manufacturer using wrappers made from tobacco applying those wrappers on a finished cigar for sale at retail.

(d) Before any person engages in the business of selling any of the items on which the tax levied by this section has not been paid to the department, the person shall make application to the department upon forms prepared by the department for a license. The license shall be a condition precedent to engaging or continuing in the business of selling the items taxed under this chapter.

(e) On or before the 20th day of each month, each person on whom the tax levied by this chapter is imposed shall render to the department on forms prescribed by the department a true and correct statement showing the amounts utilized in the measurement of the tax and all other information as the department may require and shall pay to the department the amount of tax shown due.

(f) Any person subject to this section who shall fail to make any report required of them by the department or shall fail to keep any of the records required herein shall be guilty of a Class B misdemeanor. Each month of such failure shall constitute a separate offense.

(g) The tax imposed by this section shall be in addition to all other licenses and taxes levied by law as a condition precedent to engaging in any business taxable hereunder.

(h) Any taxpayer who shall violate this section may be restrained from continuing in business, and the proper prosecution shall be instituted in the name of the State of Alabama by its Attorney General or by the counsel of the department until such person shall have complied with this chapter.

(i) The department shall enforce this section and may prescribe, adopt, promulgate, and enforce rules relating to any matter or thing pertaining to the administration and enforcement of this section and the collection of taxes, penalties, and interest imposed by this section.

(j) The department for good cause may grant up to a 30-day extension for the time for making any return required under this section.

(k) All revenue collected under the provisions of this section shall be paid to the department and shall be distributed as is provided for the distribution of funds received from tobacco products other than cigarettes in Section 40-25-23(3).

(l) The amount of money as shall be appropriated for each fiscal year by the Legislature to the department with which to pay the salaries and the cost of operation and management of the department shall be deducted, as a first charge thereon, from the taxes collected under the provisions of this section; provided, however, that the expenditure of such sum so appropriated shall be budgeted and allotted pursuant to Sections 41-4-80 to 41-4-96, inclusive, and limited to the amount appropriated to defray the expenses of operating the department for each fiscal year.

§40-25-5.

The Department of Revenue is hereby authorized and directed to have prepared and distributed stamps suitable for denoting the tax on all articles enumerated herein. Any person, firm, corporation, or association of persons, other than the Department of Revenue, who sells tobacco tax stamps not affixed to tobacco sold and delivered by them, whether the said stamps be genuine or counterfeit, shall be guilty of a felony and punishable as set out in Section 40-25-6. When wholesalers or jobbers have qualified as such with the Department of Revenue, as provided in Section 40-25-16, and desire to purchase stamps as prescribed herein for use on taxable tobaccos sold and delivered by them, the Department of Revenue shall allow on such sales of tobacco tax stamps a discount of seven and one-half two and seven tenths percent (2.7%) on the entire amount of the sale. Where wholesalers or jobbers are entitled to purchase stamps at a discount as herein provided, instead of the Department of Revenue selling such stamps to such jobbers or wholesalers for cash, it may consign such stamps, if and when such wholesaler or jobber shall give to the Department of Revenue a good and sufficient bond executed by some surety company authorized to do business in this state, conditioned to secure the payment for the stamps so consigned when and as they are used on manufactured tobacco products by such wholesaler or jobber. Every wholesaler or jobber purchasing stamps on consignment as described herein, shall be required to make a full and complete accounting and remittance on or before the twentieth of each month for all stamps used on taxable tobaccos during the preceding month. Every wholesaler or jobber refusing or failing to comply with this section shall forfeit the commission or discount on stamps used which he failed or refused to account or remit for in the time allowed, and in addition shall be charged interest on such delinquent amount for each day delinquent at the rate of eight percent per annum.

§40-25-23.

All revenues collected under the provisions of this article, except as otherwise provided, shall be paid to the Department of Revenue by check or draft made payable to the Treasurer of Alabama, and shall be distributed in the following manner:

(1) All of the revenue derived from the tax levied upon cigarettes by Sections 40-25-2 and 40-25-41 shall be deposited in the State Treasury and disbursed 66 percent to the General Fund and the remaining balance of 34 percent disbursed as follows: 38.82 percent of such revenue shall be divided as follows:

a. Six and six one-hundredths percent to the credit of the State Public Welfare Trust Fund, which is hereby appropriated for general welfare purposes. In this section, "general welfare purposes" means:

1. The administration of public assistance as set out in Sections 38-2-5 and 38-4-1;

2. Services, including supplementation and supplementary services under the federal Social Security Act, to or on behalf of persons to whom such public assistance may be given under Section 38-4-1;

3. Services to and on behalf of dependent, neglected, or delinquent children; and

4. Investigative and referral services to and on behalf of needy persons.

b. Nine and nine one-hundredths percent shall be set apart and used for the following purposes only and in the following order:

1. So much thereof as may be necessary for such purpose is hereby appropriated and shall be used by the State Treasurer to pay at their respective maturities the principal and interest that will mature during the then current fiscal year on all bonds at the time outstanding that may have been issued by the State Industrial Development Authority under the provisions of the following acts:

(i) Acts 1967, No. 231;

(ii) Acts 1971, No. 1420;

(iii) Acts 1973, No. 1039;

(iv) Acts 1975, No. 1217;

(v) Acts 1978, 2nd Ex. Sess., No. 99;

(vi) Acts 1981, No. 81-843;

(vii) Acts 1983, No. 83-925; and

(viii) Acts 1987, No. 87-550.

2. The balance thereafter remaining during each fiscal year shall be paid into a special fund in the State Treasury to be designated the "General and Mental Health Fund," and is hereby appropriated and shall be distributed as follows:

(i) Thirty-six percent of the said balance shall be expended by the State Health Officer, with the approval of the state Board of Health, for salaries, other expenses and equipment purchases, incident to general health work;

(ii) Fifty-eight percent of the said balance shall be paid to the Department of Mental Health created in Chapter 50 of Subtitle 2 of Title 22, to be expended by the said department for such purposes as it may designate for the provision of mental health services; and

(iii) Six percent of said balance shall be paid to the Alabama Mental Health Board to be expended by said board for such purposes as it may designate for the provision of services to people with an intellectual disability.

c. Twelve and twelve one-hundredths percent shall be set apart and used for the following purposes only and in the following order:

1. So much thereof as may be necessary for such purpose is hereby appropriated to the purpose of acquiring and constructing mental health facilities in the state, and to that end shall be used by the State Treasurer to pay, at their respective maturities, the principal and interest that will mature during the then current fiscal year on whichever of the following may be issued:

(i) Any bonds of the state that may be issued for acquisition and construction of mental health facilities under Amendment 266 of the Constitution of Alabama; or

(ii) Any bonds that may be issued by the Alabama Mental Health Finance Authority under the provisions of Acts 1988, Act No. 88-475.

2. The balance thereafter remaining during each fiscal year shall be paid into a special fund in the State Treasury, designated the "General and Mental Health Fund," and is hereby appropriated and shall be distributed as follows:

(i) Thirty percent of said balance shall be expended by the State Health Officer, with the approval of the state Board of Health, for salaries, other expenses, and equipment purchases incident to general health work; and

(ii) Seventy percent of the said balance shall be paid to the Department of Mental Health created in Chapter 50 of Subtitle 2 of Title 22, and shall be used by the said department for mental health purposes in the state.

d. Six and six one-hundredths percent shall be set apart and used for the following purposes only and in the following order:

1. So much thereof as may be necessary for such purposes is hereby appropriated and shall be used by the State Treasurer to pay, at their respective maturities, the principal and interest that will mature during the then current fiscal year on all bonds that may be issued by the State Parks Development Authority under the provisions of Acts 1967, No. 272, which provided for the creation of said authority and also provided for the submission of a constitutional amendment to authorize the issuance of general obligation bonds by said authority.

2. The balance thereafter remaining during each fiscal year shall be deposited into a special fund in the State Treasury to be designated the "State Parks Fund" and is hereby appropriated and shall be distributed as follows: Said fund may be expended by the State Director of Conservation at his discretion and with the approval of the Governor for salaries, other expenses, land acquisitions, equipment purchases, capital additions or improvements, or other lawful expenses relating to the state division of parks, monuments, and historical sites.

e. Sixty-six and sixty-seven one-hundredths percent to the credit of the General Fund.

(2) The remaining 61.18 percent of the revenue derived from the tax levied on cigarettes by Sections 40-25-2 and 40-25-41 shall be deposited into the State Treasury and allocated as follows:

a. Up to $2 million received annually shall be allocated to the various counties of the state levying a cigarette tax to offset the administrative expenses of obtaining local stamps to affix to cigarettes sold in their jurisdiction for the purpose of collecting their local cigarette tax and to provide a discount to wholesalers and jobbers for affixing such stamps. These funds shall be distributed by the Comptroller pro rata based on the actual administrative expenses reported to the Comptroller by the counties at the conclusion of each quarter of the fiscal year. The Comptroller shall insure that such funds are distributed as soon as possible following the receipt of such reports. Failure of any county to submit such a report shall not prohibit the Comptroller from distributing funds to the remaining counties.

b. Remaining revenues to the General Fund to be used for Medicaid services.

(3) All of the revenue derived from the tax levied by Sections 40-25-2 and 40-25-41 upon tobacco products other than cigarettes shall be deposited in the State Treasury to the credit of the State General Fund.

Section 3. All laws or parts of laws which conflict with this act are repealed.