| (a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Bonded agent--A person in Texas who is a third-party
agent of a manufacturer located outside of Texas and who receives
tobacco products in interstate commerce and stores the tobacco products
for distribution or delivery to distributors under orders from the
manufacturer.
(2) Cigar--A roll of fermented tobacco that is wrapped
in tobacco and that the main stream of smoke from which produces an
alkaline reaction to litmus paper.
(3) Commercial business location--The entire premises
occupied by a permit applicant or a person required to hold a permit
under Tax Code, Chapter 155 (Cigar and Tobacco Product Tax). A commercial
business location does not include a residence or a unit in a public
storage facility.
(4) Common carrier--A motor carrier registered under
Transportation Code, Chapter 643 (Motor Carrier Registration), or
a motor carrier operating under a certificate issued by the Interstate
Commerce Commission or its successor agency.
(5) Distributor--A person who:
(A) receives untaxed tobacco products from a manufacturer
for the purpose of making a first sale in Texas;
(B) brings or causes to be brought into Texas untaxed
tobacco products for sale, use, or consumption;
(C) manufacturers or produces tobacco products; or
(D) is an importer.
(6) Engage in business--A person engaging either directly
or through a representative, in any of the following activities:
(A) selling tobacco products in or into this state;
(B) using a warehouse or another location to store
tobacco products; or
(C) otherwise conducting through a physical presence
tobacco product-related business in this state.
(7) Export warehouse--A person in this state who receives
untaxed tobacco products from manufacturers and stores the tobacco
products for the purpose of making sales to authorized persons for
resale, use, or consumption outside the United States.
(8) Factory list price--The published manufacturer
gross cost to the distributor. The term is synonymous with manufacturer's
list price.
(9) First sale--Except as otherwise provided by this
section, the term means the first transfer of possession in connection
with a purchase, sale, or any exchange for value of tobacco products
in or into this state, which includes:
(A) the sale of tobacco products by a distributor in
or outside this state to a distributor, wholesaler, or retailer in
this state; and a manufacturer in this state who transfers the tobacco
products in this state; and does not include:
(i) the sale of tobacco products by a manufacturer
outside this state to a distributor in this state; or
(ii) the transfer of tobacco products from a manufacturer
outside this state to a bonded agent in this state;
(B) the first use or consumption of tobacco products
in this state; or
(C) the loss of tobacco products in this state whether
through negligence, theft, or other loss.
(10) Importer--A person who ships, transports, or imports
into Texas tobacco products manufactured or produced outside the United
States for the purpose of making a first sale in this state.
(11) Manufacturer--A person who manufactures, fabricates,
or assembles tobacco products, or causes or arranges for the manufacture,
fabrication, or assembly of tobacco products, for sale or distribution.
(12) Manufacturer's representative--A person who is
employed by a manufacturer to sell or distribute the manufacturer's
tobacco products.
(13) Manufacturer's listed net weight--For the purposes
of calculating and reporting the state excise tax due on tobacco products
other than cigars, the taxable net weight for a tobacco product is
the weight of the finished product as shown or listed by the product
manufacturer on the product can, package, shipping container, or the
report required by Tax Code, §155.103(b) (Manufacturer's Records
and Reports).
(14) Permit holder--A bonded agent, distributor, importer,
export warehouse, manufacturer, wholesaler, or retailer who obtains
a permit under Tax Code, §155.041 (Permits).
(15) Place of business--
(A) a commercial business location where tobacco products
are sold;
(B) a commercial business location where tobacco products
are kept for sale or consumption or otherwise stored and may not be
a residence or a unit in a public storage facility;
(C) a vehicle from which tobacco products are sold;
or
(D) a vending machine from which tobacco products are
sold.
(16) Raw tobacco--Any part of the tobacco plant, including
the tobacco leaf or stem, that is harvested from the ground and is
not a tobacco product as the term is defined in this section.
(17) Retailer--A person who engages in the business
of selling tobacco products to consumers and includes the owner of
a vending machine.
(18) Tobacco product--A tobacco product is:
(A) a cigar;
(B) smoking tobacco, including granulated, plug-cut,
crimp-cut, ready-rubbed, and any form of tobacco substitute for smoking
in a pipe or as a cigarette;
(C) chewing tobacco, including, Cavendish, Twist, plug,
scrap, and any kind of tobacco suitable for chewing;
(D) snuff or other preparations of pulverized tobacco;
or
(E) an article or product that is made of tobacco or
a tobacco substitute and that is not a cigarette or an e-cigarette
as defined by Health and Safety Code, §161.081 (Definitions).
(19) Trade discount, special discount, or deals--Includes
promotional incentive discounts, quantity purchase incentive discounts,
and timely payment or prepayment discounts.
(20) Weight of a cigar--The combined weight of tobacco
and nontobacco ingredients that make up the total product in the form
available for sale to the consumer, excluding any carton, box, label,
or other packaging materials.
(21) Wholesaler--A person, including a manufacturer's
representative, who sells or distributes tobacco products in this
state for resale but who is not a distributor.
(b) Imposition of tax. A tax is imposed and becomes
due and payable when a permit holder receives cigars or tobacco products
for the purpose of making a first sale in this state.
(1) Tax Rates.
(A) the tax on cigars is calculated at:
(i) $.01 per 10 or fraction of 10 on cigars that weigh
three pounds or less per thousand;
(ii) $7.50 per thousand on cigars that weigh more than
three pounds per thousand and that are sold at factory list price,
exclusive of any trade discount, special discount, or deal, for 3.3
cents or less each;
(iii) $11 per thousand on cigars that weigh more than
three pounds per thousand and that are sold at factory list price,
exclusive of any trade discount, special discount, or deal, for more
than 3.3 cents each, and that contain no substantial amount of nontobacco
ingredients; and
(iv) $15 per thousand on cigars that weigh more than
three pounds per thousand and that are sold at factory list price,
exclusive of any trade discount, special discount, or deal, for more
than 3.3 cents each, and that contain a substantial amount of nontobacco
ingredients.
(B) The tax for tobacco products, other than cigars,
is based on the manufacturer's listed net weight for an individual
product's can or package and a rate for each ounce and proportionate
rate on all fractional parts of an ounce of weight for that product.
The tax imposed on a can or package of a tobacco product that weighs
less than 1.2 ounces is equal to the amount of the tax imposed on
a can or package that weighs 1.2 ounces. The rates imposed for state
fiscal years 2010, 2011, 2012, 2013, 2014, and thereafter are set
forth in this subparagraph. An expanded chart showing rates for cans
or packages greater than 1.2 ounces is available at comptroller.texas.gov.
(i) The rate for the state Fiscal Year 2010 (September
1, 2009 through August 31, 2010), is $1.10 per ounce plus the proportionate
rate on all fractional parts of an ounce.
(ii) The rate for the state Fiscal Year 2011 (September
1, 2010 through August 31, 2011), is $1.13 per ounce plus the proportionate
rate on all fractional parts of an ounce.
(iii) The rate for the state Fiscal Year 2012 (September
1, 2011 through August 31, 2012), is $1.16 per ounce plus the proportionate
rate on all fractional parts of an ounce.
(iv) The rate for the state Fiscal Year 2013 (September
1, 2012 through August 31, 2013), is $1.19 per ounce plus the proportionate
rate on all fractional parts of an ounce.
(v) The rate for state Fiscal Year 2014 (which begins
September 1, 2013) and for each fiscal year thereafter, is $1.22 per
ounce plus the proportionate rate on all fractional parts of an ounce.
(C) The tax imposed on a unit that contains multiple
individual cans or packages is the sum of the taxes imposed under
paragraph (1)(B) of this subsection, on each individual can or package
intended for sale or distribution at retail. For example, on November
1, 2009 (Fiscal Year 2010) a distributor receives from a manufacturer
for the purpose of making a first sale in Texas a unit of snuff that
consists of 10 individual cans. Each can weighs 1.3 ounces. The effective
tax rate for each can is $1.43. The total tax due for the unit is
calculated by multiplying the effective tax rate on each individual
can ($1.43) by the total number of individual cans in the unit (10
cans), for a total tax due of $14.30.
(2) Free goods shall be taxed at the prevailing factory
list price, except that each tobacco product other than cigars shall
be taxed according to the manufacturer's listed net weight for the
product and the applicable fiscal year rate for each ounce and proportionate
rate for all fractional parts of an ounce according to paragraph (1)(B)
of this subsection.
(3) A person who receives or possesses tobacco products
on which a tax of more than $50 would be due is presumed to receive
or possess the tobacco products for the purpose of making a first
sale in this state. This presumption does not apply to common carriers
or to manufacturers.
(4) A tax is imposed on manufacturers, who manufacture
tobacco products in this state, at the time the tobacco products are
first transferred in connection with a purchase, sale, or any exchange
for value in intrastate commerce.
(5) The delivery of tobacco products by a principal
to its bonded agent in this state is not a first sale.
(6) If a manufacturer sells tobacco products to a purchaser
in Texas and ships the products at the purchaser's request to a third
party distributor in Texas, then the purchaser has received the tobacco
products for first sale in Texas.
(7) The person in possession of cigars or tobacco products
has the burden to prove payment of the tax.
(c) Sales and purchase requirements for permit holders.
Except for retail sales to consumers, cigarettes may only be sold
or distributed by and between permit holders as provided by this section.
A permit holder may engage in the following business activities:
(1) A manufacturer outside this state who is not a
permitted distributor may sell tobacco products only to a permitted
distributor.
(2) A permitted distributor may sell tobacco products
only to a permitted distributor, wholesaler, or retailer.
(3) A permitted importer may sell tobacco products
only to a permitted distributor, wholesaler, or retailer.
(4) A permitted wholesaler may sell tobacco products
only to a permitted distributor, wholesaler, or retailer.
(5) A permitted retailer may sell tobacco products
only to the consumer and may purchase tobacco products only from a
permitted distributor or wholesaler.
(6) A permitted export warehouse may sell tobacco products
only to persons authorized to sell or consume untaxed tobacco products
outside the United States.
(7) A manufacturer's representative may sell tobacco
products only to a permitted distributor, wholesaler, or retailer.
(d) Liability of a permitted distributor. A permitted
distributor who makes a first sale to a permitted distributor in this
state is liable for and shall pay the tax.
(e) Permits required. To engage in business as a distributor,
importer, manufacturer, export warehouse, wholesaler, bonded agent,
or retailer a person must apply for and receive the applicable permit
from the comptroller. The permits are not transferable.
(1) A person who engages in the business of a bonded
agent, distributor, importer, manufacturer, export warehouse, wholesaler,
or retailer without a valid permit is subject to a penalty of not
more than $2,000 for each violation. Each day on which a violation
occurs is a separate offense. A new application is required if a change
in ownership occurs (sole ownership to partnership, sole ownership
to corporation, partnership to limited liability company, etc.). Each
legal entity must apply for its own permit(s). All permits issued
to a legal entity will have the same taxpayer number.
Cont'd... |
