| (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 this state who is a third-party
agent of a manufacturer outside this state and who receives cigarettes
in interstate commerce and stores the cigarettes for distribution
or delivery to distributors under orders from the manufacturer.
(2) Cigar--A roll of fermented tobacco that is wrapped
in tobacco and the main stream of smoke from which produces an alkaline
reaction to litmus paper.
(3) Cigarette--A roll for smoking:
(A) that is made of tobacco or tobacco mixed with another
ingredient and wrapped or covered with a material other than tobacco;
and
(B) that is not a cigar.
(4) Distributor--A person who:
(A) is authorized to purchase for the purpose of making
a first sale in this state, cigarettes in unstamped packages from
manufacturers who distribute cigarettes in this state and to stamp
cigarette packages;
(B) ships, transports, imports into this state, acquires,
or possesses cigarettes and makes a first sale of the cigarettes in
this state;
(C) manufactures or produces cigarettes; or
(D) is an importer.
(5) Export warehouse--A person in this state who receives
cigarettes in unstamped packages from manufacturers and stores the
cigarettes for the purpose of making sales to authorized persons for
resale, use, or consumption outside the United States.
(6) First sale--Except as otherwise provided in this
section;
(A) the first transfer of possession in connection
with a purchase, sale, or any exchange for value of cigarettes in
or into this state, which:
(i) includes the sale of cigarettes by:
(I) a distributor in or outside this state to a distributor,
wholesaler, or retailer in this state; and
(II) a manufacturer in this state who transfers the
cigarettes in this state; and
(ii) does not include;
(I) the sale of cigarettes by a manufacturer outside
this state to a distributor in this state;
(II) the transfer of cigarettes from a manufacturer
outside this state to a bonded agent in this state;
(III) the sale of cigarettes by a manufacturer, bonded
agent, distributor, or importer to an interstate warehouse in this
state; or
(IV) the transfer of cigarettes by an interstate warehouse
in an interstate warehouse transaction;
(B) the first use or consumption of cigarettes in this
state; or
(C) the loss of cigarettes in this state whether through
negligence, theft, or other unaccountable loss.
(7) Individual package of cigarettes--A package that
contains at least 20 cigarettes.
(8) Interstate warehouse--A person in this state who
receives unstamped cigarettes from a manufacturer, bonded agent, distributor,
or importer and stores the cigarettes exclusively for an interstate
warehouse transaction.
(9) Interstate warehouse transaction--The sale or delivery
of cigarettes from an interstate warehouse to a person located in
another state who is licensed or permitted by the other state to affix
that state's cigarette stamps or otherwise pay the state's excise
tax on cigarettes as required.
(10) Manufacturer--A person who manufactures, fabricates,
or assembles cigarettes, or causes or arranges for the manufacture,
fabrication, or assembly of cigarettes, for sale or distribution.
(11) Retailer--A person who engages in the business
of selling cigarettes to consumers and includes the owner of a cigarette
vending machine.
(12) Stamp--Includes only a stamp that:
(A) is printed, manufactured, or made by authority
of the comptroller;
(B) shows payment of the tax imposed by this chapter;
(C) is consecutively numbered and uniquely identifiable
as a Texas tax stamp; and
(D) is not damaged beyond recognition as a valid Texas
tax stamp.
(13) Wholesaler--A person, including a manufacturer's
representative, who sells or distributes cigarettes in this state
for resale but who is not a distributor or interstate warehouse.
(b) Imposition of tax.
(1) A tax is imposed on a person who uses or disposes
of cigarettes in this state. The tax rate is $70.50 per thousand on
cigarettes weighing three pounds or less per thousand plus $2.10 per
thousand on cigarettes weighing more than three pounds per thousand.
The tax becomes due and payable when a person receives cigarettes
to make a first sale. A person who pays the tax shall securely affix
a stamp to each individual package of cigarettes to show payment of
the tax. The ultimate consumer or user of cigarettes in this state
bears the impact of the tax; and, if another person pays the tax,
the amount of the tax is added to the price to the ultimate consumer
or user. Absence of a stamp on an individual package of cigarettes
is notice that the tax has not been paid.
(2) Cigarettes are exempt from the imposition of tax
and the stamping requirements described in this section if the cigarettes
are:
(A) contained in a package labeled with "Experimental
Use Only," "Reference Cigarettes," or other similar
wording indicating that the manufacturer intends for the product to
be used exclusively for experimental purposes in compliance with Experimental
Purposes, 27 C.F.R. §40.232 (2002);
(B) sold directly by a manufacturer to a research facility
in this state, including:
(i) a laboratory, hospital, medical center, college,
or university; or
(ii) a facility designated as a Tobacco Center of Regulatory
Science by the National Institutes of Health;
(C) used by the research facility exclusively for experimental
purposes; and
(D) not resold by the research facility.
(c) 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.
(d) Cigarette tax stamp meters. Cigarette distributors
cannot use stamp metering machines as evidence of payment of the cigarette
tax.
(e) Cigarette tax stamp credits.
(1) Allowance of credit for cigarette tax stamps. The
comptroller may authorize credit for:
(A) stamps that are affixed to cigarette packages that
have been damaged or are unfit for sale and have been returned to
the manufacturer in accordance with Tax Code, §154.306 (Exchange
of Stamps);
(B) stamps that have been destroyed by vandalism, fire,
flood, or other natural disasters. The distributor must present evidence
that such stamps were purchased by the distributor and were subsequently
destroyed by such natural disaster;
(C) stamps that have been erroneously affixed to cigarette
carton flaps rather than the cigarette packages. The distributor must
submit the stamped carton flaps to the comptroller in order to obtain
credit. The comptroller will issue an authorization for refund of
the tax with disallowance of the stamping discount;
(D) stamps used to restamp cigarette packages provided
that the original tax stamps were of an illegible quality and the
restamping is required by the comptroller's office. There is no stamping
allowance for restamped cigarettes; or
(E) stamps that have been torn or otherwise damaged
by a stamping machine. The distributor must submit the damaged stamps
to the comptroller in order to obtain credit. The comptroller will
notify the distributor of the amount of stamp credit authorized.
(2) Disallowance of credit for cigarette tax stamps.
The comptroller will not authorize credit for stamps lost due to theft,
negligence, or any unaccountable loss or for stamps that have been
affixed two or more times to the same package of cigarettes resulting
in double stamping.
(f) Cigarette tax stamp payments. All persons who purchase
cigarette tax stamps from the comptroller shall transfer payments
by electronic funds transfer.
(g) Evidence of return of cigarettes unfit for use.
A distributor who requests replacement of cigarette tax stamps affixed
to cigarettes that have been returned to the manufacturer must submit
the following documentation to the comptroller:
(1) a credit memorandum from the manufacturer to whom
the cigarettes were returned, verifying the number of cigarettes returned
for credit;
(2) an affidavit from the manufacturer confirming that
the tax stamps affixed to the cigarettes listed in the memorandum
have been destroyed and listing the number, denomination, and the
value of such stamps; and
Cont'd... |
