THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY PRIME SPONSOR WITHDREW, FABRIZIO, GEORGE, GRUCELA, KILLION, SIPTROTH, LENTZ AND EACHUS, FEBRUARY 10, 2009

AS AMENDED, COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, JUNE 9, 2010   

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," further providing for exclusions from sales tax, 

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for discount and for exemption certificates, for incidence

and rate of tax, for floor tax and for commissions on sales;

providing for the taxation of tobacco products; imposing a

tax on the extraction of natural gas; providing for natural

gas severance registration certificate, for duties of the

Department of Revenue, for tax assessments and tax liens;

imposing penalties; providing for service of process, for

rulemaking, for cooperation with other governments and for

bonds; and making an appropriation.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 204(10) of the act of March 4, 1971 (P.L.

6, No.2), known as the Tax Reform Code of 1971, amended April

23, 1998 (P.L.239, No.45), is amended to read:

Section 204.  Exclusions from Tax.--The tax imposed by

section 202 shall not be imposed upon any of the following:

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(10)  The sale at retail to or use by (i) any charitable

organization, volunteer firemen's organization, volunteer

firefighters' relief association as defined in section 2 of the

act of June 11, 1968 (P.L.149, No.84), known as the "Volunteer

Firefighters' Relief Association Act," or nonprofit educational

institution, or (ii) a religious organization for religious

purposes of tangible personal property or services other than

pursuant to a construction contract: Provided, however, That the

exclusion of this clause shall not apply with respect to any

tangible personal property or services used in any unrelated

trade or business carried on by such organization or institution

or with respect to any materials, supplies and equipment used

and transferred to such organization or institution in the

construction, reconstruction, remodeling, renovation, repairs

and maintenance of any real estate structure, other than

building machinery and equipment, except materials and supplies

when purchased by such organizations or institutions for routine

maintenance and repairs.

* * *

Section 1.1.  Section 227 of the act is amended to read:

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Section 227.  Discount.--(a)  If a return is filed by a

licensee and the tax shown to be due thereon less any discount

is paid all within the time prescribed, the licensee shall be

entitled to credit and apply against the tax payable by him a

discount of one per cent of the amount of the tax collected by

him on and after the effective date of this article, as

compensation for the expense of collecting and remitting the

[same] tax due by him and as a consideration of the prompt

payment thereof.

(b)  For returns filed on or after the effective date of this

subsection, the discount under subsection (a) shall be limited

to the following:

(i)  For a semi-monthly filer, $12.50 per return.

(ii)  For a monthly filer, $25 per return.

(iii)  For a quarterly filer, $75 per return.

(iv)  For a semi-annual filer, $150 per return.

Section 2.  Section 237(c) of the act, amended July 1, 1985

(P.L.78, No.29), is amended and the section is amended by adding

a subsection to read:

Section 237.  Collection of Tax.--* * *

(c)  Exemption Certificates. If the tax does not apply to the

sale or lease of tangible personal property or services, the

purchaser or lessee shall furnish to the vendor a certificate

indicating that the sale is not legally subject to the tax. The

certificate shall be in substantially such form as the

department may, by regulation, prescribe. Where the tangible

personal property or service is of a type which is never subject

to the tax imposed or where the sale or lease is in interstate

commerce, such certificate need not be furnished. Where a series

of transactions are not subject to tax, a purchaser or user may

furnish the vendor with a single exemption certificate in

substantially such form and valid for such period of time as the

department may, by regulation, prescribe[.], provided that an

exemption certificate furnished to a volunteer firefighters'

relief association or volunteer firemen's organization shall be

considered permanent. The department shall provide all school

districts and intermediate units with a permanent tax exemption

number. An exemption certificate, which is complete and regular

and on its face discloses a valid basis of exemption if taken in

good faith, shall relieve the vendor from the liability imposed

by this section. An exemption certificate accepted by a vendor

from a natural person domiciled within this Commonwealth or any

association, fiduciary, partnership, corporation or other

entity, either authorized to do business within this

Commonwealth or having an established place of business within

this Commonwealth, in the ordinary course of the vendor's

business, which on its face discloses a valid basis of exemption

consistent with the activity of the purchaser and character of

the property or service being purchased or which is provided to

the vendor by a charitable, religious, educational, volunteer

firefighters' relief association or volunteer firemen's

organization and contains the organization's charitable

exemption number and which, in the case of any purchase costing

two hundred dollars ($200) or more, is accompanied by a sworn

declaration on a form to be provided by the department of an

intended usage of the property or service which would render it

nontaxable, shall be presumed to be taken in good faith and the

burden of proving otherwise shall be on the Department of

Revenue.

(c.1)  Surrender of Exemption Certificate.--If a volunteer

firefighters' relief association or volunteer firemen's

organization that has been furnished an exemption certificate

dissolves, the association or organization shall have sixty days

to surrender the exemption certificate to the department.

* * *

Section 2.1.  Sections 1206, 1206.1 and 1216 of the act,

amended October 9, 2009 (P.L.451, No.48), are amended to read:

Section 1206.  Incidence and Rate of Tax.--An excise tax is

hereby imposed and assessed upon the sale or possession of

cigarettes within this Commonwealth at the rate of [eight] nine 

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and one-half cents per cigarette.

Section 1206.1.  Floor Tax.--(a)  The following apply:

(1)  A person who possesses cigarettes on which the tax

imposed by section 1206 has been paid as of the effective date

of this section shall pay an additional tax at a rate of [one

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and [twenty-five hundredths] one-half cents] one-half cent per

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cigarette. The tax shall be paid and reported on a form

prescribed by the department [within ninety days of the

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effective date of this section].

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(2)  On or after the effective date of this paragraph, a

person that possesses little cigars in a package which is

similar to a package of cigarettes other than little cigars and

which contains twenty to twenty-five little cigars shall pay a

tax at the rate of [eight] nine and one-half cents per little

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cigar. The tax shall be paid and reported on a form prescribed

by the department [within ninety days of the effective date of

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this paragraph].

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(3)  After January 3, 2010, a retailer that possesses little

cigars on which the tax imposed by this article has not been

paid shall pay a tax at the rate of [eight] nine and one-half 

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cents per little cigar. The tax shall be paid and reported on a

form prescribed by the department [within ninety days of the

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effective date of this paragraph].

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(b)  If a cigarette dealer fails to file the report required

by subsection (a) or fails to pay the tax imposed by subsection

(a), the department may, in addition to the interest and

penalties provided in section 1278, do any of the following:

(1)  Impose an administrative penalty equal to the amount of

tax evaded or not paid. The penalty shall be added to the tax

evaded or not paid and assessed and collected at the same time

and in the same manner as the tax.

(2)  Suspend or revoke a cigarette dealer's license.

(c)  In addition to any penalty imposed under subsection (b),

a person who wilfully omits, neglects or refuses to comply with

a duty imposed under subsection (a) commits a misdemeanor and

shall, upon conviction, be sentenced to pay a fine of not less

than two thousand five hundred dollars ($2,500) nor more than

five thousand dollars ($5,000), to serve a term of imprisonment

not to exceed thirty days or both.

Section 1216.  Commissions on Sales.--A cigarette stamping

agent shall be entitled to a commission for the agent's services

and expenses in affixing cigarette tax stamps. The commission

shall be equal to [eighty-seven] seventy-three eighty-two 

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hundredths per cent of the total value of Pennsylvania cigarette

tax stamps purchased by the agent from the department or its

authorized agents to be used in the stamping of unstamped

cigarettes for sale within this Commonwealth. The cigarette

stamping agent may deduct from the moneys to be paid to the

department or its authorized agents for the stamps an amount

equal to [eighty-seven] seventy-three eighty-two hundredths per

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cent of the value of the stamps purchased. This section shall

not apply to purchases of stamps by a cigarette stamping agent

in an amount less than one hundred dollars ($100).

Section 2.2.  The act is amended by adding articles to read:

ARTICLE XII-A

TOBACCO PRODUCTS TAX

Section 1201-A.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Cigar."  Any roll of tobacco wrapped in tobacco, not

including little cigars.

"Cigarette."  Includes any roll for smoking made wholly or in

part of tobacco, irrespective of size or shape, and whether or

not such tobacco is flavored, adulterated or mixed with any

other ingredient, the wrapper or cover of which is made of paper

or any other substance or material, excepting tobacco, and shall

not include cigars or roll your own tobacco. The term shall

include little cigars.

"Consumer."  An individual who purchases tobacco products for

personal use and not for resale.

"Contraband."  Any tobacco product for which the tax imposed

by this article has not been paid.

"Dealer."  A wholesaler or retailer. Nothing in this article

shall preclude any person from being a wholesaler or retailer,

provided the person meets the requirements for a license in each

category of dealer.

"Department."  The Department of Revenue of the Commonwealth.

"Little cigar."  Any roll for smoking that weighs not more

than four pounds per thousand, where the wrapper or cover is

made of natural leaf tobacco or any substance containing

tobacco.

"Manufacturer."  A person that produces tobacco products.

"Person."  An individual, unincorporated association,

company, corporation, joint stock company, group, agency,

syndicate, trust or trustee, receiver, fiduciary, partnership,

conservator, any political subdivision of the Commonwealth or

any other state. Whenever used in any of the provisions of this

article prescribing or imposing penalties, the word "person" as

applied to a partnership, unincorporated association or other

joint venture, means the partners or members thereof, and as

applied to a corporation, means all the officers and directors

thereof.

"Purchase price."  The total value of anything paid or

delivered, or promised to be paid or delivered, whether it be

money or otherwise, in complete performance of a sale or

purchase, without any deduction on account of the cost or value

of the property sold, cost or value of transportation, cost or

value of labor or service, interest or discount paid or allowed

after the sale is consummated, any other taxes imposed by the

Commonwealth or any other expense.

"Retailer."  A person that purchases or receives tobacco

products from any source for the purpose of sale to a consumer,

or who owns, leases or otherwise operates one or more vending

machines for the purpose of sale of tobacco products to the

ultimate consumer. The term includes a vending machine operator

or a person that buys, sells, transfers or deals in tobacco

products and is not licensed as a tobacco products wholesaler

under this article.

"Roll-your-own tobacco."  Any tobacco which, because of its

appearance, type, packaging or labeling, is suitable for use and

is likely to be offered to, or purchased by, consumers as

tobacco for making cigarettes. For purposes of reporting sales

of this product under the act of June 22, 2000 (P.L.394, No.54),

known as the Tobacco Settlement Agreement Act, 0.09 ounces of

tobacco shall constitute one individual unit sold.

"Sale."  Any transfer of ownership, custody or possession of

tobacco products for consideration; any exchange, barter or

gift; or any offer to sell or transfer the ownership, custody or

possession of tobacco products for consideration.

"Taxpayer."  Any person subject to tax under this article.

"Tobacco products."  Granulated Cigars, cheroots, stogies,

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periques, granulated, plug cut, crimp cut, ready rubbed and

other smoking tobacco, roll-your-own tobacco, snuff, dry snuff,

snuff flour, cavendish, plug and twist tobacco, fine-cut and

other chewing tobaccos, shorts, refuse scraps, clippings,

cuttings and sweepings of tobacco and other kinds and forms of

tobacco, prepared in such manner as to be suitable for chewing

or ingesting or for smoking in a pipe or otherwise, or both for

chewing and smoking. The term does not include cigarettes or

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cigars.

"Unclassified importer."  A person in this Commonwealth that

acquires a tobacco product from any source on which the tax

imposed by this article was not paid and that is not a person

otherwise required to be licensed under the provisions of this

article. The term includes, but is not limited to, consumers who

purchase tobacco products using the Internet or mail order

catalogs for personal possession or use in this Commonwealth.

"Vending machine operator."  A person who places or services

one or more tobacco product vending machines whether owned,

leased or otherwise operated by the person at locations from

which tobacco products are sold to the consumer. The owner or

tenant of the premises upon which a vending machine is placed

shall not be considered a vending machine operator if the

owner's or tenant's sole remuneration therefrom is a flat rental

fee or commission based upon the number or value of tobacco

products sold from the machine, unless the owner or tenant

actually owns the vending machine or leases the vending machine

under an agreement whereby any profits from the sale of the

tobacco products directly inure to the owner's or tenant's

benefit.

"Wholesaler."  A person engaged in the business of selling

tobacco products that receives, stores, sells, exchanges or

distributes tobacco products to retailers or other wholesalers

in this Commonwealth or retailers who purchase from a

manufacturer or from another wholesaler who has not paid the tax

imposed by this article.

Section 1202-A.  Incidence and rate of tax.

(a)  Imposition.--A tobacco products tax is hereby imposed on

the dealer, manufacturer or any person at the time the tobacco

product is first sold to a retailer in this Commonwealth at the

rate of 30% on the purchase price charged to the retailer for

the purchase of any tobacco product. The tax shall be collected

from the retailer by whomever sells the tobacco product to the

retailer and remitted to the department. Any person required to

collect this tax shall separately state the amount of tax on an

invoice or other sales document.

(b)  Retailer.--If the tax is not collected by the seller

from the retailer, the tax is imposed on the retailer at the

time of purchase at the same rate as in subsection (a) based on

the retailer's purchase price of the tobacco products. The

retailer shall remit the tax to the department.

(c)  Unclassified importer.--The tax is imposed on an

unclassified importer at the time of purchase at the same rate

as in subsection (a) based on the unclassified importer's

purchase price of the tobacco products. The unclassified

importer shall remit the tax to the department.

(d)  Exceptions.--The tax shall not be imposed on any tobacco

products that:

(1)  are exported for sale outside this Commonwealth; or

(2)  are not subject to taxation by the Commonwealth

pursuant to any laws of the United States.

(e)  Article II.--Unless otherwise specifically noted, the

provisions of Article II shall apply to the returns, payment,

penalties, enforcement, collections and appeals of the tax

imposed on other tobacco products.

Section 1203-A.  Floor tax.

(a)  Payment.--Any retailer that, as of the effective date of

this article, possesses tobacco products subject to the tax

imposed by section 1202-A, shall pay the tax on the tobacco

products in accordance with the rates specified in section 1202-

A. The tax shall be paid and reported on a form prescribed by

the department within 90 days of the effective date of this

section.

(b)  Administrative penalty; license.--If a retailer fails to

file the report required by subsection (a) or fails to pay the

tax imposed by subsection (a), the department may, in addition

to the interest and penalties provided in section 1215-A, do any

of the following:

(1)  Impose an administrative penalty equal to the amount

of tax evaded or not paid. The penalty shall be added to the

tax evaded or not paid and assessed and collected at the same

time and in the same manner as the tax.

(2)  Suspend, revoke or refuse to issue the retailer's

license.

(c)  Criminal penalty.--In addition to any penalty imposed

under subsection (b), a person that willfully omits, neglects or

refuses to comply with a duty imposed under subsection (a)

commits a misdemeanor and shall, if convicted, be sentenced to

pay a fine of not less than $2,500 nor more than $5,000, to

serve a term of imprisonment not to exceed 30 days, or both.

Section 1204-A.  Remittance of tax to department.

Wholesalers, retailers, unclassified importers and

manufacturers shall file monthly reports on a form prescribed by

the department by the 20th day of the month following the sale

or purchase of tobacco products from any other source on which

the tax levied by this article has not been paid. The tax is due

at the time the report is due. The department may required the

filing of reports and payment of tax on a less frequent basis at

its discretion.

Section 1205-A.  (Reserved).

Section 1206-A.  Procedures for claiming refund.

A claim for a refund of tax imposed by this article under

section 3003.1 and Article XXVII shall be in the form and

contain the information prescribed by the department by

regulation.

Section 1207-A.  Sales or possession of tobacco product when tax

not paid.

(a)  Sales or possession.--Any person who sells or possesses 

any tobacco product for which the proper tax has not been paid

commits a summary offense and shall, upon conviction, be

sentenced to pay costs of prosecution and a fine of not less

than $100 not more than $1,000 or to imprisonment for not more

than 60 days, or both, at the discretion of the court. Any

tobacco products purchased from a wholesaler properly licensed

under this article shall be presumed to have the proper taxes

paid.

(b)  Tax evasion.--Any person that shall falsely or

fraudulently, maliciously, intentionally or willfully with

intent to evade the payment of the tax imposed by this article

sells or possesses any tobacco product for which the proper tax

has not been paid commits a felony and shall, upon conviction,

be sentenced to pay costs of prosecution and a fine of not more

than $15,000 or to imprisonment for not more than five years, or

both, at the discretion of the court.

Section 1208-A.  Assessment.

The department is authorized to make the inquiries,

determinations and assessments of the tax, including interest,

additions and penalties, imposed by this article.

Section 1209-A.  (Reserved).

Section 1210-A.  (Reserved).

Section 1211-A.  Failure to file return.

Where no return is filed, the amount of the tax due may be

assessed and collected at any time as to taxable transactions

not reported.

Section 1212-A.  False or fraudulent return.

Where the taxpayer willfully files a false or fraudulent

return with intent to evade the tax imposed by this article, the

amount of tax due may be assessed and collected at any time.

Section 1213-A.  Extension of limitation period.

Notwithstanding any other provision of this article, where,

before the expiration of the period prescribed for the

assessment of a tax, a taxpayer has consented, in writing, that

the period be extended, the amount of tax due may be assessed at

any time within the extended period. The period so extended may

be extended further by subsequent consents, in writing, made

before the expiration of the extended period.

Section 1214-A.  Failure to furnish information, returning false

information or failure to permit inspection.

(a)  Penalty.--Any taxpayer who fails to keep or make any

record, return, report, inventory or statement, or keeps or

makes any false or fraudulent record, return, report, inventory

or statement required by this article commits a misdemeanor and

shall, upon conviction, be sentenced to pay costs of prosecution

and a fine of $500 and to imprisonment for not more than one

year, or both, at the discretion of the court.

(b)  Examination.--The department is authorized to examine

the books and records, the stock of tobacco products and the

premises and equipment of any taxpayer in order to verify the

accuracy of the payment of the tax imposed by this article. The

person subject to an examination shall give to the department or

its duly authorized representative, the means, facilities and

opportunity for the examination. Willful refusal to cooperate

with or permit an examination to the satisfaction of the

department shall be sufficient grounds for the suspension or

revocation of a taxpayer's license. In addition, a person who

willfully refuses to cooperate with or permit an examination to

the satisfaction of the department commits a misdemeanor and

shall, upon conviction, be sentenced to pay costs of prosecution

and a fine of $500 or to imprisonment for not more than one

year, or both, at the discretion of the court.

(c)  Records; dealer or manufacturer.--A dealer or

manufacturer shall keep and maintain for a period of four years

records in the form prescribed by the department. The records

shall be maintained at the location for which the license is

issued.

(d)  Reports.--A dealer or manufacturer shall file reports at

times and in the form prescribed by the department.

(e)  Records; manufacturer or wholesaler.--A manufacturer or

wholesaler located or doing business in this Commonwealth who

sells tobacco products to a wholesale license holder in this

Commonwealth shall keep records showing:

(1)  The number and kind of tobacco products sold.

(2)  The date the tobacco products were sold.

(3)  The name and license number of the dealer the

tobacco products were sold to.

(4)  The total weight of each of the tobacco products

sold to the license holder.

(5)  The place where the tobacco products were shipped.

(6)  The name of the common carrier.

(f)  Manufacturer or wholesaler.--A manufacturer or

wholesaler shall file with the department, on or before the 20th

of each month, a report showing the information listed in

subsection (e) for the previous month.

Section 1215-A.  Other violations; peace officers; fines.

Sections 1278, 1279, 1280 and 1291 are incorporated by

reference into and shall apply to the tax imposed by this

article.

Section 1216-A.  (Reserved).

Section 1217-A.  (Reserved).

Section 1218-A.  (Reserved).

Section 1219-A.  Records of shipments and receipts of tobacco

products required.

The department may, in its discretion, require reports from

any common or contract carrier who transports tobacco products

to any point or points within this Commonwealth, and from any

bonded warehouseman or bailee who has in the possession of the

warehouseman or bailee any tobacco products. The reports shall

contain the information concerning shipments of tobacco products

that the department determines to be necessary for the

administration of this article. All common and contract

carriers, bailees and warehousemen shall permit the examination

by the department or its authorized agents of any records

relating to the shipment or receipt of tobacco products.

Section 1220-A.  Licensing of dealers and manufacturers.

(a)  Prohibition.--No person, unless all sales of tobacco

products are exempt from Pennsylvania tobacco products tax,

shall sell, transfer or deliver any tobacco products in this

Commonwealth without first obtaining the proper license provided

for in this article.

(b)  Application.--An applicant for a dealer's or

manufacturer's license shall complete and file an application

with the department. The application shall be in the form and

contain information prescribed by the department and shall set

forth truthfully and accurately the information desired by the

department. If the application is approved, the department shall

license the dealer or manufacturer for a period of one year and

the license may be renewed annually thereafter.

Section 1221-A.  Licensing of manufacturers.

Any manufacturer doing business within this Commonwealth

shall first obtain a license to sell tobacco products by

submitting an application to the department containing the

information requested by the department and designating a

process agent. If a manufacturer designates no process agent,

the manufacturer shall be deemed to have made the Secretary of

State its agent for the service of process in this Commonwealth.

Section 1222-A.  Licensing of wholesalers.

(a)  Requirements.--Applicants for a wholesale license or

renewal of that license shall meet the following requirements:

(1)  The premises on which the applicant proposes to

conduct business are adequate to protect the revenue.

(2)  The applicant is a person of reasonable financial

stability and reasonable business experience.

(3)  The applicant, or any shareholder controlling more

than 10% of the stock if the applicant is a corporation or

any officer or director if the applicant is a corporation,

shall not have been convicted of any crime involving moral

turpitude.

(4)  The applicant shall not have failed to disclose any

material information required by the department, including

information that the applicant has complied with this article

by providing a signed statement under penalty of perjury.

(5)  The applicant shall not have made any material false

statement in the application.

(6)  The applicant shall not have violated any provision

of this article.

(7)  The applicant shall have filed all required State

tax reports and paid any State taxes not subject to a timely

perfected administrative or judicial appeal or subject to a

duly authorized deferred payment plan.

(b)  Multiple locations.--The wholesale license shall be

valid for one specific location only. Wholesalers with more than

one location shall obtain a license for each location.

Section 1223-A.  Licensing of retailers.

Applicants for retail license or renewal of that license

shall meet the following requirements:

(1)  The premises in which the applicant proposes to

conduct business are adequate to protect the revenues.

(2)  The applicant shall not have failed to disclose any

material information required by the department.

(3)  The applicant shall not have any material false

statement in the application.

(4)  The applicant shall not have violated any provision

of this article.

(5)  The applicant shall have filed all required State

tax reports and paid any State taxes not subject to a timely

perfected administrative or judicial appeal or subject to a

duly authorized deferred payment plan.

Section 1224-A.  License for tobacco products vending machines.

Each tobacco products vending machine shall have a current

retail license which shall be conspicuously and visibly placed

on the machine. There shall be conspicuously and visibly placed

on every tobacco products vending machine the name and address

of the owner and the name and address of the operator.

Section 1225-A.  License fees and issuance and display of

license.

(a)  At the time of making any application or license renewal

application:

(1)  An applicant for a tobacco products manufacturers

license shall pay the department a license fee of $1,500.

(2)  An applicant for a wholesale tobacco products

dealer's license shall pay to the department a license fee of

$1,500.

(3)  An applicant for a retail tobacco products dealer's

license shall pay to the department a license fee of $25.

(4)  An applicant for a vending machine tobacco products

dealer's license shall pay to the department a license fee of

$25.

(b)  Proration.--Fees shall not be prorated.

(c)  Issuance and display.--On approval of the application

and payment of the fees, the department shall issue the proper

license which must be conspicuously displayed at the location

for which it has been issued.

Section 1226-A.  Electronic filing.

The department may at its discretion require that any or all

returns, reports or registrations that are required to be filed

under this article be filed electronically. Failure to

electronically file any return, report, registration or other

information the department may direct to be filed electronically

shall subject the taxpayer to a penalty of 5% of the tax due on

the return, up to a maximum of $1,000, but not less than $10.

This penalty shall be assessed at any time and collected in the

manner provided in this article. This penalty shall be in

addition to any civil penalty imposed in this article for

failure to furnish information or file a return. The criminal

penalty for failure to file a return electronically shall be the

same as the criminal penalty for failure to furnish information

or file a return under this article.

Section 1227-A.  Expiration of license.

(a)  Expiration.--A license shall expire on the last day of

June next succeeding the date upon which it was issued unless

the department at an earlier date suspends, surrenders or

revokes the license.

(b)  Violation.--After the expiration date of the license or

sooner if the license is suspended, surrendered or revoked, it

shall be illegal for any dealer to engage directly or indirectly

in the business heretofore conducted by the dealer for which the

license was issued. Any licensee who shall, after the expiration

date of the license, engage in the business theretofore

conducted by the licensee either by way of purchase, sale,

distribution or in any other manner directly or indirectly

engaged in the business of dealing with tobacco products for

profit shall be in violation of this article and be subject to

the penalties provided in this article.

Section 1228-A.  Administration powers and duties.

(a)  Department.--The administration of this article is

hereby vested in the department. The department shall adopt

rules and regulations for the enforcement of this article. The

department may impose fees as may be necessary to cover the

costs incurred in administering this section.

(b)  Joint administration.--The department is authorized to

jointly administer this article with other provisions of this

act, including joint reporting of information, forms, returns,

statements, documents or other information submitted to the

department.

Section 1229-A.  Sales without license.

(a)  Penalty.--Any person who shall, without being the holder

of a proper unexpired dealer's license, engage in purchasing,

selling, distributing or in any other manner directly or

indirectly engaging in the business of dealing with tobacco

products for profit commits a summary offense and shall, upon

conviction, be sentenced to pay costs of prosecution and a fine

of not less than $250 nor more than $1,000, or to imprisonment

for not more than 30 days, or both, at the discretion of the

court.

(b)  Prima facie evidence.--Open display of tobacco products

in any manner shall be prima facie evidence that the person

displaying such tobacco products is directly or indirectly

engaging in the business of dealing with tobacco products for

profit.

Section 1230-A.  Violations and penalties.

(a)  Suspension.--The license of any person who violates this

article may be suspended after due notice and opportunity for a

hearing for a period of not less than five days or more than 30

days for a first violation and shall be revoked or suspended for

any subsequent violation.

(b)  Fine.--In addition to the provisions of subsection (a),

upon adjudication of a first violation, the person shall be

fined not less than $2,500 nor more than $5,000. For subsequent

violations, the person shall, upon adjudication thereof, be

fined not less than $5,000 nor more than $15,000.

(c)  Civil penalty.--A person who violates section 1214-A

(b), (c), or (d), or 1225-A(c), shall be subject to a civil

penalty not to exceed $300 per violation but shall not be

subject to subsections (a) and (b).

Section 1231-A.  Property rights.

(a)  Incorporation.--Subject to subsection (b), section 1285

is incorporated by reference into and shall apply to this

article.

(b)  Alterations.--

(1)  References in section 1285 to cigarettes shall apply

to tobacco products in this article.

(2)  References in section 1285 to 2,000 or more

unstamped cigarettes shall apply to tobacco products worth at

least $500 in this article.

(3)  References in section 1285 to more than 200

unstamped cigarettes shall apply to tobacco products worth at

least $50 in this article.

Section 1232-A.  Sample of tobacco products.

(a)  Samples.--The department shall, by regulation, govern

the receipt, distribution of and payment of tax on sample

tobacco products issued for free distribution.

(b)  Construction.--Nothing in this article or the

regulations promulgated under this article shall prohibit the

bringing into this Commonwealth by a manufacturer samples of

tobacco products to be delivered and distributed only through

licensed dealers or the manufacturers or their sales

representatives. The tax shall be paid by the manufacturer

provided all such packs bear the legend "all applicable State

taxes have been paid." Under no circumstances shall any untaxed

tobacco products be sold within this Commonwealth.

Section 1233-A.  Labeling and packaging.

It shall be unlawful to knowingly possess, sell, give,

transfer or deliver to any person, any tobacco product where the

packaging of which has been modified or altered by a person

other than the original manufacturer. Modification or alteration

shall include the placement of a sticker, writing or mark to

cover information on the packages. For purposes of this section,

a tobacco product package shall not be construed to have been

modified or altered by a person other than the manufacturer if

the most recent modification or alteration was made by the

manufacturer or person authorized by the manufacturer and

approved by the department.

Section 1234-A.  Information exchange.

The department is authorized to exchange information with any

other Federal, State or local enforcement agency for purposes of

enforcing this article.

ARTICLE XXII

SEVERANCE TAX

Section 2201.  Short title of article.

This article shall be known and may be cited as the Natural 

Gas Severance Tax Act.

Section 2202.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Accredited laboratory."  A facility engaged in the testing

and calibration of scientific measurement devices and certified

by the Department of Environmental Protection as having met the

department's standards for accreditation.

"Association."  A partnership, limited partnership or any

other form of unincorporated enterprise owned or conducted by

two or more persons.

"Corporation."  A corporation, joint stock association,

limited liability company, business trust or any other

incorporated enterprise organized under the laws of this

Commonwealth, the United States or any other state, territory or

foreign country or dependency.

"Department."  The Department of Revenue of the Commonwealth.

"Gross value."  The volume-weighted average market price for

all arms-length transactions that a producer receives at the

sales meter for natural gas during a reporting period.

"Meter."  A device to measure the passage of volumes of gases

or liquids past a certain point.

"Municipality."  A city, borough, incorporated town or a

township.

"Natural gas."  A fossil fuel consisting of a mixture of

hydrocarbon gases, primarily methane, possibly including ethane,

propane, butane, pentane, carbon dioxide, oxygen, nitrogen and

hydrogen sulfide and other gas species. The term includes

natural gas from oil fields known as associated gas or casing

head gas, natural gas fields known as nonassociated gas, coal

beds, shale beds and other formations.

"Nonproducing site."  A point of severance that is not

capable of producing natural gas in paying quantities.

"Paying quantities."  Profit to the producer, however small,

over the producer's current operating expenses.

"Person."  A natural person or a corporation, fiduciary,

association or other entity, including the Commonwealth, its

political subdivisions, instrumentalities and authorities. When

the term is used in a clause prescribing and imposing a penalty

or imposing a fine or imprisonment, or both, the term shall

include the members, as applied to an association, and the

officers, as applied to a corporation.

"Producer."  A person who engages or continues within this

Commonwealth in the business of severing natural gas for sale,

profit or commercial use. The term does not include a person who

severs natural gas from a storage field.

"Producing site."  A point of severance capable of producing

natural gas in paying quantities.

"Reporting period."  A calendar month in which natural gas is

severed.

"Sales meter."  A meter at the point where natural gas is

sold or transported to a purchaser or market.

"Sever," "severing" or "severance."  The extraction or other

removal of natural gas from the soil or water of this

Commonwealth.

"Storage field."  A natural formation or other site that is

used to store natural gas that did not originate from and has

been injected into the formation or site.

"Stripper well."  A producing site or a nonproducing site

that is not capable of producing and does not produce more than

60,000 cubic feet of natural gas per day.

"Tax."  The tax imposed under this article.

"Taxpayer."  A person subject to the tax imposed by this

article.

"Unit."  A thousand cubic feet of natural gas measured at the

wellhead at a temperature of 60 degrees Fahrenheit and an

absolute pressure of 14.73 pounds per square inch in accordance

with American Gas Association Standards and according to Boyle's

law for the measurement of gas under varying pressures with

deviations as follows:

(1)  The average absolute atmospheric pressure shall be

assumed to be 14.4 pounds to the square inch, regardless of

elevation or location of point of delivery above sea level or

variations in atmospheric pressure from time to time.

(2)  The temperature of the gas passing the meters shall

be determined by the continuous use of a recording

thermometer installed to properly record the temperature of

gas flowing through the meters. The arithmetic average of the

temperature recorded each 24-hour day shall be used in

computing gas volumes. If a recording thermometer is not

installed, or if installed and not operating properly, an

average flowing temperature of 60 degrees Fahrenheit shall be

used in computing gas volume.

(3)  The specific gravity of the gas shall be determined

annually by tests made by the use of an Edwards or Acme

gravity balance, or at intervals as found necessary in

practice. Specific gravity determinations shall be used in

computing gas volumes.

(4)  The deviation of the natural gas from Boyle's Law

shall be determined by annual tests or at other shorter

intervals as found necessary in practice. The apparatus and

method used in making the test shall be in accordance with

recommendations of the National Bureau of Standards or Report

No. 3 of the Gas Measurement Committee of the American Gas

Association, or amendments thereto. The results of the tests

shall be used in computing the volume of gas delivered under

this article.

"Wellhead meter."  A meter placed at a producing or

nonproducing site to measure the volume of natural gas severed

for which a wellhead meter certification has been issued.

"Wellhead meter certification."  A report issued by an

accredited laboratory certifying the accuracy of a wellhead

meter.

Section 2203.  Imposition of tax.

(a)  Establishment.--There is levied a natural gas severance 

tax on every producer.

(b)  Rate.--The tax imposed in subsection (a) shall be 8% of

the gross value of units severed at the wellhead during a

reporting period, plus 7 eight cents per unit severed, but shall

<--

not be imposed on units severed from a stripper well.

Section 2204.  Return and payment.

(a)  Requirement.--Every producer is required to file a

return with the department, on a form to be prescribed by the

department, reporting all severed natural gas per reporting

period and the tax due under section 2203.

(a.1)  Additional information.--The department may require

information necessary for compliance with the act of December

19, 1984 (P.L.1140, No.223), known as the Oil and Gas Act, on

the returns required under this section or the applications

required under section 2205. Information on the returns or

applications may be provided to the Department of Environmental

Protection.

(a.2)  Other required submissions by applicant.--

(1)  An applicant for the grant, renewal or transfer of a

permit issued under section 201 of the Oil and Gas Act shall

provide to the Department of Environmental Protection, upon

forms approved by the department, the following:

(i)  The applicant's State personal income tax

identification number.

(ii)  The applicant's State sales tax number.

(iii)  The applicant's State corporation tax number.

(iv)  The applicant's State employer withholding tax

number.

(v)  The applicant's unemployment compensation

account number.

(vi)  A statement that:

(A)  State tax reports have been filed and State

taxes paid;

(B)  State taxes are subject to a timely

administrative or judicial appeal; or

(C)  State taxes are subject to a duly approved

deferred payment plan.

(2)  An applicant for the grant, renewal or transfer of a

permit referred to in paragraph (1) issued shall, by the

filing of an application as it relates to the Department of

Environmental Protection waive confidentiality regarding

State tax information regarding the application in the

possession of the department, the Office of Attorney General

or the Department of Labor and Industry, regardless of the

source of that information and shall consent to the providing

of the information to the board by the department, the Office

of Attorney General or the Department of Labor and Industry.

(3)  Upon receipt of an application for the grant,

renewal or transfer of a permit referred to in paragraph (1),

the Department of Environmental Protection shall review the

State tax status of the applicant. The Department of

Environmental Protection shall request State tax information

regarding the applicant from the department, the Office of

Attorney General or the Department of Labor and Industry and

said information shall be provided.

(4)  The Department of Environmental Protection shall not

approve an application for the grant, renewal or transfer of

a license issued under this article where the applicant has

failed to:

(i)  provide the information required by paragraph

(1);

(ii)  file required State tax reports; or

(iii)  pay State taxes not subject to a timely

administrative or judicial appeal or subject to a duly

authorized deferred payment plan.

(5)  For the purpose of this section, the term

"applicant" shall include the transferor and transferee of a

permit referred to in paragraph (1).

(6)  Upon the required submission of the permit fee or

upon issuance or transfer of any permit referred to in

paragraph (1), if the department or the Department of Labor

and Industry notifies the board of noncompliance with the

provisions of this subsection, the board shall not issue or

transfer the permit. An appeal filed therefrom shall not act

as a supersedeas.

(7)  This section shall also be applicable to a

management company utilized by the applicant.

(b)  Filing.--The return required by subsection (a) shall be

filed with the department within 15 days following the end of

the second calendar month after a reporting period.

(c)  Deadline.--The tax imposed under section 2203 is due on

the day the return is required to be filed and becomes

delinquent if not remitted to the department by that date.

Section 2205.  Natural gas severance tax registration.

(a)  Application.--Before a producer severs natural gas in

this Commonwealth, the producer shall apply to the department

for a natural gas severance tax registration certificate.

(a.1)  Application fee.--The department may charge an

application fee to cover the administrative costs associated

with the application and registration process. If the department

charges an application fee, the department shall not issue a

registration certificate until the producer has paid the

application fee.

(a.2)  Declaration.--The producer shall include in its

application a declaration of all sites in this Commonwealth used

by the producer for the severance of natural gas. The

declaration is to include all producing sites and nonproducing

sites as well as wellhead meter certification for each. The

producer is required to update the declaration when the producer

adds or removes a producing site or nonproducing site in this

Commonwealth or when there is a change in the status of a

producing site or nonproducing site or when the producer uses a

different accredited laboratory to certify the accuracy of the

producer's wellhead meters. The producer shall update the

declaration within 30 days after a calendar month in which a

change to the declaration occurs.

(b)  Issuance.--Except as provided in subsection (c), after

the receipt of an application, the department shall issue a

registration certificate under subsection (a). The registration

certificate shall be nonassignable. All registrants shall be

required to renew their registration certificates and wellhead

meter certifications on a staggered renewal system established

by the department. After the initial staggered renewal period, a

registration certificate or a wellhead meter certification 

issued shall be valid for a period of five years.

(c)  Refusal, suspension or revocation.--The department may

refuse to issue, suspend or revoke a registration certificate if

the applicant or registrant has not filed required State tax

reports and paid State taxes not subject to a timely perfected

administrative or judicial appeal or subject to a duly

authorized deferred payment plan. The department shall notify

the applicant or registrant of any refusal, suspension or

revocation. The notice shall contain a statement that the

refusal, suspension or revocation may be made public. The notice

shall be made by first class mail. An applicant or registrant

aggrieved by the determination of the department may file an

appeal under the provisions for administrative appeals of this

act. In the case of a suspension or revocation which is

appealed, the registration certificate shall remain valid

pending a final outcome of the appeals process. Notwithstanding

sections 274, 353(f), 408(b), 603, 702, 802, 904 and 1102 or any

other provision of law, if no appeal is taken or if an appeal is

taken and denied at the conclusion of the appeal process the

department may disclose, by publication or otherwise, the

identity of a producer and the fact that the producer's

registration certificate has been refused, suspended or revoked

under this subsection. Disclosure may include the basis for

refusal, suspension or revocation.

(d)  Violation.--A person severing natural gas in this

Commonwealth without holding a valid registration certificate

under subsection (b) shall be guilty of a summary offense and

shall, upon conviction, be sentenced to pay a fine of not less

than $300 nor more than $1,500. In the event the person

convicted defaults, he shall be sentenced to imprisonment for

not less than five days nor more than 30 days. The penalties

imposed by this subsection shall be in addition to any other

penalties imposed by this article. For purposes of this

subsection, the severing of natural gas during any calendar day

shall constitute a separate violation. The Secretary of Revenue

may designate employees of the department to enforce the

provisions of this subsection. The employees shall exhibit proof

of and be within the scope of the designation when instituting

proceedings as provided by the Pennsylvania Rules of Criminal

Procedure.

(e)  Failure to obtain registration certificate.--Failure to

obtain or hold a valid registration certificate does not relieve

a person from liability for the tax imposed by this article.

Section 2205.1.  Meters.

A producer shall provide for and maintain a discrete wellhead

meter and a discrete sales meter. A producer shall ensure that

the meters are maintained according to industry standards. Any

wellhead meter installed after the effective date of this

section shall be a digital meter.

Section 2206.  Assessments.

(a)  Authorization and requirement.--The department is

authorized and shall make the inquiries, determinations and

assessments of the natural gas severance tax, including

interest, additions and penalties imposed under this article.

(b)  Notice.--The notice of assessment and demand for payment

shall be mailed to the taxpayer. The notice shall set forth the

basis of the assessment. The department shall send the notice of

assessment to the taxpayer at its registered address via

certified mail if the assessment increases the taxpayer's tax

liability by $300. Otherwise, the notice of assessment may be

sent via regular mail.

Section 2207.  Time for assessment.

(a)  Requirement.--An assessment as provided under section

2206 shall be made within three years after the date when the

return provided for by section 2204 is filed or the end of the

year in which the tax liability arises, whichever shall occur

last. For the purposes of this subsection and subsection (b), a

return filed before the last day prescribed for the filing

period shall be considered as filed on the last day.

(b)  Exception.--If the taxpayer underpays the correct amount

of the tax due by 25% or more, the tax may be assessed within

six years after the date the return was filed.

(c)  Intent to evade.--Where no return is filed or where the

taxpayer files a false or fraudulent return with intent to evade

the tax imposed by this article, the assessment may be made at

any time.

(d)  Erroneous credit or refund.--Within three years of the

granting of a refund or credit or within the period in which an

assessment or reassessment may have been issued by the

department for the taxable period for which the refund was

granted, whichever period shall last occur, the department may

issue an assessment to recover a refund or credit made or

allowed erroneously.

Section 2208.  Extension of limitation period.

Notwithstanding the provisions of this article, the

assessment period may be extended in the event a taxpayer has

provided written consent before the expiration of the period

provided in section 2207 for a tax assessment. The amount of tax

due may be assessed at any time within the extended period. The

period may be extended further by subsequent written consents

made before the expiration of the extended period.

Section 2209.  Reassessments.