THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY HUGHES, TARTAGLIONE, COSTA, FARNESE AND STOUT, JULY 31, 2009

REFERRED TO FINANCE, JULY 31, 2009  

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," adding provisions relating to the taxation of

tobacco products; and imposing penalties.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding an article 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.

"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.

"Cigarillo."  A short, narrow cigar, wrapped in whole-leaf

tobacco. The term includes filtered cigarillos, which are

sometimes called 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.

"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."  Cigars, cigarillos, cheroots, stogies,

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.

"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.

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.

Section 2.  This act shall take effect October 1, 2009.