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PRINTER'S NO. 2056
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1461
Session of
2015
INTRODUCED BY PASHINSKI, D. COSTA, SCHREIBER, THOMAS, COHEN,
CALTAGIRONE AND McCARTER, JULY 21, 2015
REFERRED TO COMMITTEE ON FINANCE, JULY 21, 2015
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," providing for a vapor product tax; and
prescribing 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
VAPOR PRODUCT TAX
PART I
PRELIMINARY PROVISIONS
Section 1201-A. Definitions.
The following words and phrases when used in this article
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shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Article." This article and the rules and regulations
promulgated under this article.
"Consumable product." Any nicotine liquid solution or other
material containing nicotine that is depleted as a vapor product
is used.
"Dealer." Any wholesaler or retailer. Whenever, in the
provisions of this article, the word "dealer" is used, it shall
include both categories. Nothing contained in this article shall
preclude any person from being a wholesaler or retailer,
provided such person meets the requirements for each category of
dealer.
"Department." The Department of Revenue of the Commonwealth.
"Invoice or delivery ticket." Any invoice or delivery ticket
which shows the true name and complete and exact address of the
consignor or seller, the true name and complete and exact
address of the consignee or purchaser, the quantity and brands
of the vapor products transported, the correct date of purchase
or shipment and the true name and complete and exact address of
the person who shall assume the payment of the Pennsylvania
State tax or the tax, if any, of the state or foreign country at
the point of ultimate destination.
"Person." Any individual, unincorporated association,
company, corporation, joint stock company, group, agency,
syndicate, trust or trustee, receiver, fiduciary, partnership,
conservator and 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
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joint venture means the partners or members thereof, and as
applied to a corporation means all the officers and directors
thereof.
"Retailer." Any of the following:
(1) Any person who, in the usual course of business,
purchases or receives vapor products from any source
whatsoever for the purpose of sale to the ultimate consumer.
(2) Any person who, in the usual course of business,
owns, leases or otherwise operates one or more vending
machines for the purpose of sale of vapor products to the
ultimate consumer.
(3) Any person who buys, sells, transfers or deals in
vapor products for profit.
"Sale." Any transfer of ownership, custody or possession of
vapor products for a consideration; any exchange, barter or
gift; or any offer to sell or transfer the ownership, custody or
possession of vapor products for consideration.
"Vapor product." Any nonlighted, noncombustible product that
employs a mechanical heating element, battery or electronic
circuit regardless of shape or size and that can be used to
produce vapor from nicotine in a solution. The term includes any
vapor cartridge or other container of nicotine in a solution or
other form that is intended to be used with or in an electronic
cigarette, electronic cigar, electronic cigarillo, electronic
pipe or similar product or device. The term does not include any
product regulated by the United States Food and Drug
Administration under the Federal Food, Drug, and Cosmetic Act
(52 Stat. 1040, 21 U.S.C. § 301 et. seq.).
"Vending machine." Any mechanical device from which vapor
products are dispensed for a consideration.
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"Vending machine operator." Any person who places or
services one or more vapor product vending machines, whether
owned, leased or otherwise operated by him, at locations from
which vapor products are sold to the ultimate consumer. The
owner or tenant of the premises upon which a vending machine is
placed shall not be considered a vending machine operator if his
sole remuneration from the vending machine is a flat rental fee
or commission based upon the number or value of vapor products
sold from the machine, unless the owner or tenant actually owns
the vending machine or leases the vending machine under an
agreement whereby the profits from the sale of vapor products
directly inure to his benefit.
"Wholesaler." Any of the following:
(1) Any person that meets all of the following:
(i) In the usual course of business, purchases,
receives, stores, sells and distributes within this
Commonwealth at least 75% of the vapor products purchased
by him to retail dealers or wholesale dealers or any
combination who buys the vapor products from him for the
purpose of resale to the ultimate consumer.
(ii) Maintains an established place of business for
the receiving, storage and distribution of vapor
products.
(2) Any person that meets all of the following:
(i) Is engaged in the business of distributing vapor
products through vending machines to the ultimate
consumer by means of placing the vapor product vending
machines, owned or leased by him, in various outlets
within this Commonwealth.
(ii) Pays to the owner or lessee of the premises a
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commission or rental for the use of the premises.
(iii) Operates at least 10 vending machines.
(3) Any person, including a franchisee, that meets all
of the following:
(i) Owns and operates no fewer than three retail
outlets in this Commonwealth, having 100% common
ownership.
(ii) Purchases vapor products from another
wholesaler for resale to the ultimate consumer.
(iii) Maintains complete and accurate records of all
purchases and sales in his main office and also in the
retail outlet.
PART III
IMPOSITION OF TAX
Section 1211-A. Incidence and rate of tax.
An excise tax is imposed and assessed upon the sale or
possession of vapor products within this Commonwealth at the
rate of 5 ¢ per fluid milliliter of consumable product. All
invoices for vapor products issued by a manufacturer must state
the amount of consumable product in milliliters.
Section 1212-A. Sales to Commonwealth and political
subdivisions.
The excise tax imposed by this article is hereby levied upon
the sale of vapor products to any person as defined under the
provisions of this article and to the Commonwealth or any other
state, or any department, board, commission, authority or agency
thereof.
Section 1213-A. Limitation of tax.
Only one sale shall be taxable and used in computing the
amount of tax due under this article whether the sale consists
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of individual vapor products, packages, cartons or cases.
Section 1214-A. Exemptions from tax.
(a) General rule.--No tax imposed by this article shall be
levied upon the possession or sale of vapor products which this
Commonwealth is prohibited from taxing under the Constitution of
the United States or Federal law. In addition, when the seller
and purchaser have registered with the department and have
obtained exemption certificates in accordance with such
regulations as the department shall prescribe, the following
sales are exempt:
(1) Sales to veterans' organizations approved by the
department, if the vapor products are being purchased by the
organization for gratuitous issue to veteran patients in
Federal, State or State-aided hospitals.
(2) Sales to voluntary unincorporated organizations of
military forces personnel operating under regulations
promulgated by the United States Secretary of Defense or
departments under his jurisdiction.
(3) Sales to retail dealers located in Veterans'
Administration hospitals for sales to patients in such
hospitals.
(b) Regulations.--The department may otherwise promulgate
regulations to relieve manufacturers and dealers from payment of
tax on vapor products sold and delivered to points inside and
outside this Commonwealth for sale and use outside this
Commonwealth or sold to purchasers designated as exempt by the
provisions of this section. However, all sales shall be presumed
to be taxable and the burden shall be upon the person claiming
an exemption to prove his right to the exemption.
Section 1215-A. Liability for collection of tax.
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Every person shall be liable to pay into the State Treasury,
through the department, the tax imposed by this article on all
vapor products received by him, the tax paid, or exempted by the
provisions of this article.
Section 1216-A. Method of tax.
The department shall, by regulation, provide for the method
of paying the tax imposed by this article.
PART V
REFUNDS AND ALLOWANCES
Section 1221-A. Refund of tax.
A refund of any tax imposed by this article shall be made to
a person on proof satisfactory to the department that the
claimant:
(1) Paid the tax on vapor products withdrawn by him from
the market.
(2) Shipped vapor products into another state for sale
or use therein under the conditions as provided by the
regulations promulgated by the department.
(3) Sold to persons exempt from the tax under the
provisions of this article or regulations prescribed.
(4) Had possession of vapor products which were lost,
other than by theft, or destroyed by fire, casualty or act of
God.
(5) Paid the tax in error.
Section 1222-A. Allowance for nonpayment of tax.
If the tax has not yet been paid on vapor products for which
a refund of the tax would be allowed under section 1221-A,
relief from the payment of the tax on such vapor products may be
given upon the filing of a claim for allowance in the same
manner as a claim for refund, or in any other manner provided by
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regulations.
Section 1223-A. Limitations.
Claims for refund or allowance of tax imposed by this article
shall be filed under section 3003.1 and shall be in such form
and contain such information as the department shall, by
regulation, prescribe.
Section 1224-A. Procedures for claiming refund.
(a) General rule.--A dealer shall make a claim for a refund
of tax on a form and in the manner prescribed by the department.
(b) Certification to Board of Finance and Revenue.--If the
department is satisfied that the dealer is entitled to the
refund it shall certify the proposed amount of such refund to
the Board of Finance and Revenue for approval and, having
obtained approval from the Board of Finance and Revenue, it
shall issue to the dealer the proper refund.
(c) Department determination.--Claims for allowance for
nonpayment of tax shall be allowed by the department if the
department determines that the dealer is entitled to the
allowance.
PART VII
PENALTIES AND ENFORCEMENT
Section 1241-A. Failure to furnish information, returning false
information or failure to permit an inspection.
(a) General rule.--Any dealer 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 shall be guilty of a
misdemeanor and, upon conviction, be sentenced to pay a fine of
$500 and costs of prosecution or imprisonment for not more than
one year, or both. Notwithstanding any fine imposed by a court
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of competent jurisdiction in accordance with this subsection,
the department may impose an administrative fine of not more
than $5,000.
(b) Right to examine books and records.--The department is
authorized to examine the books and records, the stock of vapor
products and the premises and equipment of any dealer in order
to verify the accuracy of the payment of the tax imposed by this
article. Every such person is hereby directed and required to
give to the department or its duly authorized representative the
means, facilities and opportunity for such examinations. Willful
refusal to cooperate with or permit such examination to the
satisfaction of the department shall be sufficient grounds for
the suspension or revocation of any license issued under this
article and shall constitute a misdemeanor and, upon conviction,
be sentenced to pay a fine of $500 and costs of prosecution or
imprisonment for not more than one year, or both.
Section 1242-A. Right of department to impound vending machines
and contents.
(a) General rule.--Whenever any vapor products are found or
are suspected to be in any vending machine in violation of the
provisions of this article, or whenever a vending machine is not
properly licensed or labeled, the duly authorized agents or
employees of the department shall seal the machine by the means
of impounding stickers to prevent sale or removal of any vapor
products from the machine until such time as the violation is
corrected in the presence of a duly authorized agent or employee
of the department.
(b) Penalty.--Anyone other than the duly authorized agents
or employees of the department who shall remove or otherwise
tamper with any impounding stickers placed on any vending
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machine, contents, or other evidence shall be guilty of a
misdemeanor and subject to a fine of not more than $1,000 and
costs of prosecution or imprisonment for not more than one year,
or both.
Section 1243-A. Other violations.
(a) The following shall apply:
(1) Any person who willfully omits, neglects or refuses
to comply with any duty imposed upon him by this article or
does anything prohibited by this article for which no
specific penalty is otherwise provided shall, upon
conviction, in a summary proceeding be sentenced to pay a
fine of not more than $500 and costs of prosecution and, in
default of payment thereof, to undergo imprisonment for not
more than 30 days.
(2) Any person who willfully omits or neglects to file
any return required or pay any tax imposed by this article,
or attempts in any manner to evade or defeat the tax or
payment, shall, in addition to any other penalty provided in
this article, be liable to pay a penalty equal to the amount
of tax evaded or not paid, which penalty shall be added to
the tax and assessed and collected at the same time in the
same manner as a part of the tax.
(3) Any person who fails to file any required return or
pay tax at the time prescribed shall, in addition to any
other penalty provided in this article, be liable to a
penalty of 5% of the tax due but unpaid for each month or
fraction of a month the tax remains unpaid together with the
interest at the rate established pursuant to section 806 of
the act of April 9, 1929 (P.L.343, No.176) , known as The
Fiscal Code, on the tax from the time the tax became due. The
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penalties provided in this subsection shall be added to the
tax and assessed and collected at the same time in the same
manner and as a part of the tax.
Section 1244-A. Peace officers and powers.
Such employees of the department as are officially designated
by the Secretary of Revenue as field investigators of the
department, and who carry identification of such capacity, are
declared to be peace officers and they, as well as other peace
officers of the Commonwealth are given police powers and
authority throughout this Commonwealth to arrest on view, except
in private homes, without warrant, any person actually engaged
in the unlawful sale of vapor products, or any person unlawfully
having in his possession vapor products contrary to the
provisions of this article. The peace officer shall have the
power and authority upon reasonable and probable cause to search
for and seize without warrant or process, except in private
homes, any vapor products which are unlawfully possessed.
Section 1245-A. Fines and penalties payable to Commonwealth.
All fines and penalties imposed and collected under the
provisions of this article shall be payable to the Commonwealth
and are hereby appropriated to the department to be used in
enforcing this article.
PART IX
CONFISCATION AND FORFEITURE
Section 1251-A. Property rights.
The following shall apply:
(1) No property rights shall exist in any vending
machine in which vapor products which are unlawfully offered
for sale are found, nor shall any property rights exist in
any vehicle containing 2,000 or more vapor products which are
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unlawfully possessed or containing more than 200 vapor
products which are unlawfully possessed if the owner has been
previously convicted of the illegal sale, possession or
transportation of vapor products which are unlawfully
possessed in this or any other jurisdiction. The vending
machine, all vapor products contained in the vending machine
and the vehicle which contained the vapor products shall be
deemed contraband and shall be confiscated at the discretion
of the Secretary of Revenue, and shall be forfeited to the
Commonwealth as provided in paragraphs (5) and (6). No such
property, when in the custody of the department, the police
or other authorized peace officer shall be seized or taken
therefrom by any judicial process unless a petition for
forfeiture is not timely filed.
(2) Upon the forfeiture or confiscation, the department
shall dispose of any forfeited vending machine or forfeited
vapor products in accordance with paragraphs (5) and (6).
(3) No property rights shall exist in any vapor products
sold or offered for sale by any person without a proper
license or any vapor products sold or offered for sale by any
person not possessing proper documentation showing legal
purchase of vapor products and all vapor products shall be
deemed contraband, shall be confiscated and shall be
forfeited to the Commonwealth without further proceedings and
shall be delivered to the agents of the department at the
time of conviction by the judge or magisterial district
judge.
(4) No property rights shall exist in any machinery,
equipment, fixtures or other paraphernalia designed or used
to counterfeit vapor products nor shall any property rights
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exist in any vapor products confiscated in connection with
the operation of any counterfeiting or other scheme designed
to evade the payment of proper tax under this article. The
machinery, equipment, fixtures or other paraphernalia and
vapor products shall be confiscated and, at the discretion of
the Secretary of Revenue, shall be forfeited to the
Commonwealth in accordance with the provisions of this
article.
(5) The department shall dispose of vapor products
forfeited under the provisions of this article by the sale or
destruction of vapor products pursuant to regulations
promulgated by the Secretary of Revenue.
(6) The proceedings for the forfeiture of any vending
machine or motor vehicle, in which are found unlawful vapor
products shall be in rem. The Commonwealth shall be the
plaintiff and the property shall be the defendant. A petition
shall be filed within 10 days after confiscation in the court
of common pleas of the county in which the property or
vehicle was taken by agents of the department, the police or
other authorized peace officer, verified by oath or
affirmation of any enforcement officer, police officer or
other person. In the event that such petition is not filed
within the time prescribed by this paragraph, the confiscated
vending machine or motor vehicle shall be immediately
returned to the person from whom confiscated or the owner.
(7) The petition must contain the following:
(i) The description of the property or vehicle
seized.
(ii) A statement of the time when and place where
seized.
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(iii) The name and address of the owner, if known.
(iv) The name and address of the person in
possession, if known.
(v) The statement of the circumstances under which
the property was found and the number and description of
all unlawful vapor products found.
(vi) A request for an order forfeiting the property
to the Commonwealth, unless cause be shown to the
contrary.
(8) A copy of the petition shall be served in any manner
provided by law for service of process or complaint in a
civil action on the owner if he can be found within this
Commonwealth. If the owner cannot be found within this
Commonwealth, a copy of the petition shall be served on the
owner by registered mail or certified mail, return receipt
requested, addressed to the last known address of the owner.
The person in possession and all encumbrance holders having a
perfected security interest in the property confiscated shall
be notified in a like manner. The copies shall have endorsed
thereon a notice substantially similar to the following:
"To the claimant of the property described in the
petition: You are required to file an answer to this
petition stating your title in and right to possession of
the property, within 20 days from the service, and you
are also notified that if you fail to file an answer, a
decree of forfeiture will be entered against the
property."
(9) The notice shall be signed by the petitioner or his
attorney or the district attorney or Attorney General.
(10) If the owner of the property is unknown, notice of
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the petition shall also be given by an advertisement in only
one newspaper of general circulation published in the county
where the property was seized, once a week for two successive
weeks. No other advertisement of any sort shall be necessary,
any other law to the contrary notwithstanding. The notice
shall contain a statement of the seizure of the property with
the description thereof, the place and date of seizure and
shall direct any claimants to file a claim therefor, on or
before a date given in the notice, which shall not be less
than 10 days from the date of the last publication.
(11) Upon the filing of any claim for the property
setting forth a right of possession thereof, the case shall
be deemed at issue and a hearing shall be held within 10
days.
(12) At the time of the hearing, if the Commonwealth
proves by competent evidence to the satisfaction of the court
that the vending machine or motor vehicle in question was
found to contain unlawful vapor products then and in that
event the claimant shall show that he is the owner of the
vending machine or other equipment, motor vehicle or vapor
products, and that all vapor products found in the vending
machine, or any other place from which the vapor products
were seized, contained lawful vapor products or that he is
otherwise not subject to the provisions of this section as
the result of any exemption or allowance provided for in
other sections of this article.
(13) The claimant shall have the burden of proving that
he is not subject to the provisions of this section, but the
burden of proof shall be upon the Commonwealth to prove all
other facts necessary for the forfeiture of a vending machine
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or motor vehicle. In the event that the Commonwealth has not
met its burden by a preponderance of the evidence, or the
claimant has proved that he is not subject to the provisions
of this section, the court shall order the vending machine,
motor vehicle or other equipment returned to the claimant;
otherwise, the court shall order the same forfeited to the
Commonwealth. In the case of a motor vehicle, should the
claimant prove to the satisfaction of the court that he is
the registered owner of the motor vehicle and that he did not
know, nor had reason to know, that it was being used to carry
unlawful vapor products, the court in its discretion, may
order the same returned to the claimant.
(14) In the case of a motor vehicle, if the claimant
proves that he holds a valid encumbrance upon the motor
vehicle, notice of which encumbrance has been duly noted on
the certificate of title to the motor vehicle in accordance
with the provisions of 75 Pa.C.S. (relating to vehicles),
such forfeiture shall be subject to such encumbrance as of
the date of the seizure less prepaid or unearned interest and
before the motor vehicle may be sold, exchanged or otherwise
transferred or retained for use by the Commonwealth, the
outstanding amount of such encumbrance shall be paid to the
claimant; or possession of the motor vehicle shall be turned
over to the claimant who shall expose the same to public sale
and shall pay over to the Commonwealth any amount realized in
excess of the outstanding amount of such encumbrance less the
reasonable costs incurred by claimant in conducting such
sale.
Section 1252-A. Disposition of unclaimed motor vehicles.
If the court orders a motor vehicle returned to the owner or
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claimant and the owner or claimant fails to remove the vehicle
from Commonwealth property, the department shall give the owner
or claimant notice, in the manner provided in section 1251-A for
service of notice of the petition, to remove the vehicle within
90 days. Should the owner or claimant fail to remove the vehicle
within 90 days from the date notice was given, the vehicle
shall, without regard to any other period of limitations, be
disposed of as provided in Article XIII.1 of the act of April 9,
1929 (P.L.343, No.176), known as The Fiscal Code.
PART XI
ENFORCEMENT AND REGULATIONS
Section 1261-A. Enforcement and regulations.
The department shall enforce the provisions of this article
and may promulgate regulations relating to the administration
and enforcement of the provisions of this article. The violation
of a regulation promulgated under the authority of this article
shall be considered to be a violation of the article.
PART XIII
MISCELLANEOUS PROVIONS
(Reserved)
Section 2. This act shall take effect in 60 days.
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