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                                                       PRINTER'S NO. 936



No. 777 Session of 2003

           JUNE 6, 2003


                                     AN ACT

     1  Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
     2     act relating to tax reform and State taxation by codifying
     3     and enumerating certain subjects of taxation and imposing
     4     taxes thereon; providing procedures for the payment,
     5     collection, administration and enforcement thereof; providing
     6     for tax credits in certain cases; conferring powers and
     7     imposing duties upon the Department of Revenue, certain
     8     employers, fiduciaries, individuals, persons, corporations
     9     and other entities; prescribing crimes, offenses and
    10     penalties," further providing for the tax on cigarettes; and
    11     providing for a tax on other tobacco products.

    12     The General Assembly of the Commonwealth of Pennsylvania
    13  hereby enacts as follows:
    14     Section 1.  The definition of "cigarette" in section 1201 of
    15  the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform
    16  Code of 1971, added December 21, 1981 (P.L.482, No.141), is
    17  amended and the section is amended by adding definitions to
    18  read:
    19     Section 1201.  Definitions.--As used in this article:
    20     * * *
    21     "Cigarette."  Any roll for smoking made wholly or in part of
    22  tobacco, the wrapper or cover of which is made of any substance

     1  or material other than tobacco regardless of the size or shape
     2  of the roll and regardless of whether or not the tobacco is
     3  flavored, adulterated or mixed with any other ingredient. The
     4  term does not include cigars, little cigars or cigarillos.
     5     * * *
     6     "Smokeless tobacco."  Snuff, chewing tobacco and any other
     7  tobacco that is intended to be consumed by means other than
     8  smoking.
     9     "Tobacco products."  All products containing tobacco for
    10  consumption and including, but not limited to, cigars,
    11  cigarillos, pipe tobacco and smokeless tobacco. This does not
    12  include cigarettes or any other product included under the
    13  definition of "cigarette."
    14     "Tobacco products distributor or wholesaler."  Any entity
    15  engaged in the business of selling tobacco products, who sells,
    16  exchanges or distributes tobacco products to retailers,
    17  consumers or other wholesalers or distributors in this
    18  Commonwealth. Any tobacco products manufacturer or distributor
    19  that has an office, sales house, or any other place of business
    20  within this Commonwealth, that sells, exchanges or distributes
    21  tobacco products to any retailer, consumer or other wholesaler
    22  or distributor in this Commonwealth, is also included and liable
    23  for the excise tax.
    24     * * *
    25     Section 2.  Sections 1206 and 1206.1 of the act, amended June
    26  29, 2002 (P.L.559, No.89), are amended to read:
    27     Section 1206.  Incidence and Rate of Tax.--An excise tax is
    28  hereby imposed and assessed upon the sale or possession of
    29  cigarettes within this Commonwealth at the rate of [five] ten
    30  cents per cigarette.
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     1     Section 1206.1.  Floor Tax.--(a)  A person who possesses
     2  cigarettes on which the tax imposed by section 1206 has been
     3  paid as of the effective date of this section shall pay an
     4  additional tax at a rate of [three and forty-five hundredths]
     5  five cents per cigarette. The tax shall be paid and reported on
     6  a form prescribed by the department within ninety days of the
     7  effective date of this section.
     8     (b)  If a cigarette dealer fails to file the report required
     9  by subsection (a) or fails to pay the tax imposed by subsection
    10  (a), the department may, in addition to the interest and
    11  penalties provided in section 1278, do any of the following:
    12     (1)  Impose an administrative penalty equal to the amount of
    13  tax evaded or not paid. The penalty shall be added to the tax
    14  evaded or not paid and assessed and collected at the same time
    15  and in the same manner as the tax.
    16     (2)  Suspend or revoke a cigarette dealer's license.
    17     (c)  In addition to any penalty imposed under subsection (b),
    18  a person who wilfully omits, neglects or refuses to comply with
    19  a duty imposed under subsection (a) commits a misdemeanor and
    20  shall, upon conviction, be sentenced to pay a fine of not less
    21  than two thousand five hundred dollars ($2,500) nor more than
    22  five thousand dollars ($5,000), to serve a term of imprisonment
    23  not to exceed thirty days or both.
    24     Section 3.  The act is amended by adding a section to read:
    25     Section 1206.2.  Incidence and Rate of Tax on Tobacco
    26  Products.--A tax is hereby imposed on all tobacco products sold
    27  or held for sale in this Commonwealth by a distributor or a
    28  wholesaler to a retail dealer or consumer.
    29     (1)  The tax imposed by this section shall be at a rate of
    30  forty per cent of the wholesale price of tobacco products
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     1  distributor or wholesaler who brings tobacco products, or causes
     2  tobacco products to be brought into this Commonwealth, is liable
     3  for the tax imposed by this section. The tax is imposed at forty
     4  per cent of the tobacco product wholesale regardless of the
     5  actual price at which the product is sold. If the tobacco
     6  products are not sold, the tobacco products are to be taxed at
     7  the same rate. It shall be presumed that all tobacco products
     8  within this Commonwealth are subject to tax. A person claiming
     9  that a tobacco product is not taxable has the burden of proof.
    10     (2)  This tax does not apply to any tobacco products which
    11  the Commonwealth is prohibited from taxing under laws of the
    12  United States.
    13     (3)  The tax imposed is to be paid by the purchase of stamps
    14  as provided in this article. The stamp shall be affixed to or
    15  impressed upon each package of tobacco product. The Department
    16  of Revenue shall promulgate further regulations for enforcement
    17  and administration of this section.
    18     (4)  Beginning July 1, 2003, all tobacco products tax
    19  revenues shall be paid to the Department of Public Welfare for
    20  the operation of a special pharmaceutical benefit program for
    21  low-income persons with disabilities.
    22     Section 4.  Section 1296 of the act, amended June 29, 2002
    23  (P.L.559, No.89), is amended to read:
    24     Section 1296.  Disposition of Certain Funds.--Receipts from
    25  the tax imposed by this article shall be deposited into the
    26  General Fund. Twenty million four hundred eighty-five thousand
    27  dollars ($20,485,000) of the receipts deposited into the General
    28  Fund in accordance with this section shall be transferred
    29  annually to the Agricultural Conservation Easement Purchase
    30  Fund. Thirty million seven hundred thirty thousand dollars
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     1  ($30,730,000) of the receipts deposited into the General Fund in
     2  accordance with this section shall be transferred annually to
     3  the Children's Health Fund for health care for indigent
     4  children. Beginning July 1, 2003, one-half of the receipts
     5  deposited into the General Fund in accordance with this section
     6  shall be transferred annually to the adult basic coverage
     7  insurance program established under Chapter 13 of the act of
     8  June 26, 2001 (P.L.755, No.77), known as the "Tobacco Settlement
     9  Act." The transfers required by this section shall be made in
    10  two equal payments by July 15 and January 15.
    11     Section 5.  This act shall take effect July 1, 2003, or
    12  immediately, whichever is later.

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