Toughen Cigarette Tax Enforcement

Section 1. Subdivisions 8, 9 and 11 of section 470 of the tax law, subdivision 8 as amended by section 1 of part K of chapter 61 of the laws of 2005, subdivisions 9 and 11 as amended by chapter 61 of the laws of 1989, are amended and four new subdivisions 20, 21, 22 and 23 are added to read as follows:

8. "Wholesale dealer." Any person, whether located within or outside of this state, who (a) sells cigarettes or tobacco products to retail dealers or other persons for purposes of resale, or (b) owns, operates or maintains one or more cigarette or tobacco product vending machines in, at or upon premises owned or occupied by any other person, or (c) sells cigarettes or tobacco products to an Indian nation or tribe or to a reservation cigarette seller on a qualified reservation. Such term shall not include any cigarette manufacturer, export warehouse proprietor, or importer with a valid permit under 26 U.S.C. § 5712, if such person sells or distributes cigarettes in this state only to licensed agents, or to an export warehouse proprietor or another manufacturer with a valid permit under 26 U.S.C. § 5712.

9. "Retail dealer." Any person, whether located within or outside of this state, other than a wholesale dealer, engaged in selling cigarettes or tobacco products to a consumer in this state.

11. "Agent." Any [person] wholesale dealer licensed by the commissioner of taxation and finance to purchase and affix adhesive or meter stamps on packages of cigarettes under this article.

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD07490-01-9

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20. "Manufacturer" means any person who manufactures, fabricates, assembles, processes, or labels a finished cigarette.

21. "Importer" means any person who imports into the United States, either directly or indirectly, a finished cigarette for sale or distribution.

22. "Stamp" or "stamps" means the indicia, including meter impressions, required to be placed on a cigarette package that evidence payment of the tax on cigarettes under section four hundred seventy-one of this article, or the indicia, including meter impressions, used to indicate that the cigarettes are intended for a sale or distribution in this state that is exempt from state tax under paragraph (a) of subdivision one of section four hundred seventy-one-e of this article.

23. "Licensed," when used with reference to a manufacturer, importer, agent, wholesale dealer or retail dealer, means only those persons who hold a valid and current license issued under section four hundred eighty of this article for the type of business being engaged in. When the term "licensed" is used before a list of entities, such as "licensed manufacturer, importer, agent or dealer," such term shall apply to each entity in such list.

§ 2. Subdivisions 2 and 3 of section 471 of the tax law, subdivision 2 as amended by section 2 of part D of chapter 134 of the laws of 2010 and subdivision 3 as amended by chapter 6 of the laws of 1961, are amended to read as follows:

2. It is intended that the ultimate incidence of and liability for the tax shall be upon the consumer, and that any agent [or dealer] who shall pay the tax to the commissioner shall collect the tax from the purchaser or consumer. Except as [hereinafter] provided in this subdivision, the tax shall be advanced and paid by the agent. The agent shall be liable for the collection and payment of the tax on cigarettes imposed by this article and shall pay the tax to the commissioner by purchasing, under such regulations as he or she shall prescribe, adhesive stamps of such designs and denominations as he or she shall prescribe. The tax on cigarettes may also be paid by or through the use of metering machines if the commissioner so prescribes. Agents, located within or without the state, shall purchase stamps and affix such stamps in the manner prescribed to packages of cigarettes to be sold within the state[, in which case any dealer subsequently receiving such stamped packages of cigarettes will not be required to purchase and affix stamps on such packages of cigarettes]. All cigarettes sold by agents and wholesalers to Indian nations or tribes or reservation cigarette sellers located on an Indian reservation must bear a tax stamp.

3. The amount of taxes advanced and paid by the agent as [hereinabove] provided in this section shall be added to and collected as part of the sales price of the cigarettes.

§ 3. Section 471-a of the tax law, as amended by section 5 of part D of chapter 134 of the laws of 2010, is amended to read as follows:

§ 471-a. Use tax on cigarettes. There is hereby imposed and shall be paid by any consumer a tax on all cigarettes used in the state by any [person] such consumer, except that no tax shall be imposed (1) if the tax provided in section four hundred seventy-one of this article is paid, (2) on the use of cigarettes which are exempt from the tax imposed by said section, or (3) on the use of four hundred or less cigarettes, brought into the state on, or in the possession of, any [person] consumer. Such tax on cigarettes shall be at the rate of four dollars and thirty-five cents for each twenty cigarettes or fraction thereof, provided, however, that if a package of cigarettes contains more than

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twenty cigarettes, the rate of tax on the cigarettes in such package in excess of twenty shall be one dollar and eight and three-quarters cents for each five cigarettes or fraction thereof. Within twenty-four hours after liability for the tax accrues, each such [person] consumer shall file with the commissioner a return in such form as the commissioner may prescribe together with a remittance of the tax shown to be due thereon. For purposes of this article, the word "use" means the exercise of any right or power actual or constructive and shall include but is not limited to the receipt, storage or any keeping or retention for any length of time, but shall not include possession for sale, and the word "consumer" means any person who uses cigarettes in this state. All other provisions of this article if not inconsistent shall apply to the administration and enforcement of the tax imposed by this section in the same manner as if the language of said provisions had been incorporated in full into this section. By filing such return and paying such tax, a consumer shall not be relieved of any criminal or civil penalties that may be applicable under this article or article thirty-seven of this chapter.

§ 4. Section 471-e of the tax law is REPEALED and a new section 471-e is added to read as follows:

§ 471-e. Application of tax on tribal lands. 1. Exemption from tax. (a) Cigarettes sold to or received by members of a federally recognized Indian tribe on such tribe's Indian country shall not be subject to tax under this article.

(b) Cigarettes exempt from tax under 26 U.S.C. § 5701 and that are distributed in accordance with federal regulations shall not be subject to tax under this article.

2. Tax rate on sales to non-tribal members on Indian country. The tax rate applicable to cigarettes sold to or received by non-tribal members on Indian lands shall be equal to the state tax rate provided in section four hundred seventy-one of this article minus any tribal tax rate, if the resulting rate is a positive number and such rate shall be zero if the resulting rate would be a negative number. Cigarettes taxed pursuant to this subdivision shall bear a tax stamp as required by section four hundred seventy-two of this article in an amount equal to the tax imposed by section four hundred seventy-one of this article; provided, that the commissioner shall periodically rebate to any Indian tribal entity that is in compliance with this article an amount equal to the tribal tax imposed on sales under this subdivision or the face value of the tax stamps affixed to cigarettes under this subdivision, whichever amount is less.

§ 5. Subdivision 1 of section 472 of the tax law, as amended by chapter 629 of the laws of 1996 and as further amended by section 104 of part A of chapter 62 of the laws of 2011, is amended, subdivisions 2 and 3 are renumbered subdivisions 3 and 4 and a new subdivision 2 is added to read as follows:

1. The commissioner shall prescribe, prepare and furnish stamps of such denominations and quantities as may be necessary for the payment of the tax on cigarettes imposed by this article, or for indication that the cigarettes are tax-exempt under section four hundred seventy-one-e of this article, and may from time to time and as often as he or she deems advisable provide for the issuance and exclusive use of stamps of a new design and forbid the use of stamps of any other design, in the manner and with the effect provided in section two hundred seventy-four of this chapter. The commissioner shall make provisions for the sale of such stamps at such places and at such times as he or she may deem

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necessary and may license agents for such purpose. The commissioner may license wholesale dealers in cigarettes, who maintain separate warehousing facilities for the purpose of receiving and distributing cigarettes and conducting their business, and who have received commitments from at least two cigarette manufacturers whose aggregate market share is at least forty percent of the New York state cigarette market, [and importers, exporters and manufacturers of cigarettes, and other persons within or without the state as] or are themselves also licensed as manufacturers, importers or agents to buy [or] and affix stamps to be used in paying the tax [herein] imposed by this article. No person other than a licensed agent may purchase or affix stamps and agents shall not sell or provide such stamps to any other agent or person, but an agent shall at all times have the right to appoint the person in his or her employ who is to affix the stamps to any cigarettes under the agent's control. The fee for filing such application for an agent's license shall be one thousand five hundred dollars, unless such fee has been paid during the preceding twelve months, in which case, the fee for a new license shall be one thousand dollars. All of the provisions of section four hundred eighty of this article relating to wholesale dealers' licenses, including the procedure for suspension, revocation, refusal to license and for hearings, except for paragraphs (c) and [(g)] (f) of subdivision one of such section, shall be applicable to agents' licenses applied for or granted pursuant to this section, as if such provisions had been set forth in full in this subdivision and had expressly referred to the applicant for, or the holder of, an agent's license. Whenever the commissioner shall sell and deliver to any such agent any such stamps, such agent shall be entitled to receive as compensation for his or her services and expenses as such agent in [selling or] affixing such stamps, and to retain out of the moneys to be paid by him or her for such stamps, a commission on the par value thereof. The commissioner is hereby authorized to prescribe a schedule of commissions, not exceeding five per centum, allowable to such agent for buying and affixing such stamps. Such schedule shall be uniform with respect to the different types of stamps used, and may be on a graduated scale with respect to the number of stamps purchased. The commissioner may, in his or her discretion, permit an agent to pay for such stamps within thirty days after the date of purchase and may require any such agent to file with the department [of taxation and finance] a bond issued by a surety company approved by the superintendent of financial services as to solvency and responsibility and authorized to transact business in the state or other security acceptable to the commissioner, in such amount as the commissioner may fix, to secure the payment of any sums due from such agent pursuant to this article. If securities are deposited as security under this subdivision, such securities shall be kept in the custody of the commissioner and may be sold by the commissioner if it becomes necessary so to do in order to recover any sums due from such agent pursuant to this article, but no such sale shall be had until after such agent shall have had opportunity to litigate the validity of any tax if it elects so to do. Upon any such sale, the surplus, if any, above the sums due under this article shall be returned to such agent.

2. Stamps shall be applied by a licensed agent to each package of cigarettes sold or distributed within this state as follows: (a) A tax stamp shall be applied to all cigarette packages containing cigarettes subject to state tax under this article, including to cigarettes subject to reduced state tax under subdivision two of section four hundred seventy-one-e of this article.

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(b) Except as provided in paragraph (c) of this subdivision, a tax-exempt stamp shall be applied to all cigarette packages intended for sale or distribution to consumers not subject to state tax under paragraph (a) of subdivision one of section four hundred seventy-one-e of this article.