PART 1. COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3. TAX ADMINISTRATION
SUBCHAPTER G. CIGARETTE TAX
34 TAC §3.101
The Comptroller of Public Accounts proposes amendments to §3.101, concerning cigarette tax and stamping activities. This section reflects changes made under Senate Bill 1390, 85th Legislature, 2017. The bill enacted Tax Code, §154.026 (Cigarettes Used Exclusively for Research Purposes) to exempt cigarettes used exclusively for research purposes from cigarette taxes and stamping requirements.
The comptroller reorganizes subsection (a) into two new paragraphs to address the exemption for research cigarettes under Senate Bill 1390. The existing language in subsection (a) is in new paragraph (1). New paragraph (2) addresses the tax and stamping requirement exemptions provided for research cigarettes.
Throughout the section, titles are added to statutory references. In addition, the comptroller is amending the section to use the abbreviation TABC instead of the phrase "Texas Alcoholic Beverage Commission" where appropriate.
Tom Currah, Chief Revenue Estimator, has determined that during the first five years that the proposed amendment is in effect, the amendment: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the number of individuals subject to the rules' applicability; and will not positively or adversely affect this state's economy. This proposal amends a current rule.
Mr. Currah also has determined that for each year of the first five years the rule is in effect, proposed amendment would benefit the public by conforming the rule to current statutes. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. The proposed amendment would have no significant fiscal impact on the state government, units of local government, or individuals. There would be no anticipated significant economic costs to the public.
Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.
The amendments are proposed under Tax Code, §111.002 (Comptroller's Rules; Compliance; Forfeiture) and §111.0022 (Application to Other Laws Administered by Comptroller), which provide the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2, and taxes, fees, or other charges which the comptroller administers under other law.
The amendments implement Tax Code, §154.026.
§3.101.Cigarette Tax and Stamping Activities.
(a) Imposition of tax.
(1) A tax is imposed on a person who uses or disposes of cigarettes in this state. The tax rate is $70.50 per thousand on cigarettes weighing three pounds or less per thousand plus $2.10 per thousand on cigarettes weighing more than three pounds per thousand. The tax becomes due and payable when a person in this state receives cigarettes to make a first sale. The ultimate consumer or user of cigarettes in this state bears the impact of the tax; and, if another person pays the tax, the amount of the tax is added to the price to the ultimate consumer or user. A person who pays the tax shall securely affix a stamp to each individual package of cigarettes to show payment of the tax. Absence of a stamp on an individual package of cigarettes is notice that the tax has not been paid.
(2) Cigarettes are exempt from the imposition of tax and the stamping requirements described in this section if the cigarettes are:
(A) contained in a package labeled with "Experimental Use Only," "Reference Cigarettes," or other similar wording indicating that the manufacturer intends for the product to be used exclusively for experimental purposes in compliance with 27 Code of Federal Regulations Section 40.232 (Experimental Purposes);
(B) sold directly by a manufacturer to a research facility in this state, including:
(i) a laboratory, hospital, medical center, college, or university; or
(ii) a facility designated as a Tobacco Center of Regulatory Science by the National Institutes of Health;
(C) used by the research facility exclusively for experimental purposes; and
(D) not resold by the research facility.
(b) Cigarette tax stamp meters. Cigarette distributors are not authorized to use stamp metering machines as evidence of payment of the cigarette tax.
(c) Cigarette tax stamp credits.
(1) Allowance of credit for cigarette tax stamps. The comptroller may authorize credit on:
(A) stamps that are affixed to cigarette packages that have been damaged or are unfit for sale and have been returned to the manufacturer in accordance with Tax Code, §154.306 (Exchange of Stamps);
(B) stamps that have been destroyed by vandalism, fire, flood, or other natural disasters. The distributor must present evidence that such stamps were purchased by the distributor and were subsequently destroyed by such natural disaster;
(C) stamps that have been erroneously affixed to cigarette carton flaps rather than the cigarette packages. The distributor must submit the stamped carton flaps to the comptroller in order to obtain credit. The comptroller will issue an authorization for refund of the tax with disallowance of the stamping discount;
(D) stamps used to restamp cigarette packages provided that the original tax stamps were of an illegible quality and the restamping is required by the comptroller's office. There is no stamping allowance for restamped cigarettes; or
(E) stamps that have been torn or otherwise damaged by a stamping machine. The distributor must submit the damaged stamps to the comptroller in order to obtain credit. The comptroller will notify the distributor of the amount of stamp credit authorized.
(2) Disallowance of credit for cigarette tax stamps. The comptroller will not authorize credit for stamps lost due to theft, negligence, or any unaccountable loss or for stamps that have been affixed two or more times to the same package of cigarettes resulting in double stamping.
(d) Cigarette tax stamp payments. All persons who purchase cigarette tax stamps from the comptroller shall transfer payments by electronic funds transfer.
(e) Evidence of return of cigarettes unfit for use. A distributor who requests replacement of cigarette tax stamps affixed to cigarettes that have been returned to the manufacturer must submit the following documentation to the comptroller:
(1) a credit memorandum from the manufacturer to whom the cigarettes were returned, verifying the number of cigarettes returned for credit;
(2) an affidavit from the manufacturer confirming that the tax stamps affixed to the cigarettes listed in the memorandum have been destroyed and listing the number, denomination, and the value of such stamps; and
(3) an affidavit from the distributor stating that the distributor returned the number of cigarettes listed in the manufacturer's credit memorandum and that the number, denomination, and the value of state cigarette tax stamps shown in the manufacturer's affidavit were affixed to the cigarettes returned.
(f) Delivery of unstamped cigarettes to instrumentalities of the United States government.
(1) Distributors may use their own vehicles to deliver previously invoiced quantities of unstamped cigarettes to instrumentalities of the United States government. These tax-free cigarettes must be packaged in a manner that prevents the unstamped cigarettes from commingling with any other cigarettes in the distributor's vehicle.
(2) Each sale of unstamped cigarettes by a distributor to an instrumentality of the United States government shall be supported by a separate sales invoice and a properly completed federal exemption certificate. Sales invoices must be numbered and dated and must show the name of the seller, name of the purchaser, and the destination.
(g) Generation and affixing of cigarette tax stamps by the Texas Alcoholic Beverage Commission (TABC).
(1) The comptroller, by interagency cooperation contract,
may authorize the TABC [
Texas Alcoholic Beverage Commission
] to generate a cigarette tax stamp using the TABC's Port of
Entry Tax Collection System (POETCS) and to affix the cigarette tax
stamp to cigarette packages for the purpose of collecting the cigarette
tax at ports of entry into the state.
(2) Payment for the cigarette tax stamps sold will
be made by that agency according to the terms and conditions stipulated
in the interagency cooperation contract between the comptroller and
the TABC [
Texas Alcoholic Beverage Commission].
(h) Affixing of cigarette tax stamps by TABC [
Texas Alcoholic Beverage Commission] agents. Cigarette tax stamps
affixed by agents of the TABC [ Texas Alcoholic Beverage
Commission] must be affixed to the cellophane wrapper on the
bottom of each individual package of cigarettes.
(i) Disposition of cigarettes seized by TABC [
Texas Alcoholic Beverage Commission] agents.
(1) TABC [
Texas Alcoholic Beverage
Commission] agents shall seize all cigarettes for which the
holder refuses to pay the tax imposed by Tax Code, §154.021 (Imposition
and Rate of Tax).
(2) Cigarettes seized shall be released to agents of the comptroller for ultimate disposition.
(j) Importation of 200 or fewer cigarettes.
(1) A person 18 years of age or older, or a person younger than 18 years when the individual possesses the cigarettes in the presence of an adult parent, a guardian, or a spouse of the individual, who imports and personally transports 200 or fewer cigarettes into this state from another state, for personal use and not for sale is not required to pay the tax imposed by Tax Code, §154.021.
(2) TABC [
Texas Alcoholic Beverage
Commission] employees shall collect the tax imposed by Tax Code, §154.021,
at ports of entry from each person who imports and personally transports
more than 200 cigarettes into this state from another state and who
is at least 18 years of age or who is younger than 18 and possesses
the cigarettes in the presence of an adult parent, a guardian, or
a spouse of the individual.
(3) A person younger than 18 years of age may not import and personally transport cigarettes of any quantity into this state, except in the presence of an adult parent, a guardian, or a spouse of the individual.
(4) TABC [
Texas Alcoholic Beverage
Commission] employees shall seize at ports of entry all cigarettes
in the possession of a person younger than 18 years of age, except
in situations where paragraph (3) of this subsection applies.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on January 12, 2018.
Comptroller of Public Accounts
Earliest possible date of adoption: February 25, 2018
For further information, please call: (512) 475-0387