Legislature(2003 - 2004)
2004-05-11 House Journal
Full Journal pdf2004-05-11 House Journal Page 4320 HB 503 A message dated May 11, 2004, was read stating the Senate has passed: HOUSE BILL NO. 503 "An Act relating to the tobacco product Master Settlement Agreement; and providing for an effective date." with the following amendment and it is transmitted for consideration: HOUSE BILL NO. 503 am S "An Act relating to taxes on cigarettes and tobacco products, to tax stamps on cigarettes, to forfeiture of cigarettes and of property used in the manufacture, transportation, facilitation of transportation, possession, offering for sale, or sale of unstamped cigarettes, to unfair cigarette sales, and to licenses and licensees under the Cigarette Tax Act; the tobacco product Master Settlement Agreement; and providing for an effective date." (SCR 32 - title change resolution) The message further stated that under Rule 43(b) of the Uniform Rules engrossment had been waived and the following certified amendment was attached: Page 1, line 1, following "relating to": Insert "taxes on cigarettes and tobacco products, to tax stamps on cigarettes, to forfeiture of cigarettes and of property used in the manufacture, transportation, facilitation of transportation, 2004-05-11 House Journal Page 4321 possession, offering for sale, or sale of unstamped cigarettes, to unfair cigarette sales, and to licenses and licensees under the Cigarette Tax Act;" Page 1, line 3: Insert new bill sections to read: "* Section 1. AS 43.50.030(d) is amended to read: (d) For each license issued to a direct-buying retailer, and for each renewal, the fee is $50 [$25]. * Sec. 2. AS 43.50.035 is repealed and reenacted to read: Sec. 43.50.035. Wholesaler-distributor license. (a) A person outside of this state who sells or distributes cigarettes into this state and is not required to be licensed under AS 43.50.010 may apply for a wholesaler-distributor license. (b) A person outside of this state who sells or distributes cigarettes into this state, who is not required to be licensed under AS 43.50.010, and who wishes to purchase stamps under this chapter shall be licensed as a wholesaler-distributor. (c) The department shall adopt reasonable regulations necessary for the collection of cigarette taxes on cigarette sales or distributions made by a wholesaler-distributor licensee into this state and standards for (1) application and issuance of the license; and (2) refusal to issue the license. * Sec. 3. AS 43.50.090(a) is amended to read: (a) There is levied an excise tax of 38 mills on each cigarette imported or acquired in the state. The tax shall be paid through the use of stamps as provided in AS 43.50.500 - 43.50.700. A person who imports or acquires cigarettes in the state upon which a stamp required by this chapter has not been affixed in accordance with AS 43.50.500 - 43.50.700, who fails to apply to purchase stamps as required by AS 43.50.540(a), and who fails to pay the tax through the use of stamps is not relieved [THE FAILURE TO PAY THE TAX THROUGH THE USE OF STAMPS DOES NOT RELIEVE A PERSON] of the obligation to pay taxes due under this chapter. The person shall still pay the tax, and the tax is due on or before the end of the month following the month in which cigarettes were manufactured, imported, acquired, or sold in this state. Cigarettes upon which the excise is imposed are not again subject to the excise when acquired by another person. 2004-05-11 House Journal Page 4322 * Sec. 4. AS 43.50.170(1) is amended to read: (1) "buyer" means a person who imports or acquires cigarettes for the person's own consumption from any source other than a manufacturer, distributor, direct-buying retailer, [OR] retailer, or wholesaler-distributor; * Sec. 5. AS 43.50.170(3) is amended to read: (3) "direct-buying retailer" means a person who is engaged in the sale of cigarettes at retail in this state, and who brings cigarettes or causes cigarettes to be brought [CIGARETTES] into the state that are not purchased from a wholesaler-distributor; * Sec. 6. AS 43.50.170(4) is amended to read: (4) "distributor" means a person who brings cigarettes that are not purchased from a wholesaler-distributor, or has cigarettes that are not purchased from a wholesaler-distributor brought into the state, and who sells or distributes at least 75 percent [PER CENT] of the cigarettes to others for resale in the state; * Sec. 7. AS 43.50.170(12) is amended to read: (12) "wholesaler-distributor" means a person outside this state who sells or distributes cigarettes into this state, [AND] who is not required to be licensed under AS 43.50.010, and who is licensed under AS 43.50.035. * Sec. 8. AS 43.50.190(a) is amended to read: (a) There is levied an excise tax of 62 [12] mills on each cigarette imported or acquired in this state. * Sec. 9. AS 43.50.300 is amended to read: Sec. 43.50.300. Excise tax levied. An excise tax is levied on tobacco products in the state at the rate of 100 [75] percent of the wholesale price of the tobacco products. The tax is levied when a person (1) brings, or causes to be brought, a tobacco product into the state from outside the state for sale; (2) makes, manufactures, or fabricates a tobacco product in the state for sale in the state; [OR] (3) ships or transports a tobacco product to a retailer in the state for sale by the retailer or to an individual for personal consumption; or (4) brings, or causes to be brought, a tobacco product into the state from outside the state for personal consumption. 2004-05-11 House Journal Page 4323 * Sec. 10. AS 43.50.320(a) is repealed and reenacted to read: (a) Except as provided in (g) of this section, a person engaging in an activity described in AS 43.50.300(1) - (3) must be licensed by the department as a distributor, and a person engaging in an activity described in AS 43.50.300(4) must be licensed as a buyer. * Sec. 11. AS 43.50.320(b) is amended to read: (b) The department, upon application and payment of a fee of $50, shall issue a license for one year to a person who applies for a distributor license [UNDER (a) OF THIS SECTION]. The department, upon application and payment of a fee of $25, shall issue a license for one year to a person who applies for a buyer license. * Sec. 12. AS 43.50.320(d) is amended to read: (d) A distributor license issued under this section must include the name and address of the licensee, the type of business to be conducted, and the year for which the license is issued. * Sec. 13. AS 43.50.320(e) is amended to read: (e) The department may renew a distributor license issued under this section for a fee of $50. The department may renew a buyer license issued under this section for a fee of $25. * Sec. 14. AS 43.50.330(a) is amended to read: (a) On or before the last day of each calendar month, a licensee shall file a return with the department. The return must state the number or amount of tobacco products sold or imported for personal consumption by the licensee during the preceding calendar month, the selling price or purchase price of the tobacco products, and the amount of tax imposed on the tobacco products. * Sec. 15. AS 43.50.390(2) is amended to read: (2) "licensee" means a distributor or buyer who is (A) licensed under AS 43.50.320; or (B) exempted by AS 43.50.320(g) from licensing under AS 43.50.320; * Sec. 16. AS 43.50.390 is amended by adding a new paragraph to read: (6) "buyer" means a person who imports tobacco products for the person's own consumption from any source other than a licensee. * Sec. 17. AS 43.50.540(f) is amended to read: (f) Title to the stamps passes immediately to the licensee at 2004-05-11 House Journal Page 4324 the time the stamps are obtained in person or, if the stamps are shipped or transported, at the time the stamps are placed in the United States mail or received by the common or private carrier. The licensee bears all costs associated with shipping or transporting the stamps. The department may replace stamps lost or damaged in transit if the licensee provides proof acceptable to the department verifying that the loss or damage occurred while the stamps were in the possession of the shipping company and the shipping company substantiates the loss or damage. Damaged stamps must be returned to the department before the department may replace them [AND ALL RISKS OF POSSIBLE LOSS OR DAMAGE WHILE IN TRANSIT]. * Sec. 18. AS 43.50.550(b) is amended to read: (b) A licensee who submits an application for the purchase of stamps on a deferred-payment basis shall, as a condition of approval of the application, post a bond acceptable to the department in an amount equal to (1) 200 percent of the maximum dollar amount of allowed monthly purchases under this section; or (2) 100 percent of the maximum dollar amount of allowed monthly purchases under this section if the licensee (A) holds a license issued under AS 43.50.010 for a physical location in this state; and (B) has been in full compliance with the provisions of this title and regulations adopted under this title during the preceding 60 months [AS A CONDITION OF APPROVAL OF THE APPLICATION]. * Sec. 19. AS 43.50.580(b) is amended to read: (b) A licensee may possess unstamped cigarettes in this state if (1) the licensee posts a surety bond in an amount satisfactory to the department to ensure performance of its duties under this chapter; and (2) unstamped cigarettes are necessary for the conduct of the licensee's business in making sales or distributions (A) to an instrumentality of the federal government or an Indian tribal organization authorized by law to possess cigarettes not taxed under this chapter; or (B) to customers outside the state and the licensee 2004-05-11 House Journal Page 4325 provides proof acceptable to the department that the licensee is properly licensed in the jurisdictions outside the state where the sales or distributions are made. * Sec. 20. AS 43.50.590(a) is amended to read: (a) The department shall adopt procedures for a refund or credit to a licensee in the amount of the denominated value, less the discount given under AS 43.50.540, for (1) unused or damaged stamps; [OR] (2) stamps affixed to cigarette packages that have become unfit for use or sale, are destroyed, or are returned to the manufacturer for credit or replacement if the licensee provides proof acceptable to the department that the cigarettes have not been and will not be consumed in this state; or (3) stamps affixed to cigarette packages that are sold or distributed outside the state if the licensee provides proof acceptable to the department that the cigarettes have not been and will not be consumed in this state and the licensee is properly licensed in the jurisdictions outside the state where the sales or distributions are made. * Sec. 21. AS 43.50 is amended by adding a new section to read: Sec. 43.50.625. Forfeiture of other property. (a) Upon a showing of probable cause that a person has committed the crime of misconduct involving unstamped cigarettes or stamps in the first degree under AS 43.50.640, the following are subject to forfeiture: (1) material and equipment used in the manufacture, sale, offering for sale, or possession for sale of cigarettes in this state in violation of AS 43.50.500 - 43.50.640 or 43.50.660 - 43.50.700; (2) aircraft, vehicles, or vessels used to transport or facilitate the transportation of cigarettes manufactured, sold, offered for sale, or possessed for sale in this state in violation of AS 43.50.500 - 43.50.640 or 43.50.660 - 43.50.700; (3) money, securities, negotiable instruments, or other things of value used in financial transactions derived from activity prohibited under AS 43.50.500 - 43.50.640 or 43.50.660 - 43.50.700. (b) Property subject to forfeiture under this section may be actually or constructively seized under an order issued by the superior court upon a showing of probable cause that the property is subject to forfeiture under this section. Constructive seizure is 2004-05-11 House Journal Page 4326 effected upon posting a signed notice of seizure on the item to be forfeited, stating the violation and the date and place of seizure. Seizure without a court order may be made if (1) the seizure is incident to a valid arrest or search; (2) the property subject to seizure is the subject of a prior judgment in favor of the state; or (3) there is probable cause to believe that the property is subject to forfeiture under (a) of this section; property seized under this paragraph may be held for not more than 48 hours unless an order of forfeiture is issued by the court before the end of that time period. (c) Within 30 days after a seizure under this section, the Department of Public Safety shall make reasonable efforts to ascertain the identity and whereabouts of any person holding an interest, or an assignee of a person holding an interest, in the property seized, including a right to possession, or a lien, mortgage, or conditional sales contract. The Department of Public Safety shall notify the person ascertained to have an interest in the seized property of the impending forfeiture, and, before forfeiture, the Department of Public Safety shall publish, once a week for four consecutive calendar weeks, a notice of the impending forfeiture in a newspaper of general circulation in the judicial district in which the seizure was made, or if a newspaper is not published in that judicial district, in a newspaper published in the state and distributed in that judicial district. (d) Property subject to forfeiture under (a) of this section may be forfeited (1) upon conviction of a person for a violation of AS 43.50.640; or (2) upon judgment by the superior court in a proceeding in rem that the property was used in a manner subjecting it to forfeiture under (a) of this section. (e) The owner of property subject to forfeiture under (a) of this section is entitled to relief from the forfeiture in the nature of remission of the forfeiture if, in an action under (d) of this section, the owner shows that the owner (1) was not a party to the violation; (2) did not have actual knowledge or reasonable cause to believe that the property was used or was to be used in violation of the law; and 2004-05-11 House Journal Page 4327 (3) did not have actual knowledge or reasonable cause to believe that the person committing the violation had, within the last 10 years, (A) a criminal record for violating this chapter; or (B) committed other violations of this chapter. (f) The court may allow the owner of property that is subject to forfeiture under (a) of this section to redeem the property by paying an amount determined by the court to be the fair market value of the property. (g) A person other than the owner holding, or the assignee of, a lien, mortgage, or conditional sales contract on, or the right to possession of property subject to forfeiture under (a) of this section is entitled to relief from the forfeiture in the nature of remission of the forfeiture if, in an action under (d) of this section, the person shows that the person (1) was not a party to the violation subjecting the property to forfeiture; (2) did not have actual knowledge or reasonable cause to believe that the property was used or was to be used in violation of the law; and (3) did not have actual knowledge or reasonable cause to believe that the person committing the violation had, within the last 10 years, (A) a criminal record for violating this chapter; or (B) committed other violations of this chapter. (h) It is not a defense in an in rem forfeiture proceeding brought under (d)(2) of this section that a criminal proceeding is pending or has resulted in conviction or acquittal of a person charged with violating AS 43.50.640. (i) Property forfeited under this section shall be placed in the custody of the commissioner of public safety for disposition according to an order entered by the court. The court shall order destroyed any property forfeited under this section that is harmful to the public and may order any property forfeited under this section that was seized in a municipality to be transferred to the municipality in which the property was seized or to another municipality affected by the crime for which the property was forfeited. The state shall notify all municipalities affected by the crime of the forfeiture proceeding. Other property shall be ordered sold and the proceeds used for payment of expenses of the 2004-05-11 House Journal Page 4328 proceedings for forfeiture and sale, including expenses of seizure, custody, and court costs. The remainder of the proceeds shall be deposited in the general fund. (j) The title to a vehicle or vessel forfeited to the state under this section may be transferred by the state to a municipality or the local governing body of a village for official use by the municipality or village, on condition that the vehicle or vessel not be available for use by the defendant. * Sec. 22. AS 43.50.640(a) is amended to read: (a) A person commits the crime of misconduct involving unstamped cigarettes or stamps in the first degree if the person (1) with reckless disregard that the cigarettes are unstamped (A) sells or distributes 5,000 [1,000] or more unstamped cigarettes in a single transaction; (B) owns or possesses 5,000 [1,000] or more unstamped cigarettes with the intent to sell; or (C) acquires, holds, transports, imports, or possesses 10,000 or more unstamped cigarettes; or (2) with reckless disregard that the stamp was previously affixed to another cigarette package[;] (A) affixes a previously used stamp to a cigarette package; or (B) possesses, sells, or distributes a previously used stamp. * Sec. 23. AS 43.50.650(a) is amended to read: (a) A person commits the crime of misconduct involving unstamped cigarettes or stamps in the second degree if the person (1) with reckless disregard that the cigarettes are unstamped (A) sells or distributes at least one but fewer than 5,000 [1,000] unstamped cigarettes in a single transaction; (B) owns or possesses at least one but fewer than 5,000 [1,000] unstamped cigarettes, with intent to sell; or (C) acquires, holds, transports, imports, or possesses at least one but fewer than 10,000 unstamped cigarettes; or (2) is not licensed under this chapter or otherwise authorized by the department to possess stamps and possesses a stamp that is not affixed to a cigarette package. * Sec. 24. AS 43.50.710 is amended by adding a new subsection to 2004-05-11 House Journal Page 4329 read: (e) Nothing in this section prohibits a manufacturer from offering promotions to a wholesaler or a retailer provided the wholesale promotion is the same for all participating wholesalers and the retail promotion is the same for all participating retailers. * Sec. 25. AS 43.50.720 is amended to read: Sec. 43.50.720. Sale at less than cost; with gift or concession. In all advertisements, offers for sale, or sales involving two or more items when at least one of the items is cigarettes at a combined price, and in all advertisements, offers for sale, or sales involving the giving of any gift, concession, or coupon of any kind in conjunction with the sale of cigarettes, the wholesaler's or retailer's combined selling price may not be below the actual cost to the wholesaler or the actual cost to the retailer, respectively, of the total of all articles, products, commodities, gifts, and concessions included in the transactions, except that, if any articles, products, commodities, gifts, or concessions are not cigarettes, the actual [BASIC] cost shall be determined as provided under AS 43.50.800. * Sec. 26. AS 43.50.760(b) is amended to read: (b) The presumptive actual [WHOLESALE AND PRESUMPTIVE RETAIL] cost of cigarettes as determined by the department under AS 43.50.800 [FROM THE MANUFACTURER'S PRICE LIST] is considered competent evidence in a court action or proceeding as tending to prove actual cost to the wholesaler or retailer complained against. A party against whom the presumptive actual [WHOLESALE OR PRESUMPTIVE RETAIL] cost as determined by the department is introduced in evidence has the right to offer evidence tending to prove any inaccuracy of the presumptive actual [WHOLESALE OR PRESUMPTIVE RETAIL] cost or any statement of facts that would impair its probative value. * Sec. 27. AS 43.50.770 is amended to read: Sec. 43.50.770. Determination of cost of cigarettes purchased outside of ordinary channels of trade. In establishing the actual [BASIC] cost of cigarettes to a wholesaler or retailer, the invoice cost [OR THE ACTUAL COST] of cigarettes purchased at a forced, bankrupt, or closeout sale, or other sale outside the ordinary channels of trade may not be used. * Sec. 28. AS 43.50.790(a) is amended to read: 2004-05-11 House Journal Page 4330 (a) The department (1) shall administer AS 43.50.710 - 43.50.849; (2) may adopt regulations relating to the administration and enforcement of AS 43.50.710 - 43.50.849; (3) may determine the actual [BASIC] cost of cigarettes to a wholesaler or retailer as provided in AS 43.50.800 [FROM INFORMATION OBTAINED FROM A MANUFACTURER]; (4) may, after reasonable notice and hearing, revoke or suspend a license issued under AS 43.50.010 or 43.50.035 to a person who refuses or neglects to comply with a provision of AS 43.50.710 - 43.50.849. * Sec. 29. AS 43.50.800 is repealed and reenacted to read: Sec. 43.50.800. Presumptions applicable to determination of cost. (a) The presumptive actual cost of cigarettes to a wholesaler is, for purposes of AS 43.50.710 - 43.50.849, the presumptive wholesale cost as calculated by the department plus an amount equal to four and one-half percent of the presumptive wholesale cost to account for business costs. For purposes of this section, the presumptive wholesale cost is the manufacturer's list price, less trade discounts, plus the full face value of all cigarette taxes. (b) The presumptive actual cost of cigarettes to a retailer is, for purposes of AS 43.50.710 - 43.50.849, the presumptive actual cost of cigarettes to the wholesaler as calculated by the department under (a) of this section, plus an amount equal to six percent of the presumptive actual cost of cigarettes to the wholesaler to account for business costs. (c) A wholesaler or retailer that wishes to advertise, offer to sell, or sell cigarettes at less than the presumptive actual cost to the wholesaler or retailer as calculated under (a) or (b) of this section must first obtain approval from the department. The department may grant approval only if the wholesaler or retailer provides proof satisfactory to the department that the wholesaler or retailer's actual cost is lower than presumed. Approval for cigarette sales at less than the presumptive actual cost as determined under (a) or (b) of this section may not be granted for a period longer than one year. In reviewing proof of actual wholesale or retail cost, the department may consider the costs reflected on the actual invoice, but may not consider cash discounts. In reviewing proof of actual costs, the department may 2004-05-11 House Journal Page 4331 consider the standards and methods of accounting regularly employed, and must include labor costs, rent, depreciation, selling costs, maintenance of equipment, delivery costs, all types of licenses, taxes, insurance, advertising, preopening expenses, provision for impaired assets and closing costs, interest expenses, and provision for merger and restructuring expenses. The department shall adopt regulations under which the wholesaler's and retailer's actual costs are determined for purposes of AS 43.50.710 - 43.50.849." Renumber the following bill sections accordingly. Page 3, following line 22: Insert new bill sections to read: "* Sec. 33. The uncodified law of the State of Alaska enacted in sec. 4, ch. 48, SLA 1997, is repealed and reenacted to read: Sec. 4. AS 43.50.190(a) is repealed and reenacted to read: (a) There is levied an excise tax of 97.5 mills on each cigarette imported or acquired in this state. * Sec. 34. AS 43.50.740(b), 43.50.849(1), 43.50.849(6), and 43.50.849(7) are repealed." Renumber the following bill sections accordingly. Page 3, line 25: Delete "Section 2" Insert "Section 31" Page 3, line 26: Delete "sec. 1" Insert "sec. 30" Page 3, line 28: Delete "Section 3" Insert "Section 32" Delete "sec. 1" Insert "sec. 30" Page 3, line 29: Delete "sec. 2" Insert "sec. 31" 2004-05-11 House Journal Page 4332 Page 3, line 30: Delete all material. Insert a new bill section to read: "* Sec. 36. The uncodified law of the State of Alaska is amended by adding a new section to read: TRANSITION: FLOOR STOCK TAX FOR CERTAIN CIGARETTES IN THE STATE ON THE EFFECTIVE DATE OF THIS SECTION. (a) Notwithstanding any other provision to the contrary, a floor stock tax is imposed at 12:01 a.m. on the effective date of this section upon every person in control or possession of cigarettes for sale or distribution in the state that were taxed at the rate in effect before the effective date of this section. The floor stock tax is the difference between the tax computed on each cigarette as provided in AS 43.50.190, as amended by sec. 8 of this Act, on the effective date of this section and the tax actually paid on each cigarette as required by AS 43.50.190 as it read on the day before the effective date of this section. The person subject to the floor stock tax under this section must provide proof that the tax required by AS 43.50.190, as it read on the day before the effective date of this section, on each cigarette was previously paid or the tax actually paid on each cigarette is considered to be zero. (b) A person subject to the floor stock tax under this section shall file a report on a form prescribed by the Department of Revenue and pay the tax to the Department of Revenue in six sequential monthly installments. The first installment shall be paid not later than the last day of the month in which this section takes effect. The penalty, interest, and taxpayer remedy provisions of AS 43.05 apply to the floor stock tax under this section." Renumber the following bill sections accordingly. Page 3, line 31: Delete "sec. 2" Insert "sec. 31" Delete "sec. 4(a)" Insert "sec. 35(a)" Page 4, line 2: Delete "sec. 1" Insert "sec. 30" 2004-05-11 House Journal Page 4333 Page 4, line 3: Delete "sec. 3" Insert "sec. 32" Delete "sec. 4(b)" Insert "sec. 35(b)" Page 4, line 5: Delete "sec. 2" Insert "sec. 31" Page 4, following line 5: Insert a new bill section to read: "* Sec. 39. Except as provided in secs. 37 and 38 of this Act, this Act takes effect July 1, 2004. " HB 503 is under Unfinished Business.