Bill Text: AZ HB2832 | 2024 | Fifty-sixth Legislature 2nd Regular | Introduced
Bill Title: Luxury tax; electronic nicotine systems.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2024-02-08 - House read second time [HB2832 Detail]
Download: Arizona-2024-HB2832-Introduced.html
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REFERENCE TITLE: luxury tax; electronic nicotine systems. |
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State of Arizona House of Representatives Fifty-sixth Legislature Second Regular Session 2024
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HB 2832 |
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Introduced by Representative De Los Santos
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An Act
amending sections 8-1181, 36-770, 42-1124, 42-1125, 42-1127, 42-2003, 42-3001, 42-3004, 42-3005, 42-3008, 42-3010, 42-3051, 42-3052, 42-3053 and 42-3101, Arizona Revised Statutes; amending title 42, chapter 3, article 3, Arizona Revised Statutes, by adding section 42-3105; amending sections 42-3151, 42-3301, 42-3302, 42-3303, 42-3304, 42-3305, 42-3307, 42-3308, 42-3401, 42-3402, 42-3403, 42-3404, 42-3405, 42-3406, 42-3501, 42-3502, 42-3503 and 44-7101, Arizona Revised Statutes; relating to luxury privilege tax.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Subject to the requirements of article IV, part 1, section 1, Constitution of Arizona, section 8-1181, Arizona Revised Statutes, is amended to read:
8-1181. Early childhood development and health fund
A. The early childhood development and health fund is established consisting of funds monies transferred pursuant to subsection D; of this section, federal, state, local and private funds monies accepted by the board pursuant to section 8-1182, ; monies deposited pursuant to section 42-3105 and any monies appropriated to the board by the legislature. The board shall administer the fund.
B. The early childhood development and health fund is divided into the following accounts:
1. The program account. ,
2. The administrative costs account. ,
3. The private gifts account. ,
4. The grant monies account. and
5. The legislative appropriations account.
C. Monies in the program, administrative costs, private gifts and grant monies accounts of the fund are not subject to legislative appropriation and are exempt from the provisions of section 35-190 relating to lapsing of appropriations.
D. Ninety percent of the monies deposited into the early childhood development and health fund pursuant to section 42-3373 42-3372 shall be deposited into the program account and ten percent of the monies shall be deposited into the administrative costs account. Administrative costs of the board, including staff compensation, may only be paid from the administrative costs account. Funds Monies may be transferred by the board from the administrative costs account to the program account, but funds monies may not be transferred from the program account to the administrative costs account. Funds Monies may be transferred by the board from the private gifts account and the grant monies account to the administrative costs account to cover the administrative costs of programs and activities undertaken using gift or grant monies.
E. The board may invest any unexpended monies in the fund as provided in title 35, chapter 2. Interest and other income from investments of monies in any account shall be credited to that account except as otherwise provided by law.
Sec. 2. Subject to the requirements of article IV, part 1, section 1, Constitution of Arizona, section 36-770, Arizona Revised Statutes, is amended to read:
36-770. Tobacco products tax fund
A. The tobacco products tax fund is established consisting of revenues deposited in the fund pursuant to section 42-3251.01, section 42-3302, subsection d and interest earned on those monies. The Arizona health care cost containment system administration shall administer the fund.
B. Forty-two cents $.42 of each dollar in the fund shall be deposited in the proposition 204 protection account established by section 36-778.
C. Five cents $.05 of each dollar in the fund shall be deposited in the health research fund established by section 36-275.
D. Twenty-seven cents $.27 of each dollar in the fund shall be deposited in the medically needy account established by section 36-774.
E. Twenty cents $.20 of each dollar in the fund shall be deposited in the emergency health services account established by section 36-776.
F. Four cents $.04 of each dollar in the fund shall be deposited in the health care adjustment account established by section 36-777.
G. Two cents $.02 of each dollar in the fund shall be deposited in the health education account established by section 36-772.
H. Except as provided in section 36-776, monies in the fund:
1. Are continuously appropriated.
2. Do not revert to the state general fund.
3. Are exempt from the provisions of section 35-190 relating to lapsing of appropriations.
Sec. 3. Section 42-1124, Arizona Revised Statutes, is amended to read:
42-1124. Failure to affix stamps or pay or account for tax; forfeiture of commodity; sale of forfeited commodity; effect of seizure and sale; request for administrative hearing; definitions
A. If the department or its authorized agents or representatives discover any luxury subject to tax under chapter 3 of this title to which official stamps have not been affixed as required or on which the tax has not been paid or accounted for, the department or its agent or representative may seize and take possession of the luxury, and it is deemed forfeited to this state. Except as provided in subsection D or E of this section, the department, within a reasonable time thereafter, pursuant to a notice posted on the premises or by publication in a newspaper of general circulation in the county where the sale is to take place, not fewer than five days before the date of sale, shall offer for sale and sell the forfeited luxuries. The department shall pay the proceeds of the sale into the state general fund. The sale shall take place in the county that is most convenient and economical. The department need not offer any property for sale if, in its opinion, the probable cost of sale exceeds the value of the property.
B. The seizure and sale do not relieve any person from the penalties provided for violating this title.
C. The department of revenue may enter into an interagency agreement with the department of transportation for the purpose of carrying out tobacco or Electronic nicotine delivery system products enforcement under chapter 3 of this title at ports of entry.
D. All tobacco products or Electronic nicotine delivery system products that are seized for violations under this title shall be forfeited to this state. All tobacco products or Electronic nicotine delivery system products that are forfeited to this state pursuant to section 13-3711, 36-798.06 or 42-3461 or section 44-7111, section 6(b), as applicable, shall be destroyed. If a distributor or Electronic nicotine delivery system distributor defrauds this state by knowingly and intentionally failing to keep or make any record, return, report or inventory pertaining to tobacco products or Electronic nicotine delivery system products, by refusing to pay any luxury tax for tobacco products or Electronic nicotine delivery system products subject to tax under chapter 3 of this title or by attempting to evade or defeat any requirement of this title, the distributor or Electronic nicotine delivery system distributor shall forfeit to this state all fixtures, equipment and all other materials and personal property that are located on the premises of the distributor or Electronic nicotine delivery system distributor. Alternatively, at the request of the department, the distributor or Electronic nicotine delivery system distributor may be enjoined by an action commenced by the attorney general or a county attorney in the name of the state from engaging or continuing in any business for which a tax is imposed by this chapter until the tax has been paid and until the person has complied with this title.
E. The department may sell or otherwise dispose of any tobacco products or Electronic nicotine delivery system products forfeited to this state on such conditions as it deems most advantageous and just under the circumstances, unless the tobacco products or Electronic nicotine delivery system products are forfeited pursuant to section 13-3711, 36-798.06 or 42-3461 or section 44-7111, section 6(b), as applicable. The department shall deposit the proceeds of any sales made pursuant to this subsection in the state general fund.
F. The department shall give notice of the seizure and forfeiture of tobacco products or Electronic nicotine delivery system products described in this section by personal service or by certified mail to all persons known by the department to have any right, title or interest in the property. Notice shall include a description of the tobacco products or Electronic nicotine delivery system products seized, the reason for the seizure and the time and place of the seizure. For seizures of cigarettes of more than sixty-one cartons of two hundred cigarettes each or the equivalent in cigarette count, the department shall post and maintain an online notice of seizure and forfeiture on its website for a period of at least six months, beginning not later than ten business days after the date of the personal service of the notice to a person or the date of the mailing of the notice. The online notice shall display the date on which the department posts the notice to the website, which shall serve as the date of publication of the notice.
G. Any person whose legal rights, duties or privileges are determined by the notice of seizure and forfeiture may file a request for an administrative hearing with the department on a form prescribed by the department. The request for an administrative hearing shall contain a statement of the petitioner's interest in the tobacco products or Electronic nicotine delivery system products and an explanation of why the release or recovery of the tobacco products or Electronic nicotine delivery system products is warranted on the ground that the tobacco products or Electronic nicotine delivery system products were erroneously or illegally seized.
H. The seizure and forfeiture of tobacco products or Electronic nicotine delivery system products by the department is an appealable agency action as defined in section 41-1092 and is governed by title 41, chapter 6, article 10 and section 42-1251, except that:
1. A request for an administrative hearing that is filed under subsection G of this section is deemed to be timely filed if the request is filed with the department within ten days after the date of personal service on the petitioner or the date of mailing the notice to the petitioner. Any person who is not served personally or by mail shall file the request within ten days after the date of publication of the notice. The failure of a person to file a timely request constitutes a bar to that person's right to any interest in the tobacco products or Electronic nicotine delivery system products, except insofar as the rights of that person may be established in an action filed by the department under this chapter.
2. If a request for an administrative hearing is not filed with the department at the expiration of ten days after the notice has been personally served, mailed or published, the department's determination is final. If a timely request for an administrative hearing has been filed with the department, the department shall request a hearing by the office of administrative hearings and the department shall suspend action until the final order of the department has been issued. An order that is issued by the office of administrative hearings is the final order of the department thirty days after the petitioner receives the decision unless a decision by the director is issued pursuant to section 42-1251. If the director issues a decision, that decision is the final order of the department.
I. For the purposes of this section, "cigarette", "distributor", "Electronic nicotine delivery system distributor" and "tobacco products" have the same meanings prescribed in section 42-3001.
Sec. 4. Section 42-1125, Arizona Revised Statutes, is amended to read:
42-1125. Civil penalties; definition
A. If a taxpayer fails to make and file a return for a tax administered pursuant to this article on or before the due date of the return or the due date as extended by the department, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect, four and one-half percent of the tax required to be shown on the return shall be added to the tax for each month or fraction of a month elapsing between the due date of the return and the date on which it is filed. The total penalty shall not exceed twenty-five percent of the tax found to be remaining due. The penalty so added to the tax is due and payable on notice and demand from the department. For the purpose of computing the penalty imposed under this subsection, the amount required to be shown as tax on a return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of the month and by the amount of any credit against the tax that may be claimed on the return. If the amount required to be shown as tax on a return is less than the amount shown as tax on the return, the penalty described in this subsection shall be applied by substituting the lower amount.
B. If a taxpayer fails or refuses to file a return on notice and demand by the department, the taxpayer shall pay a penalty of twenty-five percent of the tax, which is due and payable on notice and demand by the department, in addition to any penalty prescribed by subsection A of this section, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. This penalty is payable on notice and demand from the department.
C. If a taxpayer fails or refuses to furnish any information requested in writing by the department, the department may add a penalty of twenty-five percent of the amount of any deficiency tax assessed by the department concerning the assessment of which the information was required, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.
D. If a person fails to pay the amount shown as tax on any return within the time prescribed, a penalty of one-half of one percent, not to exceed a total of ten percent, shall be added to the amount shown as tax for each month or fraction of a month during which the failure continues, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. If the department determines that the person's failure to pay was due to reasonable cause and not due to wilful neglect and that a payment agreement pursuant to section 42-2057 is appropriate, the department shall not impose the penalty unless the taxpayer fails to comply with the payment agreement. If the taxpayer is also subject to a penalty under subsection A of this section for the same tax period, the total penalties under subsection A of this section and this subsection shall not exceed twenty-five percent. For the purpose of computing the penalty imposed under this subsection:
1. The amount shown as tax on a return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of that month and by the amount of any credit against the tax that may be claimed on the return.
2. If the amount shown as tax on a return is greater than the amount required to be shown as tax on that return, the penalty shall be applied by substituting the lower amount.
E. If a person fails to pay any amount required to be shown on any return that is not so shown within twenty-one calendar days after the date of notice and demand, a penalty of one-half of one percent, not to exceed a total of ten percent, shall be added to the amount of tax for each month or fraction of a month during which the failure continues, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. If the taxpayer is also subject to penalty under subsection A of this section for the same tax period, the total penalties under subsection A of this section and this subsection shall not exceed twenty-five percent. For the purpose of computing the penalty imposed under this subsection, any amount required to be shown on any return shall be reduced by the amount of any part of the tax that is paid on or before the beginning of that month and by the amount of any credit against the tax that may be claimed on the return.
F. In the case of a deficiency, for which a determination is made of an additional amount due, that is due to negligence but without intent to defraud, the person shall pay a penalty of ten percent of the amount of the deficiency.
G. If part of a deficiency is due to fraud with intent to evade tax, fifty percent of the total amount of the tax, in addition to the deficiency, interest and other penalties provided in this section, shall be assessed, collected and paid as if it were a deficiency.
H. If the amount, whether determined by the department or the taxpayer, required to be withheld by the employer pursuant to title 43, chapter 4 is not paid to the department on or before the date prescribed for its remittance, the department may add a penalty of twenty-five percent of the amount required to be withheld and paid, unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.
I. A person who, with or without intent to evade any requirement of this article or any lawful administrative rule of the department of revenue under this article, fails to file a return or to supply information required under this article or who, with or without such intent, makes, prepares, renders, signs or verifies a false or fraudulent return or statement or supplies false or fraudulent information shall pay a penalty of not more than $1,000. This penalty shall be recovered by the department of law in the name of this state by an action in any court of competent jurisdiction.
J. If the taxpayer files what purports to be a return of any tax administered pursuant to this article but that is frivolous or that is made with the intent to delay or impede the administration of the tax laws, that person shall pay a penalty of $500.
K. If any person who is required to file or provide an information return under this title or title 43 or who is required to file or provide a return or report under chapter 3 of this title fails to file the return or report at the prescribed time or in the manner required, or files a return or report that fails to show the information required, that person shall pay a penalty of $100 for each month or fraction of a month during which the failure continues unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. The total penalties for each return or report under this subsection shall not exceed $500.
L. If it appears to the superior court that proceedings before it have been instituted or maintained by a taxpayer primarily for delay or that the taxpayer's position is frivolous or groundless, the court may award damages in an amount not to exceed $1,000 to this state. Damages so awarded shall be collected as a part of the tax.
M. A person who is required under section 43-413 to furnish a statement to an employee and who wilfully furnishes a false or fraudulent statement, or who wilfully fails to furnish a statement required by section 43-413, is for each such failure subject to a penalty of $50.
N. A person who is required to collect or truthfully account for and pay a tax administered pursuant to this article, including any luxury privilege tax, and who wilfully fails to collect the tax or truthfully account for and pay the tax, or wilfully attempts in any manner to evade or defeat the tax or its payment, is, in addition to other penalties provided by law, liable for a penalty equal to the total amount of the tax evaded, not collected or not accounted for and paid. Except as provided in subsections U, V and W of this section, no other penalty under this section relating to failure to pay tax may be imposed for any offense to which this subsection applies.
O. For reporting periods beginning from and after February 28, 2011, if a taxpayer who is required under section 42-1129 to pay by electronic funds transfer fails to do so, that taxpayer shall pay a penalty of five percent of the amount of the payment not made by electronic funds transfer unless it is shown that the failure is due to reasonable cause and not due to wilful neglect. For the reporting periods beginning on July 1, 2015, the penalty in this subsection applies to any taxpayer who is required under section 42-3053 to pay by electronic funds transfer and fails to do so unless it is shown that the failure is due to reasonable cause and not due to wilful neglect.
P. Unless due to reasonable cause and not to wilful neglect:
1. A person who fails to provide that person's taxpayer identification number in any return, statement or other document as required by section 42-1105, subsection A shall pay a penalty of $5 for each such failure.
2. A person, when filing any return, statement or other document for compensation on behalf of a taxpayer, who fails to include that person's own taxpayer identification number and the taxpayer's identification number shall pay a penalty of $50 for each such failure.
3. A person, when filing any return, statement or other document without compensation on behalf of a taxpayer, who fails to include that person's own taxpayer identification number and the taxpayer's identification number is not subject to a penalty.
No other penalty under this section may be imposed if the only violation is failure to provide taxpayer identification numbers.
Q. If a taxpayer fails to pay the full amount of estimated tax required by title 43, chapter 5, article 6, a penalty is assessed equal to the amount of interest that would otherwise accrue under section 42-1123 on the amount not paid for the period of nonpayment, not exceeding ten percent of the amount not paid. The penalty prescribed by this subsection is in lieu of any other penalty otherwise prescribed by this section and in lieu of interest prescribed by section 42-1123.
R. Beginning January 1, 2015, if a taxpayer continues in business without timely renewing a municipal privilege tax license as prescribed in section 42-5005, subsection D, a civil penalty of up to $25 shall be added to the renewal fee for each jurisdiction.
S. The department of law, with the consent of the department of revenue, may compromise any penalty for which it may bring an action under this section.
T. Penalties shall not be assessed under subsection D of this section on additional amounts of tax paid by a taxpayer at the time the taxpayer voluntarily files an amended return. This subsection does not apply if:
1. The taxpayer is under audit by the department.
2. The amended return was filed on demand or request by the department.
U. In addition to other penalties provided by law, a person who knowingly and intentionally does not comply with any requirement under chapter 3 of this title relating to tobacco products shall pay a penalty of $1,000. A person who knowingly and intentionally does not pay any luxury tax that relates to tobacco products imposed by chapter 3 of this title shall pay a penalty that is equal to ten percent of the amount of the unpaid tax.
V. A manufacturer, or importer, or a distributor or Electronic nicotine delivery system distributor, as defined in section 42-3001, who knowingly and intentionally sells or possesses cigarettes or Electronic nicotine delivery system products with false manufacturing labels or cigarettes with counterfeit tax stamps, or who obtains cigarettes or Electronic nicotine delivery system products through the use of a counterfeit license, shall pay the following penalties:
1. For a first violation involving two thousand or more cigarettes or Electronic nicotine delivery system products, $1,000.
2. For a subsequent violation involving two thousand or more cigarettes or Electronic nicotine delivery system products, $5,000.
W. The civil penalties in this section are in addition to any civil penalty under chapter 3, article 10, 11 or 12 of this title.
X. Notwithstanding subsection A of this section:
1. And except as provided by paragraph 2 of this subsection, the penalty imposed on a taxpayer that fails to make and file a return for tax administered pursuant to chapter 5 or 6 of this title on or before the due date of the return or the due date as extended by the department, unless it is shown that the failure is due to a reasonable cause and not due to wilful neglect, is four and one-half percent of the tax required to be shown on the return, or $25, whichever is greater. The penalty shall be added to the tax for each month or fraction of a month elapsing between the due date of the return and the date on which it is filed. The total penalty may not exceed twenty-five percent of the tax required to be shown on the return, or $100, whichever is greater.
2. The penalty imposed on a taxpayer that is required under section 42-5014 to file electronically and that fails to do so is five percent of the tax required to be shown on the return, or $25, whichever is greater, unless the failure is due to a reasonable cause and not due to wilful neglect.
3. For the purposes of this subsection, "tax required to be shown on the return" means the total tax liability before deducting payments.
Y. Notwithstanding subsection B of this section, the penalty imposed on a taxpayer that fails to file a return pursuant to chapter 5 or 6 of this title on notice and demand by the department is twenty-five percent of the tax, or $100, whichever is greater. The penalty is due and payable on notice and demand by the department, in addition to any penalty prescribed by subsection A of this section, unless it is shown that the failure is due to a reasonable cause and not due to wilful neglect.
Z. For the purposes of this section, and only as applied to the taxes imposed by chapter 5, articles 1 through 6 and chapter 6, articles 1, 2 and 3 of this title, "reasonable cause" means a reasonable basis for the taxpayer to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in this state.
Sec. 5. Section 42-1127, Arizona Revised Statutes, is amended to read:
42-1127. Criminal violation; classification; place of trial; definitions
A. It is a class 4 felony to:
1. Corruptly or by force or threats of force or injury:
(a) Attempt to intimidate, impede or injure an employee of the department acting in an official capacity.
(b) Obstruct, impede or attempt to obstruct or impede the administration of this title or title 43.
2. Attempt by means of bribery, misrepresentation, intimidation or force or threats of force to obstruct, delay or prevent the communication of information or testimony relating to a violation of this title or title 43 to an employee or officer of the department, or knowingly injure another personally or injure the person's property on account of the person giving, personally or by any other person, any such information or testimony to an employee of the department.
3. Make, forge, alter or counterfeit with the intent to defraud a stamp or meter impression prepared or prescribed by the department under chapter 3 of this title, or to knowingly utter, publish, pass or tender as true a false, altered, forged or counterfeited stamp or meter impression, or to use a stamp provided for and required by chapter 3 of this title which has already once been used, with the intent to evade the tax imposed by chapter 3 of this title.
4. Tamper with, or cause to be tampered with, any metering machine authorized to be used under chapter 3 of this title.
B. A first-time violation of this subsection may be designated as a class 1 misdemeanor, but otherwise it is a class 5 felony to:
1. Knowingly fail to pay any tax administered pursuant to this article due or believed due by the taxpayer with intent to evade the tax.
2. Knowingly prepare, present or aid, procure or advise in preparing or presenting any return, affidavit, claim or other document which is fraudulent or is false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the taxpayer authorized or required to present the return, affidavit, claim or document.
3. Simulate or falsely or fraudulently execute or sign any license or other required document, or cause the license or document to be falsely or fraudulently executed or advise or aid in such execution, with the intent to conceal or cover up a material fact relating to a tax administered pursuant to this article.
4. Knowingly fail to file a return or supply required information, or falsify or conceal a material fact, document or record, make a false, fictitious or fraudulent statement or representation or make or use a false writing or document knowing it to contain a false, fictitious or fraudulent statement or entry, with intent that the department rely on the false, fictitious or fraudulent statement or entry in determining tax liability under this article.
5. Purchase, install or use any automated sales suppression device or service or zapper or phantom-ware with the intent to defeat or evade any tax administered pursuant to this article that is due or believed to be due by the taxpayer. In addition, a person that is convicted of a violation of this paragraph:
(a) Is subject to a fine of not more than one hundred thousand dollars $100,000 or, if a corporation, not more than five hundred thousand dollars $500,000. Monies paid as fines shall be deposited in the department of revenue tax fraud interdiction fund established by section 42-1116.02.
(b) Is liable for all taxes, fees, penalties and interest due as a result of the person's use of the automated sales suppression device or service or zapper or phantom-ware.
(c) Shall forfeit all profits associated with the person's purchase or use of the automated sales suppression device or service or zapper or phantom-ware.
6. Sell, license, purchase, install, transfer, sell as a service, manufacture, develop or possess any automated sales suppression device or service or zapper or phantom-ware knowing that the purpose of the device is to defeat or evade any tax administered pursuant to this article. In addition, a person that is convicted of a violation of this paragraph:
(a) Is subject to a fine of not more than one hundred thousand dollars $100,000 or, if a corporation, not more than five hundred thousand dollars $500,000. Monies paid as fines shall be deposited in the department of revenue tax fraud interdiction fund established by section 42-1116.02.
(b) Is liable for all taxes, fees, penalties and interest due as a result of the person's use of the automated sales suppression device or service or zapper or phantom-ware.
(c) Shall forfeit all profits associated with the person's sale or use of the automated sales suppression device or service or zapper or phantom-ware.
C. A distributor as defined in section 42-3001 who violates section 42-3452, subsection A, paragraph 2 is guilty of a class 1 misdemeanor. If the distributor is convicted of a second violation of section 42-3452, subsection A, paragraph 2, the department may revoke the distributor's license issued pursuant to section 42-3401.
D. A distributor or Electronic nicotine delivery system distributor as defined in section 42-3001 who violates any provision of section 42-3401, section 42-3452, subsection A, paragraph 1 or section 42-3456 as applicable is guilty of a class 1 misdemeanor. If the distributor is a licensee under section 42-3401 and is convicted of a second violation of section 42-3456, the department may revoke the distributor's license.
E. It is a class 3 felony for any person to:
1. Except as provided in section 42-3457, transport, in an unstamped or unlawfully stamped condition, for the purpose of sale ten thousand or more cigarettes that were subject to the tax imposed by chapter 3, article 2, 6, 7 or 9 of this title.
2. Wilfully sell or offer for sale, in an unstamped or unlawfully stamped condition, ten thousand or more cigarettes that were subject to the tax imposed by chapter 3, article 2, 6 or 7 of this title.
3. Wilfully sell or offer for sale off an Indian reservation ten thousand or more cigarettes that are stamped for on-reservation sales.
F. For the purposes of subsection E of this section, the possession or transportation in this state at any time by any person, other than a licensed distributor, as defined in section 42-3001, of ten thousand or more cigarettes in an unstamped or unlawfully stamped condition, other than in interstate shipment consistent with federal contraband cigarette trafficking laws (18 United States Code chapter 114), is presumptive evidence that the cigarettes:
1. Are possessed or transported for the purpose of sale.
2. Are subject to the taxes imposed by chapter 3, article 2, 6, 7 or 9 of this title.
G. A person who knowingly sells a luxury on which the tax has not been paid or accounted for as required by chapter 3 of this title is guilty of a class 1 misdemeanor.
H. A retailer who possesses any package, bottle or other container containing a luxury that does not bear the stamps required to be affixed by chapter 3 of this title is guilty of a class 1 misdemeanor.
I. A person is guilty of a class 3 misdemeanor who:
1. Is engaged in the business of selling a luxury, either at wholesale or retail, and who knowingly refuses or fails to produce on demand by the department invoices of all luxuries the person purchased or received within two years immediately before the demand, unless the person shows by satisfactory proof that the person is unable to do so for reasons beyond the person's control.
2. Makes a false entry on an invoice, package or container of luxuries, or who with intent to avoid the taxes imposed by chapter 3 of this title presents a false entry for inspection of the department.
3. Knowingly prevents or hinders the department from making a full inspection of any place where a luxury is sold or stored, or knowingly prevents or hinders the inspection of invoices, books, records or papers required to be kept.
4. Violates any provision of this article or an administrative rule adopted by the department for which no other penalty is prescribed.
J. The place of trial for the offenses enumerated in this section is in the county of residence or principal place of business of the defendant or defendants. If the defendant has no residence or principal place of business in this state, the trial shall be held in Maricopa county.
K. A person who defrauds this state by violating any requirement under chapter 3 of this title, with criminal intent to evade any such requirement, is guilty of a class 4 felony and shall pay a penalty of three times the retail value of the cigarettes involved.
L. A person who knowingly violates any requirement under chapter 3 of this title, with the criminal intent to evade any such requirement, is guilty of a class 6 felony.
M. A person who knowingly sells or offers to sell off an Indian reservation more than two thousand but less than ten thousand cigarettes that are stamped for on-reservation sales, with the criminal intent to evade the tax imposed by chapter 3 of this title, is guilty of a class 5 felony.
N. Any distributor or Electronic nicotine delivery system distributor, as defined in section 42-3001, who sells or possesses more than two thousand cigarettes or Electronic nicotine delivery system products with false manufacturing labels or cigarettes with counterfeit tax stamps, with the criminal intent to evade any requirement under chapter 3 of this title, is guilty of a class 5 felony and shall pay a penalty of:
1. For a first violation involving two thousand or more cigarettes or Electronic nicotine delivery system products, two thousand dollars $2,000 or three times the retail value of the cigarettes or electronic nicotine delivery system product, whichever is greater.
2. For a subsequent violation involving two thousand or more cigarettes or Electronic nicotine delivery system products, fifty thousand dollars $50,000 or three times the retail value of the cigarettes or electronic nicotine delivery system product, whichever is greater.
O. For the purposes of this section:
1. "Automated sales suppression device" means a computer software program that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including transaction data and transaction reports.
2. "Electronic cash register" means an electronic or computer system that records a register or supporting data for the purpose of computing, storing or processing retail sales and other transaction data.
3. "Luxury" means any article, object or device on which a tax is imposed under chapter 3 of this title.
4. "Phantom-ware" means hidden or concealed computer software or hardware of an electronic cash register or other point-of-sale system that can create a second set of records or eliminate or manipulate transaction records that may or may not be preserved in digital formats in order to misrepresent the existence or the true record of a transaction in the electronic cash register.
5. "Point-of-sale system" means an electronic device that is used to process card payments at retail locations.
6. "Transaction data" means data relating to a commercial transaction that includes data identifying each purchased item, the price for each item, a taxability determination for each item, a segregated tax amount for each taxed item, the amount of cash or credit tendered, the net amount of change returned to the customer, the date and time of the purchase, the name, address and identification number of the vendor and the receipt or invoice number of the transaction.
7. "Transaction report" means any means or method of reporting, displaying or generating transaction data.
8. "Zapper":
(a) Means a computer software program that falsifies the electronic records of electronic cash registers or other point-of-sale systems, including, but not limited to, transaction data and transaction reports.
(b) Includes the software program, any device that carries the software program or an internet link to the software program.
Sec. 6. Section 42-2003, Arizona Revised Statutes, is amended to read:
42-2003. Authorized disclosure of confidential information
A. Confidential information relating to:
1. A taxpayer may be disclosed to the taxpayer, its successor in interest or a designee of the taxpayer who is authorized in writing by the taxpayer. A principal corporate officer of a parent corporation may execute a written authorization for a controlled subsidiary. If a taxpayer elects to file an Arizona small business income tax return under section 43-302, a written authorization by the taxpayer to allow the department to disclose personal income tax information to a designee includes the corresponding Arizona small business income tax return.
2. A corporate taxpayer may be disclosed to any principal officer, any person designated by a principal officer or any person designated in a resolution by the corporate board of directors or other similar governing body. If a corporate officer signs a statement under penalty of perjury representing that the officer is a principal officer, the department may rely on the statement until the statement is shown to be false. For the purposes of this paragraph, "principal officer" includes a chief executive officer, president, secretary, treasurer, vice president of tax, chief financial officer, chief operating officer or chief tax officer or any other corporate officer who has the authority to bind the taxpayer on matters related to state taxes.
3. A partnership may be disclosed to any partner of the partnership. This exception does not include disclosure of confidential information of a particular partner unless otherwise authorized.
4. A limited liability company may be disclosed to any member of the company or, if the company is manager-managed, to any manager.
5. An estate may be disclosed to the personal representative of the estate and to any heir, next of kin or beneficiary under the will of the decedent if the department finds that the heir, next of kin or beneficiary has a material interest that will be affected by the confidential information.
6. A trust may be disclosed to the trustee or trustees, jointly or separately, and to the grantor or any beneficiary of the trust if the department finds that the grantor or beneficiary has a material interest that will be affected by the confidential information.
7. A government entity may be disclosed to the head of the entity or a member of the governing board of the entity, or any employee of the entity who has been delegated the authorization in writing by the head of the entity or the governing board of the entity.
8. Any taxpayer may be disclosed if the taxpayer has waived any rights to confidentiality either in writing or on the record in any administrative or judicial proceeding.
9. The name and taxpayer identification numbers of persons issued direct payment permits may be publicly disclosed.
10. Any taxpayer may be disclosed during a meeting or telephone call if the taxpayer is present during the meeting or telephone call and authorizes the disclosure of confidential information.
B. Confidential information may be disclosed to:
1. Any employee of the department whose official duties involve tax administration.
2. The office of the attorney general solely for its use in preparation for, or in an investigation that may result in, any proceeding involving tax administration before the department or any other agency or board of this state, or before any grand jury or any state or federal court.
3. The department of liquor licenses and control for its use in determining whether a spirituous liquor licensee has paid all transaction privilege taxes and affiliated excise taxes incurred as a result of the sale of spirituous liquor, as defined in section 4-101, at the licensed establishment and imposed on the licensed establishments by this state and its political subdivisions.
4. Other state tax officials whose official duties require the disclosure for proper tax administration purposes if the information is sought in connection with an investigation or any other proceeding conducted by the official. Any disclosure is limited to information of a taxpayer who is being investigated or who is a party to a proceeding conducted by the official.
5. The following agencies, officials and organizations, if they grant substantially similar privileges to the department for the type of information being sought, pursuant to statute and a written agreement between the department and the foreign country, agency, state, Indian tribe or organization:
(a) The United States internal revenue service, alcohol and tobacco tax and trade bureau of the United States treasury, United States bureau of alcohol, tobacco, firearms and explosives of the United States department of justice, United States drug enforcement agency and federal bureau of investigation.
(b) A state tax official of another state.
(c) An organization of states, federation of tax administrators or multistate tax commission that operates an information exchange for tax administration purposes.
(d) An agency, official or organization of a foreign country with responsibilities that are comparable to those listed in subdivision (a), (b) or (c) of this paragraph.
(e) An agency, official or organization of an Indian tribal government with responsibilities comparable to the responsibilities of the agencies, officials or organizations identified in subdivision (a), (b) or (c) of this paragraph.
6. The auditor general, in connection with any audit of the department subject to the restrictions in section 42-2002, subsection D.
7. Any person to the extent necessary for effective tax administration in connection with:
(a) The processing, storage, transmission, destruction and reproduction of the information.
(b) The programming, maintenance, repair, testing and procurement of equipment for purposes of tax administration.
(c) The collection of the taxpayer's civil liability.
8. The office of administrative hearings relating to taxes administered by the department pursuant to section 42-1101, but the department shall not disclose any confidential information without the taxpayer's written consent:
(a) Regarding income tax or withholding tax.
(b) On any tax issue relating to information associated with the reporting of income tax or withholding tax.
9. The United States treasury inspector general for tax administration for the purpose of reporting a violation of internal revenue code section 7213A (26 United States Code section 7213A), unauthorized inspection of returns or return information.
10. The financial management service of the United States treasury department for use in the treasury offset program.
11. The United States treasury department or its authorized agent for use in the state income tax levy program and in the electronic federal tax payment system.
12. The Arizona commerce authority for its use in:
(a) Qualifying renewable energy operations for the tax incentives under section 42-12006.
(b) Qualifying businesses with a qualified facility for income tax credits under sections 43-1083.03 and 43-1164.04.
(c) Fulfilling its annual reporting responsibility pursuant to section 41-1512, subsections U and V and section 41-1517, subsection L.
(d) Certifying computer data centers for tax relief under section 41-1519.
(e) Certifying applicants for the tax credit for motion picture production costs under sections 43-1082 and 43-1165.
13. A prosecutor for purposes of section 32-1164, subsection C.
14. The office of the state fire marshal for use in determining compliance with and enforcing title 37, chapter 9, article 5.
15. The department of transportation for its use in administering taxes, surcharges and penalties prescribed by title 28.
16. The Arizona health care cost containment system administration for its use in administering nursing facility provider assessments.
17. The department of administration risk management division and the office of the attorney general if the information relates to a claim against this state pursuant to section 12-821.01 involving the department of revenue.
18. Another state agency if the taxpayer authorizes the disclosure of confidential information in writing, including an authorization that is part of an application form or other document submitted to the agency.
19. The department of economic security for its use in determining whether an employer has paid all amounts due under the unemployment insurance program pursuant to title 23, chapter 4.
20. The department of health services for its use in determining the following:
(a) Whether a medical marijuana dispensary is in compliance with the tax requirements of chapter 5 of this title for the purposes of section 36-2806, subsection A.
(b) Whether a marijuana establishment, marijuana testing facility or dual licensee licensed under title 36, chapter 28.2 is in compliance with the tax obligations under this title or title 43.
21. The Arizona department of agriculture for the purpose of ascertaining compliance with the licensing provisions in title 3.
22. The office of economic opportunity for the purpose of performing the duties and obligations to or on behalf of this state prescribed by title 41, chapter 53.
C. Confidential information may be disclosed in any state or federal judicial or administrative proceeding pertaining to tax administration pursuant to the following conditions:
1. One or more of the following circumstances must apply:
(a) The taxpayer is a party to the proceeding.
(b) The proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of the taxpayer's civil liability, with respect to any tax imposed under this title or title 43.
(c) The treatment of an item reflected on the taxpayer's return is directly related to the resolution of an issue in the proceeding.
(d) Return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer and directly affects the resolution of an issue in the proceeding.
2. Confidential information may not be disclosed under this subsection if the disclosure is prohibited by section 42-2002, subsection C or D.
D. Identity information may be disclosed for purposes of notifying persons entitled to tax refunds if the department is unable to locate the persons after reasonable effort.
E. The department, on the request of any person, shall provide the names and addresses of bingo licensees as defined in section 5-401, verify whether or not a person has a privilege license and number, a tobacco product distributor's license and number, an Electronic nicotine delivery system distributor's license and number or a withholding license and number or disclose the information to be posted on the department's website or otherwise publicly accessible pursuant to section 42-1124, subsection F and section 42-3401.
F. A department employee, in connection with the official duties relating to any audit, collection activity or civil or criminal investigation, may disclose return information to the extent that disclosure is necessary to obtain information that is not otherwise reasonably available. These official duties include the correct determination of and liability for tax, the amount to be collected or the enforcement of other state tax revenue laws.
G. Confidential information relating to transaction privilege tax, use tax, severance tax, jet fuel excise and use tax and any other tax collected by the department on behalf of any jurisdiction may be disclosed to any county, city or town tax official if the information relates to a taxpayer who is or may be taxable by a county, city or town or who may be subject to audit by the department pursuant to section 42-6002. Any taxpayer information that is released by the department to the county, city or town:
1. May be used only for internal purposes, including audits. If there is a legitimate business need relating to enforcing laws, regulations and ordinances pursuant to section 9-500.39 or 11-269.17, a county, city or town tax official may redisclose transaction privilege tax information relating to a vacation rental or short-term rental property owner or online lodging operator from the new license report and license update report, subject to the following:
(a) The information redisclosed is limited to the following:
(i) The transaction privilege tax license number.
(ii) The type of organization or ownership of the business.
(iii) The legal business name and doing business as name, if different from the legal name.
(iv) The business mailing address, tax record physical location address, telephone number, email address and fax number.
(v) The date the business started in this state, the business description and the North American industry classification system code.
(vi) The name, address and telephone number for each owner, partner, corporate officer, member, managing member or official of the employing unit.
(b) Redisclosure is limited to nonelected officials in other units within the county, city or town. The information may not be redisclosed to an elected official or the elected official's staff.
(c) All redisclosures of confidential information made pursuant to this paragraph are subject to paragraph 2 of this subsection.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The county, city or town shall agree in writing with the department that any release of confidential information that violates the confidentiality standards adopted by the department will result in the immediate suspension of any rights of the county, city or town to receive taxpayer information under this subsection.
H. The department may disclose statistical information gathered from confidential information if it does not disclose confidential information attributable to any one taxpayer. The department may disclose statistical information gathered from confidential information, even if it discloses confidential information attributable to a taxpayer, to:
1. The state treasurer in order to comply with the requirements of section 42-5029, subsection A, paragraph 3.
2. The joint legislative income tax credit review committee, the joint legislative budget committee staff and the legislative staff in order to comply with the requirements of section 43-221.
I. The department may disclose the aggregate amounts of any tax credit, tax deduction or tax exemption enacted after January 1, 1994. Information subject to disclosure under this subsection shall not be disclosed if a taxpayer demonstrates to the department that such information would give an unfair advantage to competitors.
J. Except as provided in section 42-2002, subsection C, confidential information, described in section 42-2001, paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement agencies for law enforcement purposes.
K. The department may provide transaction privilege tax license information to property tax officials in a county for the purpose of identification and verification of the tax status of commercial property.
L. The department may provide transaction privilege tax, luxury tax, use tax, property tax and severance tax information to the ombudsman-citizens aide pursuant to title 41, chapter 8, article 5.
M. Except as provided in section 42-2002, subsection D, a court may order the department to disclose confidential information pertaining to a party to an action. An order shall be made only on a showing of good cause and that the party seeking the information has made demand on the taxpayer for the information.
N. This section does not prohibit the disclosure by the department of any information or documents submitted to the department by a bingo licensee. Before disclosing the information, the department shall obtain the name and address of the person requesting the information.
O. If the department is required or allowed to disclose confidential information, it may charge the person or agency requesting the information for the reasonable cost of its services.
P. Except as provided in section 42-2002, subsection D, the department of revenue shall release confidential information as requested by the department of economic security pursuant to section 42-1122 or 46-291. Information disclosed under this subsection is limited to the same type of information that the United States internal revenue service is authorized to disclose under section 6103(l)(6) of the internal revenue code.
Q. Except as provided in section 42-2002, subsection D, the department shall release confidential information as requested by the courts and clerks of the court pursuant to section 42-1122.
R. To comply with the requirements of section 42-5031, the department may disclose to the state treasurer, to the county stadium district board of directors and to any city or town tax official that is part of the county stadium district confidential information attributable to a taxpayer's business activity conducted in the county stadium district.
S. The department shall release to the attorney general confidential information as requested by the attorney general for purposes of determining compliance with or enforcing any of the following:
1. Any public health control law relating to tobacco sales as provided under title 36, chapter 6, article 14.
2. Any law relating to reduced cigarette ignition propensity standards as provided under title 37, chapter 9, article 5.
3. Sections 44-7101 and 44-7111, the master settlement agreement referred to in those sections and all agreements regarding disputes under the master settlement agreement.
T. For proceedings before the department, the office of administrative hearings, the state board of tax appeals or any state or federal court involving penalties that were assessed against a return preparer, an electronic return preparer or a payroll service company pursuant to section 42-1103.02, 42-1125.01 or 43-419, confidential information may be disclosed only before the judge or administrative law judge adjudicating the proceeding, the parties to the proceeding and the parties' representatives in the proceeding prior to its introduction into evidence in the proceeding. The confidential information may be introduced as evidence in the proceeding only if the taxpayer's name, the names of any dependents listed on the return, all social security numbers, the taxpayer's address, the taxpayer's signature and any attachments containing any of the foregoing information are redacted and if either:
1. The treatment of an item reflected on such a return is or may be related to the resolution of an issue in the proceeding.
2. Such a return or the return information relates or may relate to a transactional relationship between a person who is a party to the proceeding and the taxpayer that directly affects the resolution of an issue in the proceeding.
3. The method of payment of the taxpayer's withholding tax liability or the method of filing the taxpayer's withholding tax return is an issue for the period.
U. The department and attorney general may share the information specified in subsection S of this section with any of the following:
1. Federal, state or local agencies located in this state for the purposes of enforcement of the statutes or agreements specified in subsection S of this section or for the purposes of enforcement of corresponding laws of other states.
2. Indian tribes located in this state for the purposes of enforcement of the statutes or agreements specified in subsection S of this section.
3. A court, arbitrator, data clearinghouse or similar entity for the purpose of assessing compliance with or making calculations required by the master settlement agreement or agreements regarding disputes under the master settlement agreement, and with counsel for the parties or expert witnesses in any such proceeding, if the information otherwise remains confidential.
V. The department may provide the name and address of qualifying hospitals and qualifying health care organizations, as defined in section 42-5001, to a business that is classified and reporting transaction privilege tax under the utilities classification.
W. The department may disclose to an official of any city, town or county in a current agreement or considering a prospective agreement with the department as described in section 42-5032.02, subsection G any information relating to amounts that are subject to distribution and that are required by section 42-5032.02. Information disclosed by the department under this subsection:
1. May be used only by the city, town or county for internal purposes.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The city, town or county must agree with the department in writing that any release of confidential information that violates the confidentiality standards will result in the immediate suspension of any rights of the city, town or county to receive information under this subsection.
X. Notwithstanding any other provision of this section, the department may not disclose information provided by an online lodging marketplace, as defined in section 42-5076, without the written consent of the online lodging marketplace, and the information may be disclosed only pursuant to subsection A, paragraphs 1 through 6, 8 and 10, subsection B, paragraphs 1, 2, 7 and 8 and subsections C, D and G of this section. Such information:
1. Is not subject to disclosure pursuant to title 39, relating to public records.
2. May not be disclosed to any agency of this state or of any county, city, town or other political subdivision of this state.
Sec. 7. Section 42-3001, Arizona Revised Statutes, is amended to read:
42-3001. Definitions
In this chapter, unless the context otherwise requires:
1. "Affix" and "affixed" include imprinting tax meter stamps on packages and individual containers as authorized by the department.
2. "Brand family" has the same meaning prescribed in section 44-7111.
3. "Cavendish" means a tobacco product that is smoked from a pipe and that meets one of the following criteria:
(a) Is described as cavendish, as containing cavendish or as a cavendish blend on its packaging, labeling or promotional materials.
(b) Appears to have been processed or manufactured with an amount of flavorings and humectants that exceeds twenty percent of the weight of the tobacco contained in the product.
(c) Appears to be blended with or contain a tobacco product described in subdivision (b) of this paragraph.
4. "Cider" means vinous liquor that is made from the normal alcoholic fermentation of the juice of sound, ripe apples, pears or other pome fruit, including flavored, sparkling and carbonated cider and cider made from condensed apple, pear or other pome fruit must, and that contains more than one-half of one percent of alcohol by volume but not more than seven percent of alcohol by volume.
5. "Cigar" means any roll of tobacco wrapped in leaf tobacco or in any substance containing tobacco other than any roll of tobacco that is a cigarette, as defined in paragraph 6, subdivision (b) of this section.
6. "Cigarette" means either of the following:
(a) Any roll of tobacco wrapped in paper or any substance not containing tobacco.
(b) Any roll of tobacco wrapped in any substance containing tobacco that, because of its appearance, the type of tobacco used in the filler or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subdivision (a) of this paragraph. This subdivision shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.
7. "Consumer" means a person in this state that comes into possession of any luxury subject to the tax imposed by this chapter and that, on coming into possession of the luxury, is not a distributor intending to sell or distribute the luxury, a retailer or a wholesaler.
8. "Craft distiller" means a distiller in the United States or in a territory or possession of the United States that holds a license pursuant to section 4-205.10.
9. "Distributor" means any person that manufactures, produces, ships, transports or imports into this state or in any manner acquires or possesses for the purpose of making the first sale of the following:
(a) Cigarettes without Arizona tax stamps affixed as required by this article.
(b) Roll-your-own tobacco or other tobacco products on which the taxes have not been paid as required by this chapter.
10. "Electronic nicotine delivery system distributor" means any person that manufactures, produces, ships, transports or imports into this state an electronic nicotine delivery system product or in any manner acquires or possesses an electronic nicotine delivery system product for the purpose of making a sale to a retailer.
11. "Electronic nicotine delivery system product":
(a) Means any noncombustible product containing nicotine or other substances that employ a heating element, power source, electronic circuit or other electronic, chemical or mechanical means, regardless of shape or size, used to produce vapor from nicotine in a solution or other form, including:
(i) Any component, liquid, part or accessory of a device described in this paragraph regardless of whether sold separately from the device.
(ii) Any substance that is intended for human consumption that may be used to simulate smoking through inhalation of vapor or aerosol from the device regardless of whether the substance contains nicotine.
(b) Does not include:
(i) Drugs, devices or combination products authorized for sale by the United States food and drug administration, as those terms are defined in the federal food, drug, and cosmetic act or the regulations adopted pursuant to the federal food, drug, and cosmetic act.
(ii) A substance sold separately that is intended to be aerosolized or vaporized during the use of the devise that is regulated pursuant to title 36, chapter 28.1 or 28.2.
10. 12. "Farm winery" has the same meaning prescribed in section 4-101.
11. 13. "First sale" means the initial sale or distribution in intrastate commerce or the initial use or consumption of cigarettes, roll-your-own tobacco or other tobacco products.
12. 14. "Luxury" means any article, object or device on which a tax is imposed under this chapter.
13. 15. "Malt liquor" means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation and not distillation of hops or grains, but not including:
(a) Liquids made by the process of distillation of such substances.
(b) Medicines that are unsuitable for beverage purposes.
14. 16. "Master settlement agreement" has the same meaning prescribed in section 44-7101.
15. 17. "Microbrewery" has the same meaning prescribed in section 4-101.
16. 18. "Nonparticipating manufacturer" has the same meaning prescribed in section 44-7111.
17. 19. "Other tobacco products" means tobacco products other than cigarettes and roll-your-own tobacco.
18. 20. "Participating manufacturer" has the same meaning prescribed in section 44-7111.
19. 21. "Person" means any individual, firm, partnership, joint venture, association, corporation, municipal corporation, estate, trust, club, society or other group or combination acting as a unit, and the plural as well as the singular number.
20. 22. "Place of business":
(a) Means a building, facility site or location where an order is received or where tobacco products are sold, distributed or transferred. Place of business
(b) Does not include a vehicle.
21. 23. "Retailer" means any person that comes into possession of any luxury subject to the taxes imposed by this chapter for the purpose of selling it for consumption and not for resale.
22. 24. "Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes. This paragraph shall be interpreted consistently with the term as used in section 44-7101. This paragraph shall be interpreted consistently with the classification guidelines established by the federal alcohol and tobacco tax and trade bureau.
23. 25. "Smoking tobacco":
(a) Means any tobacco that, because of its appearance, type, packaging, labeling or promotion, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making cigarettes or otherwise consumed by burning. Smoking tobacco
(b) Includes pipe tobacco and roll-your-own tobacco.
24. 26. "Spirituous liquor":
(a) Means any liquid that contains more than one-half of one percent alcohol by volume, that is produced by distillation of any fermented substance and that is used or prepared for use as a beverage. Spirituous liquor
(b) Does not include medicines that are unsuitable for beverage purposes.
25. 27. "Tobacco product manufacturer" has the same meaning prescribed in section 44-7101.
26. 28. "Tobacco products" means all luxuries included in section 42-3052, paragraphs 5 through 9.
27. 29. "Vehicle" means a device in, on or by which a person or property is or may be transported or drawn on the roads of this state regardless of the means by which it is propelled or whether it runs on a track.
28. 30. "Vinous liquor":
(a) Means any liquid that contains more than one-half of one percent alcohol by volume and that is made by the process of fermentation of grapes, berries, fruits, vegetables or other substances. but
(b) Does not include:
(a) (i) Liquids in which hops or grains are used in the process of fermentation.
(b) (ii) Liquids made by the process of distillation of hops or grains.
(c) (iii) Medicines that are unsuitable for beverage purposes.
29. 31. "Wholesaler" means a person that sells any spirituous, vinous or malt liquor taxed under this chapter to retail dealers or for the purposes of resale only.
Sec. 8. Section 42-3004, Arizona Revised Statutes, is amended to read:
42-3004. Rules
The department may:
1. Adopt rules, not in conflict with this chapter, necessary for the enforcement of this chapter, including rules relating to refunds of taxes paid under this chapter.
2. Adopt different detailed rules applicable to diverse methods and conditions of sale or use of the luxuries upon on which a tax is imposed by this chapter.
3. Prescribe in each luxury classification:
(a) Upon on whom, as between the distributor, the Electronic nicotine delivery system distributor, the wholesaler and the retailer or between the owner, lessor or other person in possession of any luxury, except for cigarettes, the primary duty of affixing official stamps or official labels rests.
(b) The manner in which the stamps or labels shall be affixed.
Sec. 9. Section 42-3005, Arizona Revised Statutes, is amended to read:
42-3005. Agents and other employees; bond; credentials; removal
A. The department shall appoint, as necessary, such agents, clerks and stenographers authorized by law who:
1. Shall perform duties as may be required and not inconsistent with this chapter.
2. May act for the department as it prescribes and as provided by this chapter.
3. Shall assist the department as needed to enforce the tax laws vested with the department.
B. Each agent shall execute a bond in the amount of five thousand dollars $5,000 conditioned upon on the faithful discharge of the agent's duties, but the department, in its discretion, may bond all or any of its agents by a multiple or joint bond.
C. The agents, clerks and stenographers may be removed by the department for cause, and the department is the final judge of the sufficiency of the cause.
D. All agents or representatives of the department shall have credentials signed by the director for identification purposes.
Sec. 10. Section 42-3008, Arizona Revised Statutes, is amended to read:
42-3008. Refunds; definitions
A. Except as provided in subsection C of this section, the tax imposed by this chapter on any luxury shall be refunded when the amount of the tax has been paid and when one of the following applies:
1. Proof is made to the department that the luxuries were exported from this state or that the stamps have been affixed to luxuries on which stamps are not required.
2. Proof is made to the department that the luxury becomes unfit for sale due to breakage or spoilage within either six months from after the date that the distributor originally receives the luxury for sale or two months from after the date that the luxury was returned to the distributor or Electronic nicotine delivery system distributor by a retailer, whichever occurs later.
3. Within six months after a distributor or Electronic nicotine delivery system distributor returns a luxury to the manufacturer or importer, proof of the return is made to the department.
B. The manner of making proof shall be in accordance with rules adopted by the department.
C. The department shall not refund the tax for stamps that are affixed to luxuries that are deemed contraband under this chapter.
D. Except as otherwise provided in section 42-1123, interest is calculated sixty days after receipt by the department of a claim for refund under this section.
E. For the purposes of this section:
1. "Breakage" means damage to the outer wrapping or container of a tobacco product or Electronic nicotine delivery system product.
2. "Importer" and "manufacturer" have the same meanings prescribed in section 42-3451.
3. "Spoilage" means mutilation, product expiration or unfit for intended consumption.
Sec. 11. Section 42-3010, Arizona Revised Statutes, is amended to read:
42-3010. Transaction invoices and other records; retention period
A. When any wholesaler, or distributor or Electronic nicotine delivery system distributor in this state sells or delivers to any person any of the luxuries on which a tax is imposed by this chapter, the wholesaler, or distributor or Electronic nicotine delivery system distributor shall make a duplicate invoice of the transaction, showing the date of delivery, the amount and value of each sale, shipment or consignment, and the name and location of the purchaser or person to whom delivery is made. Except as otherwise provided in section 42-3405, the wholesaler, or distributor or Electronic nicotine delivery system distributor shall file and retain the invoice for a period of two years, subject to inspection and use by the department.
B. Every wholesaler, distributor, Electronic nicotine delivery system distributor or retailer shall procure and retain invoices showing the amount and value of each purchase or shipment of any luxuries received, the date of the shipment, the name and location of the shipper and the value of the purchase or shipment. Except as otherwise provided in section 42-3405, the wholesaler, distributor, Electronic nicotine delivery system distributor or retailer shall retain the invoices for a period of two years, subject to inspection and use by the department.
C. Transactions that involve tobacco products shall also meet the requirements of article 11 of this chapter.
Sec. 12. Section 42-3051, Arizona Revised Statutes, is amended to read:
42-3051. Levy of tax
In addition to all other taxes, there is levied and imposed and there shall be collected and deposited, pursuant to sections 35-146 and 35-147, in the manner provided by this chapter, taxes on all spirituous, vinous and malt liquors and on all cigarettes, cigars, smoking tobacco, plug tobacco, snuff, and other forms of tobacco and on all Electronic nicotine delivery system products, for use as may be prescribed by law.
Sec. 13. Section 42-3052, Arizona Revised Statutes, is amended to read:
42-3052. Classifications of luxuries; rates of tax
The taxes under this chapter are imposed at the following rates:
1. On each sealed container of spirituous liquor, at the rate of three dollars $3 per gallon and at a proportionate rate for any lesser or greater quantity than one gallon.
2. On each container of vinous liquor, except cider, of which the alcoholic content is not greater than twenty-four per cent percent by volume, at the rate of eighty-four cents $.84 per gallon and at a proportionate rate for any lesser or greater quantity than one gallon.
3. On each container of vinous liquor of which the alcoholic content is greater than twenty-four per cent percent by volume, containing eight ounces or less, twenty-five cents $.25, and for each eight ounces for containers containing more than eight ounces, twenty-five cents $.25.
4. On each gallon of malt liquor or cider, sixteen cents $.16, and at a proportionate rate for any lesser or greater quantity than one gallon.
5. On each cigarette, nine-tenths cent $.009.
6. On smoking tobacco, snuff, fine cut chewing tobacco, cut and granulated tobacco, shorts and refuse of fine cut chewing tobacco, and refuse, scraps, clippings, cuttings and sweepings of tobacco, excluding tobacco powder or tobacco products used exclusively for agricultural or horticultural purposes and unfit for human consumption, two cents $.02 per ounce or major fraction of an ounce.
7. On all cavendish, plug or twist tobacco, one-half cent $.005 per ounce or fractional part of an ounce.
8. On each twenty small cigars or fractional part weighing not more than three pounds per thousand, four cents $.04.
9. On cigars of all descriptions except those included in paragraph 8 of this section, made of tobacco or any tobacco substitute:
(a) If manufactured to retail at not more than five cents $.05 each, two cents $.02 on each three cigars.
(b) If manufactured to retail at more than five cents $.05 each, two cents $.02 on each cigar.
10. On each Electronic nicotine delivery system product, fifty percent of the Electronic nicotine delivery system distributor's list price of the Electronic nicotine delivery system product.
Sec. 14. Section 42-3053, Arizona Revised Statutes, is amended to read:
42-3053. Method of payment; receipts; electronic filings of returns, reports and other documents; license applications and requests for refund or rebate; civil penalties; definition
A. All orders for the purchase or receipt of tax stamps required under this chapter must be submitted pursuant to an electronic filing program established by the department. Except as provided in subsection B of this section, all remittances of taxes for the purchase of Arizona tax stamps imposed by this chapter shall be made by electronic funds transfer to the department in monies that are immediately available to this state on the date of transfer. A remittance other than cash does not constitute a final discharge of liability for the tax levied by this chapter until it has been paid in cash to the department.
B. Any distributor remitting any taxes levied under section 42-3302 or under this chapter on any tobacco product other than cigarettes that is subject to tax under this chapter or any Electronic nicotine delivery system distributor remitting any taxes under this chapter on any Electronic nicotine delivery system products is required to pay the tax liability on or before the payment date in monies that are immediately available to this state on the date of transfer. The payment in immediately available monies must be made by electronic funds transfer and with the state treasurer's approval. The distributor or Electronic nicotine delivery system distributor must furnish evidence as prescribed by the department that the payment was remitted on or before the payment due date.
C. A person is required to electronically file any report, return or other document required under this chapter pursuant to an electronic filing program established by the department. The report, return or other document is deemed filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02.
D. An application for a license issued pursuant to section 42-3401 and any request for a refund or rebate of taxes paid on tobacco products or electronic nicotine delivery system products made pursuant to section 42-3406 must be submitted pursuant to an electronic filing program established by the department. The application or request is considered to be filed and received by the department on the date of the electronic postmark pursuant to section 42-1105.02. The department may not consider applications or requests that fail to comply with this subsection. An applicant shall pay the application fee required under section 42-3401 to the department by electronic funds transfer.
E. A distributor who or Electronic nicotine delivery system distributor that is required to make payment by electronic funds transfer under this chapter and who fails to do so is subject to the civil penalties prescribed by section 42-1125, subsection O. A distributor who or Electronic nicotine delivery system distributor that fails to make a timely payment in immediately available monies as prescribed by this section is subject to civil penalties prescribed by section 42-1125, subsection D. A person who is required to electronically file any report, return or document under this chapter but fails to do so is subject to the civil penalty prescribed by section 42-1125, subsection K.
F. For the purposes of this section, "electronic filing program" has the same meaning prescribed in section 42-1105.02.
Sec. 15. Section 42-3101, Arizona Revised Statutes, is amended to read:
42-3101. Deposit
The department shall deposit, pursuant to sections 35-146, 35-147, and 42-1116 and 42-3102, all monies received under this chapter accompanied by a monthly statement showing the amount received from each class of luxury prescribed by section 42-3052.
Sec. 16. Title 42, chapter 3, article 3, Arizona Revised Statutes, is amended by adding section 42-3105, to read:
42-3105. Monies collected from electronic nicotine delivery system products
the department shall deposit, pursuant to sections 35-146 and 35-147, all monies collected pursuant to section 42-3052, paragraph 10 as follows:
1. eighty percent in the state general fund.
2. Twenty percent in the early childhood development and health fund established by section 8-1181.
Sec. 17. Section 42-3151, Arizona Revised Statutes, is amended to read:
42-3151. Inspection of records and stocks of luxuries
A. All books, papers, invoices and records of any wholesaler, distributor, Electronic nicotine delivery system distributor or retailer whether or not required under this chapter to be kept, showing sales, receipts and purchases of luxuries, shall be open for inspection by the department as follows:
1. Except as provided in paragraph 2 of this subsection, any inspection must begin during the normal business hours of the building, facility, site or place being inspected.
2. Any inspection that does not begin during normal business hours requires a judicial warrant or the prior written consent of the wholesaler, distributor, Electronic nicotine delivery system distributor or retailer.
B. Any stock of luxuries in and upon on any building, facility, site or place where placed, produced, stored or sold may be inspected by the department to determine compliance with this chapter. Except as provided in subsections A and C of this section, a business may not maintain any books, papers, invoices, records and luxuries subject to the department's inspection in a place and manner that requires a judicial warrant or prior written consent of the wholesaler, distributor, Electronic nicotine delivery system distributor or retailer.
C. A business that maintains any books, papers, invoices or records electronically shall provide access to the data for the department's inspection at its business location, regardless of the storage location of the data. The business shall provide the access at the business location in a place and manner that is accessible to the department during normal business hours without a judicial warrant or prior written consent of the wholesaler, distributor, Electronic nicotine delivery system distributor or retailer.
Sec. 18. Heading change
The article heading of title 42, chapter 3, article 7, Arizona Revised Statutes, is changed from "INDIAN RESERVATION TOBACCO TAX" to "INDIAN RESERVATION TOBACCO AND ELECTRONIC NICOTINE DELIVERY SYSTEM PRODUCT TAX".
Sec. 19. Section 42-3301, Arizona Revised Statutes, is amended to read:
42-3301. Definitions
In this article, unless the context otherwise requires:
1. "Indian" means any person who is duly registered on the tribal rolls of an Indian tribe that occupies an Indian reservation.
2. "Indian reservation" means all lands that are held in trust by the United States within the limits of an area that is set aside by the United States for the exclusive use and occupancy of Indian tribes by treaty, statute or executive order and that is recognized as an Indian reservation by the United States department of the interior.
3. "Indian tribe" means any organized Indian nation, tribe, band or community that is recognized as an Indian tribe by the United States department of the interior.
4. "Luxury, sales, transaction privilege or similar tax" means an excise tax levied exclusively on tobacco products or electronic nicotine delivery system products.
Sec. 20. Section 42-3302, Arizona Revised Statutes, is amended to read:
42-3302. Levy; rates; disposition of revenues
A. In addition to all other taxes, there is levied and shall be collected by the department a tax on the purchase on an Indian reservation of cigarettes, cigars, smoking tobacco, plug tobacco, snuff and other forms of tobacco at the rates prescribed by sections 42-3251 and 42-3251.01.
B. In addition to all other taxes, there is levied and shall be collected by the department a tax on the purchase of electronic nicotine delivery system products on an Indian reservation at the rate prescribed by section 42-3251.
B. C. The department shall deposit, pursuant to sections 35-146 and 35-147, monies levied and collected pursuant to subsection A of this section in the tobacco tax and health care fund established by section 36-771 and the tobacco products tax fund established by section 36-770 for use as prescribed by title 36, chapter 6, article 8.
d. The department shall deposit, pursuant to sections 35-146 and 35-147, monies levied and collected pursuant to subsection b of this section in the tobacco products tax fund established by section 36-770.
C. E. If an Indian tribe imposes a luxury, sales, transaction privilege or similar tax on cigarettes, cigars, smoking tobacco, plug tobacco, snuff, and other forms of tobacco and electronic nicotine delivery system products but at a rate that is:
1. Less than that prescribed by subsection A or B of this section, as applicable, the tax imposed by this article shall be levied at a rate equal to the difference between the rate prescribed by subsection A or B of this section, as applicable, and the tax imposed by the Indian tribe.
2. Equal to or greater than the tax prescribed by subsection A or B of this section, as applicable, then the rate of tax under this article is zero.
Sec. 21. Section 42-3303, Arizona Revised Statutes, is amended to read:
42-3303. Tax on the consumer; precollection and remission by distributor
A. The taxes levied pursuant to this article are conclusively presumed to be direct taxes on the consumer but shall be precollected and remitted to the department by the distributor or electronic nicotine delivery system distributor for purposes of convenience and facility only. The taxes that the distributor or electronic nicotine delivery system distributor precollects and pays to the department:
1. Are considered to be an advance payment.
2. Shall be added to the price of the cigarettes, cigars, smoking tobacco, plug tobacco, snuff, and other forms of tobacco and electronic nicotine delivery system products.
3. Shall be recovered from the consumer.
B. For the purpose of the precollection and remittance of the tax imposed by this article on cigarettes, the distributor shall obtain and affix revenue stamps pursuant to article 11 of this chapter.
Sec. 22. Section 42-3304, Arizona Revised Statutes, is amended to read:
42-3304. Exemptions; refund; rules
A. The tax levied by this article does not apply to cigarettes, cigars, smoking tobacco, plug tobacco, snuff, and other forms of tobacco and, if applicable, electronic nicotine delivery system products:
1. For which the taxes imposed by article 6 of this chapter have been paid.
2. That are sold by an Indian tribe, or by a federally licensed Indian trader, on an Indian reservation to Indians who are enrolled members of the Indian tribe for whose benefit the Indian reservation was established.
3. That are exempt from tax under 26 United States Code section 5704 and that are distributed according to federal regulations.
B. Notwithstanding any other law, the department shall refund taxes that were precollected and remitted to the department under this article only if documentation demonstrates to the department's satisfaction that an exemption applied is provided with the request for a refund.
B. C. The department shall adopt rules prescribing the procedures for claiming and verifying sales that are exempt under this section.
Sec. 23. Section 42-3305, Arizona Revised Statutes, is amended to read:
42-3305. Enforcement; penalty for failure to precollect and remit tax; violation; classification
A. If the a distributor or electronic nicotine delivery system distributor fails to precollect or remit the tax imposed by this article when due, the distributor or electronic nicotine delivery system distributor is subject to a civil penalty equal to the amount of taxes that should have been precollected or remitted but was not.
B. A distributor or electronic nicotine delivery system distributor or any person who that ships, transports, sells or distributes cigarettes, cigars, smoking tobacco, plug tobacco, snuff, and other forms of tobacco and electronic nicotine delivery system products on which the tax required by this article has not been paid when due is guilty of a class 3 misdemeanor.
Sec. 24. Section 42-3307, Arizona Revised Statutes, is amended to read:
42-3307. Preemption by state
This state preempts the area of Indian reservation tobacco taxation and electronic nicotine delivery system products taxation. A county, city, town or any other political subdivision of this state shall may not levy such a tax. Nothing in This article precludes does not preclude an Indian tribe from imposing its own tobacco tax, electronic nicotine delivery system products tax or a similar levy.
Sec. 25. Section 42-3308, Arizona Revised Statutes, is amended to read:
42-3308. Agreements between the department and tribal tax authorities; definition
A. The department may collect and administer any tribal excise tax on tobacco products or electronic nicotine delivery system products imposed by an Indian tribe, as described in section 42-3302, subsection C E on entering into an intergovernmental agreement or contract with the tribe to provide a uniform or coordinated method of administration of Indian reservation tobacco tax or electronic nicotine delivery system products tax imposed by this state under this article and tribal excise tax imposed by the tribe.
B. Any intergovernmental agreement or contract entered into pursuant to subsection A of this section must contain provisions for a uniform or coordinated audit procedure for the Indian reservation tobacco tax or electronic nicotine delivery system products tax imposed by this state under this article and tribal excise tax on tobacco products imposed by the tribe.
C. For the purposes of this section, "excise tax on tobacco products or electronic nicotine delivery system products" has the same meaning prescribed for "luxury, sales, transaction privilege or similar tax" under section 42-3301.
Sec. 26. Heading change
The article heading of title 42, chapter 3, article 10, Arizona Revised Statutes, is changed from "DISTRIBUTORS AND RETAILERS OF TOBACCO PRODUCTS" to "electronic nicotine delivery system distributors and DISTRIBUTORS AND RETAILERS OF TOBACCO PRODUCTS".
Sec. 27. Section 42-3401, Arizona Revised Statutes, is amended to read:
42-3401. Tobacco distributor licenses; electronic nicotine delivery system distributor licenses; application; conditions; revocations and cancellations
A. Every person acquiring or possessing for the purpose of making the initial sale or distribution in this state of any tobacco products on which a tax is imposed by this chapter and every electronic nicotine delivery system distributor of electronic nicotine delivery system products on which a tax imposed by this chapter shall obtain from the department a license to sell tobacco products or electronic nicotine delivery system products. The application for the license shall be in the form provided by the department and shall be accompanied by a fee of $25 for each place of business listed in the application. The form shall state that the identity of the applicant will be posted to the department's website for public inspection. The application for a license shall include the applicant's name and address, the applicant's principal place of business, all other places of business where the applicant's business is conducted for the purpose of making the initial sale or distribution of tobacco products or electronic nicotine delivery system products in this state, including any location that maintains an inventory of tobacco products or electronic nicotine delivery system products, and any other information required by the department. The applicant's principal place of business and other business locations may not include a residential location or post office box address, except as allowed under subsection D, paragraph 2, subdivision (c) of this section. If the applicant is a firm, partnership, limited liability company, limited liability partnership or association, the applicant shall list the name and address of each of the applicant's members. If the applicant is a corporation, the application shall list the name and address of the applicant's officers and any person who directly or indirectly owns an aggregate amount of ten percent or more of the ownership interest in the corporation. If a licensee is a corporation, firm, partnership, limited liability company, limited liability partnership or association, the licensee under this subsection shall notify the department in writing within thirty days after any change in membership, legal entity status or ownership of more than fifty percent of the total ownership interest in a single transaction. If a licensee changes its business location, the licensee under this subsection shall notify the department within thirty days after a change in location. If the licensee is making a change in its business location by adding or replacing one or more additional places of business that are not currently listed on its application, the licensee must remit a fee of $25 for each additional place of business.
B. For the purposes of subsection A of this section, an applicant with a controlling interest in more than one business engaged in activities as a distributor or electronic nicotine delivery system distributor shall apply for a single license encompassing all such businesses and list each place of business in its application. For the purposes of this subsection, "controlling interest" means direct or indirect ownership of at least eighty percent of the voting shares of a corporation or of the interests in a company, business or person other than a corporation.
C. The department shall issue a license authorizing the applicant to acquire or possess tobacco products or electronic nicotine delivery system products in this state on the condition that the applicant complies with this chapter and the rules of the department. The license:
1. Shall be nontransferable. A licensee may not transfer its license to a new owner when selling its business, and any court-appointed trustee, receiver or other person shall obtain a license in its own name in cases of liquidation, insolvency or bankruptcy or pursuant to a court order if the business remains in operation as a distributor of tobacco products or as a electronic nicotine delivery system distributor. In cases of liquidation, insolvency or bankruptcy or pursuant to a court order, the department will not consider a business as remaining in operation under this paragraph if the court-appointed trustee, receiver or other person winds up the business within sixty days after the order is issued. A licensee shall apply for a new license if it changes its legal entity status or otherwise changes the legal structure of its business.
2. Shall be valid for one year unless earlier canceled or revoked by the department.
3. Shall be displayed in a conspicuous place at the licensee's place of business. If the licensee operates from more than one place of business, the licensee must display a copy of its license in a conspicuous place at each location.
D. As a condition of licensure under this section, an applicant agrees to the following conditions:
1. A person may not hold or store any tobacco products or electronic nicotine delivery system products, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor or electronic nicotine delivery system distributor at any place other than a location that has been disclosed to the department pursuant to subsection A of this section. This paragraph does not include a person holding or storing tobacco products or electronic nicotine delivery system products by or on behalf of the distributor or electronic nicotine delivery system distributor when the tobacco products or electronic nicotine delivery system products are in transit to a distributor, electronic nicotine delivery system distributor or retailer as part of a lawful sale.
2. All tobacco products or electronic nicotine delivery system products held or stored, whether within or outside of this state, for sale or distribution in this state by or on behalf of a distributor or electronic nicotine delivery system distributor:
(a) Shall be accessible to the department during normal business hours without a judicial warrant or prior written consent of the distributor.
(b) May not be held or stored in a vehicle, except as allowed under section 42-3403, subsection B.
3. Tobacco products or electronic nicotine delivery system products may be sold, transferred or distributed to a retailer located on an Indian reservation in this state only if the retailer is registered with, and has a registration identification number issued by, the department.
E. A person who is convicted of an offense described in section 42-1127, subsection E is permanently ineligible to hold a license issued under this section.
F. The department may not issue or renew a license to an applicant and may revoke a license issued under subsection C of this section if any of the following applies:
1. The applicant or licensee owes $1,000 or more in delinquent taxes imposed on tobacco products or electronic nicotine delivery system products under this chapter that are not under protest or subject to a payment agreement.
2. The department has revoked any license held by the applicant or licensee within the previous two years.
3. The applicant or licensee has been convicted of a crime that relates to stolen or counterfeit cigarettes or electronic nicotine delivery system products.
4. The applicant or licensee has imported cigarettes into the United States for sale or distribution in violation of 19 United States Code section 1681a.
5. The applicant or licensee has imported cigarettes into the United States for sale or distribution without fully complying with the federal cigarette labeling and advertising act (P.L. 89-92; 79 Stat. 282; 15 United States Code section 1331).
6. The applicant or licensee is in violation of section 13-3711 or section 36-798.06, subsection A.
7. Pursuant to section 44-7111, section 6(a), the applicant or licensee is in violation of section 44-7111, section 3(c).
8. The civil rights of the applicant or licensee have been suspended under section 13-904. An applicant or licensee whose civil rights have been suspended is ineligible to hold a license for a period of five years following the restoration of the applicant's or licensee's civil rights.
G. In addition to any other civil or criminal penalty and except as otherwise provided in this section, the department may deny the issuance or renewal of or revoke a license issued under subsection C of this section if the person violates any requirement under this title more than two times within a three-year period or fails to otherwise maintain the conditions of licensure in this section.
H. The department shall publish on its website the names of each person who is issued a license under subsection C of this section, including any trade names or business names used by the licensee. The department shall update the published names at least once each month.
I. A person may not apply for or hold a distributor's or electronic nicotine delivery system distributor's license if that person does not engage in the activities described in subsection A of this section. In addition to any other applicable penalty, the department may cancel the license of any licensee that fails to incur any tax liability under this chapter for twelve consecutive months.
J. Any revocation, cancellation or denial of a license issued under this section by the department must comply with section 41-1092.11, subsection B.
K. Notwithstanding any other law, for the purposes of subsection F, paragraphs 1 and 2 of this section, section 42-1127, subsection C and section 42-3461, subsection B, if a distributor or electronic nicotine delivery system distributor has listed in its application more than one place of business, any revocation, cancellation, denial or nonrenewal of the distributor's or electronic nicotine delivery system distributor's license shall apply only with effect to remove the place of business or business location at which the activity occurred from the distributor's or electronic nicotine delivery system distributor's license. If such a removal occurs, the distributor shall be or electronic nicotine delivery system distributor is subject to restrictions that the department prescribes by rule.
Sec. 28. Section 42-3402, Arizona Revised Statutes, is amended to read:
42-3402. Contraband tobacco products and electronic nicotine delivery system products
Notwithstanding any other law to the contrary, tobacco products or electronic nicotine delivery system products that are ordered, purchased or transported in violation of section 13-3711, 36-798.06 or 42-3461 or section 44-7111, section 3(c) or any other statute under which the tobacco products or electronic nicotine delivery system products are subject to seizure and destruction are considered to be contraband for which taxes that are imposed under this chapter may not be reported and remitted by a distributor or electronic nicotine delivery system distributor pursuant to sections 42-3462 and 42-3501 or reported by a person pursuant to section 42-3457, subsection B.
Sec. 29. Section 42-3403, Arizona Revised Statutes, is amended to read:
42-3403. Tobacco product retailers; vehicle as place of business prohibited; exceptions
A. A retailer may sell any tobacco product or electronic nicotine delivery system product that is not otherwise prohibited by federal or state law from sale for resale, but a retailer may not acquire or possess unstamped cigarettes, or other tobacco products, or cigarettes or electronic nicotine delivery system products on which taxes levied under this chapter have not been paid, unless the retailer holds a valid license issued under section 42-3401.
B. A person may not use a vehicle as a place of business for selling, transferring or otherwise distributing tobacco products or electronic nicotine delivery system products. This subsection does not prohibit the lawful delivery of other tobacco products or electronic nicotine delivery system products by a person who holds a valid license issued under section 42-3401, or by that person's representative, using a vehicle that is owned, operated or contracted by that person or that person's representative. That person or that person's representative is expressly allowed to use such a vehicle to carry and store tax-paid other tobacco products in the normal course of performing the person's or the person's representative's duties, including for the purpose of selling other tobacco products to, and performing similar lawful transactions with, retailers and distributors or electronic nicotine delivery system distributors. If a vehicle is used by a licensed distributor or electronic nicotine delivery system distributor to carry and store tax-paid other tobacco products or electronic nicotine delivery system products, as a condition of licensure, the distributor or electronic nicotine delivery system distributor shall provide written consent and allow access to the department to inspect the stock of luxuries and all books, papers, invoices, records and electronically stored data showing sales, receipts and purchases of luxuries. The distributor or electronic nicotine delivery system distributor shall submit the written consent to the department with the license application or on demand of the department.
C. This section does not prohibit business activities that are allowed under sections 42-3454 and 42-3502 for both taxed and untaxed tobacco products.
Sec. 30. Section 42-3404, Arizona Revised Statutes, is amended to read:
42-3404. Exemptions and exclusions of certain tobacco products and electronic nicotine delivery system products from tobacco taxes and electronic nicotine delivery system taxes
A. The taxes imposed by this chapter do not apply to:
1. Tobacco products that are sold to the United States army, air force, navy, marine corps or coast guard exchanges and commissaries and navy or coast guard ships' stores.
2. Tobacco products that are sold to the United States department of veterans affairs.
3. Tobacco products that are non-tax-paid under subtitle E, chapter 52 of the internal revenue code and that are under internal revenue bond or customs control.
4. Tobacco products that are sold or transferred to a law enforcement agency for use in a criminal investigation if the sale or transfer is authorized by the department. A law enforcement agency authorized by the department to receive or purchase tobacco products is not required to:
(a) Be licensed as a distributor.
(b) Collect or remit the tax imposed by this chapter with respect to authorized distributions.
5. Tobacco products that are sold by a distributor licensed under section 42-3401 to a common carrier engaged in foreign passenger service or to a retailer that sells tobacco products on the facilities of the carrier that are dedicated to foreign passenger service.
6. Federally tax free tobacco products that are sold or given for delivery directly from the manufacturer under internal revenue bond to a veterans' home of this state or a hospital or domiciliary facility of the United States department of veterans affairs for gratuitous issue to veterans receiving hospitalization or domiciliary care. The taxes are not imposed with respect to the use or consumption of the tobacco products by the institution, veteran patients or domiciliaries.
7. Tobacco products that are sold by a manufacturer to a distributor licensed under section 42-3401.
8. Tobacco products that are manufactured outside the United States and that are sold by an importer to a distributor licensed under section 42-3401.
B. The taxes imposed by this chapter do not apply to sales and transfers involving or electronic nicotine delivery system products that are otherwise identical to the transactions for tobacco products described in subsection A of this section.
B. C. Subsection A, paragraphs 1 and 2 of this section do not apply after the first day of the first calendar month beginning more than sixty days after existing federal law is amended to permit state taxation of cigarettes, other tobacco products or electronic nicotine delivery system products sold by or through federal military installations.
C. D. Sales of tobacco products by a licensed distributor or sales of electronic nicotine delivery system products by a licensed distributor to an instrumentality of the United States government must be supported by a separate sales invoice and a properly completed federal exemption certificate. Each sales invoice must be numbered, be dated and show the name of the seller, the name of the purchaser and the destination.
D. E. This section does not affect the imposition of transaction privilege and use taxes pursuant to chapter 5 of this title to any transactions described in subsection A of this section if the transaction is otherwise subject to transaction privilege tax or use tax.
E. F. The exemptions and exclusions provided in subsection A or B of this section do not affect the taxability under this chapter of tobacco products or electronic nicotine delivery system products that are sold, given or transferred to a person in this state subsequent to the transactions described in subsection A or B of this section.
Sec. 31. Section 42-3405, Arizona Revised Statutes, is amended to read:
42-3405. Tobacco manufacturers, importers, distributors and retailers and electronic nicotine delivery system distributors; recordkeeping and invoicing requirements; retention period
A. Except for retail transactions with consumers, each manufacturer, importer and distributor of tobacco products or electronic nicotine delivery system distributor shall maintain copies of invoices or equivalent documentation for each facility and for each transaction that involves the sale, purchase, transfer, consignment or receipt of tobacco products or electronic nicotine delivery system products within this state. The invoices or equivalent documentation for each transaction shall be in the form and manner prescribed by the department and shall indicate the name and address of the other party and the quantity by brand style of the tobacco products or electronic nicotine delivery system products involved in the transaction.
B. A distributor of tobacco products or electronic nicotine delivery system distributor shall issue an invoice or equivalent documentation for each transaction that involves the sale, purchase or consignment of tobacco products or electronic nicotine delivery system products to a retailer. The invoice or equivalent documentation must include the license number of the distributor or electronic nicotine delivery system distributor, which the retailer may use to ascertain whether the license is current and valid.
C. Any retailer of tobacco products or electronic nicotine delivery system products shall retain all invoices or equivalent documentation received under subsection B of this section.
D. Records required under this section shall be preserved on the premises described in the relevant license in a manner as to ensure accessibility for inspection at reasonable hours by authorized personnel of the department. With the department's permission, persons with multiple places of business may retain centralized records, but shall transmit duplicates of the invoices or the equivalent documentation to each place of business within three business days after a request by the department.
E. The records required by this section shall be retained for a period of four years after the date of the transaction.
F. On request, the department and the United States secretary of the treasury or secretary's designee shall have access to records required under this section and reports required under section 42-3462. The department at its sole discretion may share the records and reports required by this chapter with other law enforcement officials of federal and state governments under conditions that assume the confidentiality of taxpayer information contained in the records and reports.
Sec. 32. Section 42-3406, Arizona Revised Statutes, is amended to read:
42-3406. Refunds and rebates of tobacco taxes; supporting documentation; distributor's burden of proof
A. Except as otherwise provided under subsection B of this section or by the department for a refund or redemption under section 42-3008 or 42-3460, a distributor or electronic nicotine delivery system distributor requesting any refund or rebate of taxes paid on tobacco products pursuant to article 2, 6, 7 or 9 of this chapter shall establish entitlement to the refund or rebate by obtaining a report executed by the retailer that purchased the tobacco products or electronic nicotine delivery system products on which the distributor or electronic nicotine delivery system distributor paid taxes, indicating the name and address of the retailer and the quantities of tobacco products or electronic nicotine delivery system products sold, separately identified by the tax category of tobacco product or electronic nicotine delivery system product and the necessary facts to establish the appropriate amount of refund or rebate. The report is subject to the following conditions:
1. The report shall be provided in the form and manner prescribed by the department. Under such rules as it may prescribe, the department may identify transactions for which a distributor or electronic nicotine delivery system distributor may not rely solely on the information in the retailer's report but must instead obtain additional information as required by the rules in order to be entitled to the refund or rebate.
2. The burden of proof for the refund or rebate is on the distributor or electronic nicotine delivery system distributor, but if the distributor or electronic nicotine delivery system distributor complies in all other respects with this section, the department may require the retailer that caused the execution of the report to establish the accuracy and completeness of the information required to be contained in the report that would entitle the distributor or electronic nicotine delivery system distributor to the refund or rebate. If the retailer cannot establish the accuracy and completeness of the information, the retailer is liable in an amount equal to any tax, penalty and interest that the distributor or electronic nicotine delivery system distributor would have been liable for under this chapter if the distributor or electronic nicotine delivery system distributor had not otherwise complied with this section. Payment of the amount under this section by the retailer exempts the distributor from liability for the underlying tax, penalty and interest. All amounts paid by a retailer under this paragraph shall be treated as tax revenues collected from the distributor or electronic nicotine delivery system distributor in order to designate the distribution base for the purposes of this chapter. notwithstanding any other law, this paragraph shall be interpreted consistent with federal law prohibiting the direct or indirect levy of state taxes on an Indian tribe or federally licensed Indian trader on an Indian reservation.
B. In its discretion and in circumstances in which a retailer is uncooperative, nonresponsive or no longer in business, the department may accept proof other than a report described in subsection A of this section if the distributor or electronic nicotine delivery system distributor shows, to the satisfaction of the department, that it exercised ordinary business care and prudence but was unable to furnish a report executed by the retailer. Acceptable forms of proof presented by the distributor or electronic nicotine delivery system distributor pursuant to this subsection must consist of books, records or papers maintained by the distributor, electronic nicotine delivery system distributor or retailer in the regular course of business.
Sec. 33. Heading change
The article heading of title 42, chapter 3, article 12, Arizona Revised Statutes, is changed from "TOBACCO PRODUCTS OTHER THAN CIGARETTES" to "electronic nicotine delivery system products and TOBACCO PRODUCTS OTHER THAN CIGARETTES".
Sec. 34. Section 42-3501, Arizona Revised Statutes, is amended to read:
42-3501. Return and payment by distributors of tobacco products other than cigarettes and electronic nicotine delivery system distributors
A. Except for tobacco products and electronic nicotine delivery system products described in section 42-3402, every distributor of tobacco products other than cigarettes and every electronic nicotine delivery system distributor shall pay the tax imposed by this chapter on all those products received within the this state and shall add the amount of the tax to the sales price.
B. The distributor or electronic nicotine delivery system distributor shall pay the tax to the department monthly on or before the twentieth day of the month next succeeding the month in which the tax accrues.
C. On or before that date the distributor or electronic nicotine delivery system distributor shall prepare a sworn return for the month in which the tax accrues in the form prescribed by the department, showing:
1. The amount of tobacco products other than cigarettes and electronic nicotine delivery system products received in this state during the month in which the tax accrues.
2. The amount of tax for the period covered by the return.
3. Any other information the department deems necessary for the proper administration of this chapter, including information required for roll-your-own tobacco provided under section 42-3462.
D. The distributor or electronic nicotine delivery system distributor shall deliver the return, together with a remittance of the amount of the tax due, to the department.
E. A taxpayer who fails to pay the tax within ten days of after the date on which the payment becomes due is subject to and shall pay a penalty determined under section 42-1125 plus interest at the rate determined pursuant to section 42-1123 from the time the tax was due and payable until paid.
Sec. 35. Section 42-3502, Arizona Revised Statutes, is amended to read:
42-3502. Transport of untaxed other tobacco products prohibited; exceptions; definition
A. Except as allowed in section 42-3403, a person may not hold, store or transport untaxed other tobacco products or electronic nicotine delivery system products for sale or distribution in this state in any vehicle.
B. This section does not apply to either of the following:
1. A vehicle that is owned, operated or contracted by a person who holds a valid license issued under section 42-3401 and is transporting untaxed other tobacco products or electronic nicotine delivery system products from one to another of the licensee's places of business listed on its application.
2. A vehicle that is transporting untaxed other tobacco products or electronic nicotine delivery system products to a licensed distributor as part of a lawful sale or in interstate commerce to a person lawfully operating as a manufacturer, distributor or retailer of other tobacco products or electronic nicotine delivery system products.
C. For the purposes of this section, "untaxed other tobacco products or electronic nicotine delivery system products" means other tobacco products or electronic nicotine delivery system products on which applicable taxes have not been remitted pursuant to this chapter.
Sec. 36. Section 42-3503, Arizona Revised Statutes, is amended to read:
42-3503. Acquisition and possession of untaxed other tobacco products or electronic nicotine delivery system products; definitions
A. A person, other than a manufacturer or an importer that is shipping into the this state, shall be licensed as a distributor or electronic nicotine delivery system distributor if the person acquires or possesses untaxed other tobacco products or electronic nicotine delivery system products for sale, barter or exchange or for any other purpose besides or in addition to personal use or consumption in this state, including Indian reservations located in this state.
B. A distributor or electronic nicotine delivery system distributor shall obtain other tobacco products or electronic nicotine delivery system products only from a manufacturer or an importer, or a distributor or an electronic nicotine delivery system distributor with a current license issued under section 42-3401.
C. For the purposes of this section:
1. "Importer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to directly or indirectly import finished tobacco products or electronic nicotine delivery system products into the United States for sale or distribution, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 41 or any other applicable federal statute or regulation.
2. "Manufacturer" means a person who has received approval from the federal alcohol and tobacco tax and trade bureau to manufacture, fabricate, assemble, process or label finished tobacco products or electronic nicotine delivery system products, pursuant to 26 United States Code section 5712 and 27 Code of Federal Regulations part 40 or any other applicable federal statute or regulation.
Sec. 37. Section 44-7101, Arizona Revised Statutes, is amended to read:
44-7101. Tobacco product manufacturers escrow accounts; model statute
This state enacts the model statute described in the master settlement agreement entered into on November 23, 1998 between this state and certain United States tobacco product manufacturers as exhibit T as follows:
Section 1. Findings and Purpose.
(a) Cigarette smoking presents serious public health concerns to the state and to the citizens of the state. The surgeon general has determined that smoking causes lung cancer, heart disease and other serious diseases, and that there are hundreds of thousands of tobacco-related deaths in the United States each year. These diseases most often do not appear until many years after the person in question begins smoking.
(b) Cigarette smoking also presents serious financial concerns for the state. Under certain health-care programs, the state may have a legal obligation to provide medical assistance to eligible persons for health conditions associated with cigarette smoking, and those persons may have a legal entitlement to receive such medical assistance.
(c) Under these programs, the state pays millions of dollars each year to provide medical assistance for these persons for health conditions associated with cigarette smoking.
(d) It is the policy of the state that financial burdens imposed on the state by cigarette smoking be borne by tobacco product manufacturers rather than by the state to the extent that such manufacturers either determine to enter into a settlement with the state or are found culpable by the courts.
(e) On November 23, 1998, leading United States tobacco product manufacturers entered into a settlement agreement, entitled the "master settlement agreement," with the state. The master settlement agreement obligates these manufacturers, in return for a release of past, present and certain future claims against them as described therein, to pay substantial sums to the state (tied in part to their volume of sales); to fund a national foundation devoted to the interests of public health; and to make substantial changes in their advertising and marketing practices and corporate culture, with the intention of reducing underage smoking.
(f) It would be contrary to the policy of the state if tobacco product manufacturers who determine not to enter into such a settlement could use a resulting cost advantage to derive large, short-term profits in the years before liability may arise without ensuring that the state will have an eventual source of recovery from them if they are proven to have acted culpably. It is thus in the interest of the state to require that such manufacturers establish a reserve fund to guarantee a source of compensation and to prevent such manufacturers from deriving large, short-term profits and then becoming judgment-proof before liability may arise.
Section 2. Definitions.
(a) "Adjusted for inflation" means increased in accordance with the formula for inflation adjustment set forth in exhibit C to the master settlement agreement.
(b) "Affiliate" means a person who directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or control with, another person. Solely for purposes of this definition, the terms "owns," "is owned" and "ownership" mean ownership of an equity interest, or the equivalent thereof, of ten percent or more, and the term "person" means an individual, partnership, committee, association, corporation or any other organization or group of persons.
(c) "Allocable share" means allocable share as that term is defined in the master settlement agreement.
(d) "Cigarette" means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains (1) any roll of tobacco wrapped in paper or in any substance not containing tobacco; or (2) tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette; or (3) any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in clause (1) of this definition. The term "cigarette" includes "roll-your-own" (i.e., any tobacco which, because of its appearance, type, packaging, or labeling is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes). For purposes of this definition of "cigarette," 0.09 ounces of "roll-your-own" tobacco shall constitute one individual "cigarette."
(e) "Master settlement agreement" means the settlement agreement (and related documents) entered into on November 23, 1998 by the state and leading United States tobacco product manufacturers.
(f) "Qualified escrow fund" means an escrow arrangement with a federally or state chartered financial institution having no affiliation with any tobacco product manufacturer and having assets of at least $1,000,000,000 where such arrangement requires that such financial institution hold the escrowed funds' principal for the benefit of releasing parties and prohibits the tobacco product manufacturer placing the funds into escrow from using, accessing or directing the use of the funds' principal except as consistent with section 3(B)(2) of this act.
(g) "Released claims" means released claims as that term is defined in the master settlement agreement.
(h) "Releasing parties" means releasing parties as that term is defined in the master settlement agreement.
(i) "Tobacco product manufacturer" means an entity that after the date of enactment of this act directly (and not exclusively through any affiliate):
(1) Manufactures cigarettes anywhere that such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer (except where such importer is an original participating manufacturer (as that term is defined in the master settlement agreement) that will be responsible for the payments under the master settlement agreement with respect to such cigarettes as a result of the provisions of subsection II(MM) of the master settlement agreement and that pays the taxes specified in subsection II(Z) of the master settlement agreement, and provided that the manufacturer of such cigarettes does not market or advertise such cigarettes in the United States);
(2) Is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States; or
(3) Becomes a successor of an entity described in paragraph (1) or (2).
The term "tobacco product manufacturer" shall not include an affiliate of a tobacco product manufacturer unless such affiliate itself falls within any of (1)-(3) above.
(j) "Tribal luxury taxes" means those taxes referenced in section 42-3302, subsection C E.
(k) "Units sold" means the number of individual cigarettes sold to a consumer in the state by the applicable tobacco product manufacturer (whether directly or through a distributor, retailer or similar intermediary or intermediaries) during the year in question, regardless of whether state excise taxes were due or collected. For cigarettes for which a state or tribal excise, luxury or similar tax is collected or precollected or that have a department of revenue cigarette tax stamp affixed to the package, the sale occurs at the earlier of the time that any tax is collected or precollected or that the tax stamp is affixed. The department of revenue shall adopt such rules as are necessary to ascertain the units sold of such tobacco product manufacturer for each year.
Section 3. Requirements.
Any tobacco product manufacturer selling cigarettes to consumers within the state (whether directly or through a distributor, retailer or similar intermediary or intermediaries) after the date of enactment of this act shall do one of the following:
(a) Become a participating manufacturer (as that term is defined in section II(jj) of the master settlement agreement) and generally perform its financial obligations under the master settlement agreement; or
(b) (1) place into a qualified escrow fund by April 15 of the year following the year in question the following amounts (as such amounts are adjusted for inflation):
2000: $.0104712 per unit sold after the date of enactment of this act;
For each of 2001 and 2002: $.0136125 per unit sold;
For each of 2003 through 2006: $.0167539 per unit sold;
For each of 2007 and each year thereafter: $.0188482 per unit sold.
(2) A tobacco product manufacturer that places funds into escrow pursuant to paragraph (1) shall receive the interest or other appreciation on such funds as earned. Such funds themselves shall be released from escrow only under the following circumstances:
(a) To pay a judgment or settlement on any released claim brought against such tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this subparagraph (i) in the order in which they were placed into escrow and (ii) only to the extent and at the time necessary to make payments required under such judgment or settlement;
(b) To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the master settlement agreement payments, as determined pursuant to section IX(i) of that agreement including after final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or
(c) To the extent not released from escrow under subparagraphs (a) or (b), funds shall be released from escrow and revert back to such tobacco product manufacturer twenty-five years after the date on which they were placed into escrow.
(3) Each tobacco product manufacturer that elects to place funds into escrow pursuant to this subsection shall annually certify to the attorney general that it is in compliance with this subsection. The attorney general may bring a civil action on behalf of the state against any tobacco product manufacturer that fails to place into escrow the funds required under this section. Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this section shall:
(a) Be required within 15 days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a violation of this subsection, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed 5 percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 100 percent of the original amount improperly withheld from escrow;
(b) In the case of a knowing violation, be required within 15 days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a knowing violation of this subsection, may impose a civil penalty to be paid to the general fund in an amount not to exceed 15 percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 300 percent of the original amount improperly withheld from escrow; and
(c) In the case of a second knowing violation, be prohibited from selling cigarettes to consumers within the state (whether directly or through a distributor, retailer or similar intermediary) for a period not to exceed 2 years.
Each failure to make an annual deposit required under this section shall constitute a separate violation and the violator shall pay to the attorney general the costs and attorney fees incurred during a successful prosecution under paragraph (3).
(c) Notwithstanding subparagraph (b), paragraph 2 of this section, a tobacco product manufacturer that elects to place funds into escrow pursuant to subparagraph (b), paragraph 1 of this section may make an irrevocable assignment of its interest in the funds to the benefit of this state. The assignment shall be permanent and apply to all funds in the escrow account or that may subsequently come into the account, including those funds deposited into the escrow account before the assignment is executed, those funds deposited into the escrow account after the assignment is executed and interest or other appreciation on the funds. The tobacco product manufacturer, the attorney general and the financial institution where the escrow account is maintained may make amendments to the qualified escrow account agreement as may be necessary to effectuate an assignment of rights executed pursuant to this subparagraph or a withdrawal of monies from the escrow account pursuant to subparagraph (b), paragraph 2 of this section. An assignment of rights executed pursuant to this subparagraph shall be in writing, shall be signed by a duly authorized representative of the tobacco product manufacturer making the assignment and shall become effective on delivery of the assignment to the attorney general and the financial institution where the escrow account is maintained. An assignment of escrow funds shall not be made by a tobacco product manufacturer unless and until the attorney general provides written approval to the tobacco product manufacturer.
(d) Notwithstanding subparagraph (b), paragraph 2 of this section, any escrow funds assigned to the state pursuant to subparagraph (c) of this section shall be withdrawn by the state on the approval of the attorney general. Any funds withdrawn pursuant to this subparagraph shall be deposited in the consumer protection-consumer fraud revolving fund established by section 44-1531.01 and shall be calculated on a dollar-for-dollar basis as a credit against any judgment or settlement described in subparagraph (b), paragraph 2 of this section that may be obtained against the tobacco product manufacturer that has assigned the funds in the escrow account. This section does not relieve a tobacco product manufacturer from any past, current or future obligations that the manufacturer may have pursuant to this section or section 44-7111.
Section 4. Effect of judicial action.
If section 3, subparagraph (b), paragraph 2, subdivision (b) is held by a court of competent jurisdiction to be unconstitutional, the following provisions apply in its place:
To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow in a particular year was greater than the state's allocable share of the total payments that such manufacturer would have been required to make in that year under the master settlement agreement (as determined pursuant to section IX(i)(2) of the master settlement agreement, and before any of the adjustments or offsets described in section IX(i)(3) of that agreement other than the inflation adjustment) had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or
Any holding of unconstitutionality or the repeal of section 3, subparagraph (b), paragraph 2, subdivision (b) of this statute does not impair or invalidate any other portion of this statute or the application of this statute to any other person or circumstance and the remaining portions of this statute continue in full force and effect.
Any holding that federal law preempts or prohibits the application of any other provision of this section 44-7101 in one or more circumstances does not impair or invalidate the statute's application in any other circumstance.
Sec. 38. Exemption from rulemaking
Notwithstanding any other law, for the purposes of this act, the department of revenue is exempt from the rulemaking requirements of title 41, chapter 6, Arizona Revised Statutes, for one year after the effective date of this act.
Sec. 39. Applicability
This act applies to taxable periods beginning on or after December 31, 2024.
Sec. 40. Requirements for enactment; three-fourths vote
Pursuant to article IV, part 1, section 1, Constitution of Arizona, sections 8-1181 and 36-770, Arizona Revised Statutes, as amended by this act, are effective only on the affirmative vote of at least three-fourths of the members of each house of the legislature.
Sec. 41. Requirements for enactment; two-thirds vote
Pursuant to article IX, section 22, Constitution of Arizona, this act is effective only on the affirmative vote of at least two-thirds of the members of each house of the legislature and is effective immediately on the signature of the governor or, if the governor vetoes this act, on the subsequent affirmative vote of at least three-fourths of the members of each house of the legislature.
