BILL ANALYSIS

 

 

Senate Research Center	H.B. 4865
88R26348 BEF-D	By: Harris, Cody (LaMantia)
	Finance
	5/17/2023
	Engrossed

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

H.B. 4865 is the product of negotiations between the Cigar Association of America (CAA), the Premium Cigar Coalition (PCC), and states across the country. This bill seeks to establish uniformity in the approach to collecting tobacco excise taxes on remote sales of cigars and pipe tobacco to consumers. Similar laws have been enacted in Indiana, Maryland, Michigan, North Carolina, and Virginia, while bills are currently pending in legislatures in Colorado, Maine, Illinois, and Wisconsin.

 

H.B. 4865 removes barriers present in Texas law that currently hinder the lawful collection of tobacco excise taxes, specifically focusing on cigars and pipe tobacco in the context of remote retail sales. It clarifies, extends, and introduces clear guidelines on the application of the Texas cigar and pipe tobacco excise tax to transactions occurring between remote retail sellers and consumers within Texas. Further, it establishes the responsibility of remote retail sellers to collect the cigar and pipe tobacco excise tax from consumers and remit it to Texas for all remote retail sales shipped to addresses within the state.

 

H.B. 4865 also outlines procedures to collect the cigar and pipe tobacco excise tax on all remote transactions, regardless of whether the source is located inside or outside the state of Texas. Furthermore, it establishes a clear path to compliance with cigar and pipe tobacco excise tax requirements in Texas through licensure for remote sellers engaged in interstate and intrastate commerce.

 

H.B. 4865 amends current law relating to the taxation of cigars and pipe tobacco sold by certain remote retail sellers and requires an occupational permit.

 

RULEMAKING AUTHORITY

 

Rulemaking authority is expressly granted to the Comptroller of Public Accounts of the State of Texas in SECTION 18 of this bill.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 155.001, Tax Code, by amending Subdivisions (2), (8), and (12) and adding Subdivisions (12-a), (13-b), (13-c), and (14-a) to redefine "cigar," "first sale," and "permit holder" and define "pipe tobacco," "remote retail sale," "remote retail seller," and "sale."

 

SECTION 2. Amends Sections 155.021(a) and (c), Tax Code, as follows:

 

(a) Provides that a tax is imposed and becomes due and payable when:

 

(1) creates this subdivision from existing text and makes nonsubstantive changes; or

 

(2) a remote retail seller makes a first sale of cigars to a consumer in this state.

 

(c) Requires the manufacturer and the remote retail seller to make a certain affidavit if the remote retail seller prepares a certain report. Makes nonsubstantive changes.

 

SECTION 3. Amends Section 155.0211(a), Tax Code,

 

(a) Provides that a tax is imposed and becomes due and payable when:

 

(1) creates this subdivision from existing text and makes nonsubstantive changes; or

 

(2) a remote retail seller makes a first sale of pipe tobacco to a consumer in this state.

 

SECTION 4. Amends Subchapter B, Chapter 155, Tax Code, by adding Section 155.0235, as follows:

 

Sec. 155.0235. REMOTE RETAIL SELLERS: LIABILITY FOR AND PAYMENT OF TAX. (a) Provides that a permitted remote retail seller who makes a first sale of cigars or pipe tobacco to a consumer in this state is liable for and is required to pay the tax imposed by Chapter 155 (Cigars and Tobacco Products Tax).

 

(b) Requires a remote retail seller to pay the tax on cigars and pipe tobacco sold to consumers in this state at the time the remote retail seller files the report required by Section 155.1115. Requires the remote retail seller to pay the tax by cashier's check payable to the Comptroller of Public Accounts of the State of Texas (comptroller), by electronic funds transfer to the comptroller, or by any other method of payment authorized by the comptroller.

 

SECTION 5. Amends Section 155.026(a), Tax Code, to require a distributor or remote retail seller who fails to timely pay the tax when due to pay five percent of the amount of the tax then due as a penalty, and if the distributor or remote retail seller fails to pay the tax on or before the 30th day after the day on which the tax is due, requires the distributor or remote retail seller to pay an additional five percent of the amount of tax then due.

 

SECTION 6. Amends Sections 155.041(a), (b), and (h), Tax Code, as follows:

 

(a) Prohibits a person from engaging in business as a distributor, wholesaler, bonded agent, interstate warehouse, manufacturer, export warehouse, importer, remote retail seller, or retailer unless the person has applied for and received the applicable permit from the comptroller.

 

(b) and (h) Makes conforming changes to these subsections.

 

SECTION 7. Amends Section 155.0415, Tax Code, by adding Subsection (k) to authorize a permitted remote retail seller to sell cigars and pipe tobacco only to a consumer in this state.

 

SECTION 8. Amends Subchapter C, Chapter 155, Tax Code, by adding Section 155.0416, as follows:

 

Sec. 155.0416. REMOTE RETAIL SELLER PERMIT. (a) Prohibits a person from making a remote retail sale of cigars or pipe tobacco to a consumer in this state unless the person holds a remote retail seller permit.

 

(b) Requires a remote retail seller, unless a remote retail seller is exempt under comptroller rule from the requirement to obtain a permit under Section 151.201 (Sales Tax Permits) based on annual review from sales to persons in this state, to:

 

(1) apply for and obtain a permit under Section 151.201; and

 

(2) collect and remit the taxes imposed under this chapter and Chapter 151 (Limited Sales, Excise, and Use Tax).

 

(c) Requires a remote retail seller to use an independent, third-party age verification service that compares information available from a commercially available database, or aggregate of databases, that is regularly used by government agencies and businesses for the purpose of age and identity verification to verify the personal information entered by the individual during the ordering process and establish that the individual is of age.

 

SECTION 9. Amends Section 155.048(a), Tax Code, to require the comptroller to issue a permit to certain retail entities, including a remote retail seller, if certain conditions are met.

 

SECTION 10. Amends Section 155.049(b), Tax Code, as follows:

 

(b) Requires an application for a permit required by this chapter to be accompanied by a fee of:

 

(1)-(3) makes no changes to these subdivisions;

 

(4)-(5) makes nonsubstantive changes to these subdivisions;

 

(6) $180 for a remote retailer seller's permit.

 

SECTION 11. Amends Section 155.053, Tax Code, by adding Subsection (d) to provide that Section 155.053 (Sales Tax Brackets) does not apply to a remote retail seller or permit holder.

 

SECTION 12. Amends Section 155.058(a), Tax Code, as follows:

 

(a) Provides that revenue from the sale of permits to certain entities, including remote retail sellers, is allocated in the same manner that other revenue is allocated by Subchapter H (Exemptions), except as provided by Subsection (b) (relating to requiring revenue from the sale of retailer's permits to be deposited and appropriated according to a certain statute).

 

SECTION 13. Amends Section 155.101,Tax Code, as follows:

 

Sec. 155.101. RECORD OF PURCHASE OR RECEIPT. (a)-(b) Creates these subsections from existing text.

 

(c) Requires each remote retail seller to keep records at the principal place of business location identified on the business permit.

 

(d) Requires the records required by this section to include certain information.

 

SECTION 14. Amends Subchapter D, Chapter 155, Tax Code, by adding Section 155.1115, as follows:

 

Sec. 155.1115.� REMOTE RETAIL SELLERS: RECORDS AND REPORT.� (a)� Requires each remote retail seller to keep records of the sale or other disposition of cigars and pipe tobacco as required by comptroller rule.

 

(b)� Requires a remote retail seller to file with the comptroller on or before the 25th day of each month a report for the preceding month.� Requires that the report� show:

 

(1)� the date the report was made;

 

(2)� the remote retail seller's name and address;

 

(3)� the month the report covers;

 

(4)� the amount of cigars and pipe tobacco sold to consumers in this state; and

 

(5)� any other information the comptroller requires relating to cigars and pipe tobacco and to the payment of taxes due on cigars and pipe tobacco.

 

(c) Requires the comptroller to prescribe the form and content of the report under Subsection (b).

 

SECTION 15.  Amends Section 155.201(a), Tax Code, to make conforming changes.

 

SECTION 16.� Amends Section 155.207, Tax Code, as follows:

 

Sec. 155.207.� PERMITS.� Provides that a person commits an offense if the person acting:

 

(1)-(3) makes no changes to these subdivisions;

 

(4) as a distributor, interstate warehouse,  wholesaler, remote retail seller, or retailer, sells tobacco products without having a valid permit; or

 

(5) makes no changes to this subdivision.

 

SECTION 17. Amends Section 155.211(b), Tax Code, to provide that Section 155.211 (Possession: Tax Due) does not prohibit transportation of tobacco products by a common carrier, including as part of a remote retail sale made by a permit holder.

 

SECTION 18.� Requires the comptroller to adopt rules necessary to implement the changes in law made by this Act, not later than January 1, 2024.

 

SECTION 19.� Provides that a person who makes a remote retail sale of cigars or pipe tobacco, notwithstanding Section 155.0416, Tax Code, as added by this Act, is not required to hold a permit as a remote retail seller before April 1, 2024.

 

SECTION 20. Provides that the changes in law made by this Act do not affect tax liability accruing before the effective date of this Act. Provides that that liability continues in effect as if this Act had not been enacted, and the former law is continued in effect for the collection of taxes due and for civil and criminal enforcement of the liability for those taxes.

 

SECTION 21. Effective date: September 1, 2023.