88R26348 BEF-D
 
  By: Harris of Anderson H.B. No. 4865
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the taxation of cigars and pipe tobacco sold by certain
  remote retail sellers; requiring an occupational permit.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 155.001, Tax Code, is amended by
  amending Subdivisions (2), (8), and (12) and adding Subdivisions
  (12-a), (13-b), (13-c), and (14-a) to read as follows:
               (2)  "Cigar" means a roll of [fermented] tobacco [that
  is] wrapped in tobacco leaf or in another substance containing
  tobacco [and the main stream of smoke from which produces an
  alkaline reaction to litmus paper].
               (8)  "First sale" means, except as otherwise provided
  by this chapter:
                     (A)  the first transfer of possession in
  connection with a purchase, sale, or any exchange for value of
  tobacco products in or into this state, which:
                           (i)  includes the sale of tobacco products
  by:
                                 (a)  a distributor in or outside this
  state to a distributor, wholesaler, or retailer in this state; and
                                 (b)  a manufacturer in this state who
  transfers the tobacco products in this state; and
                           (ii)  does not include:
                                 (a)  the sale of tobacco products by a
  manufacturer outside this state to a distributor in this state;
                                 (b)  the transfer of tobacco products
  from a manufacturer outside this state to a bonded agent in this
  state; or
                                 (c)  the sale of tobacco products by a
  manufacturer, bonded agent, distributor, or importer to an
  interstate warehouse in this state;
                     (B)  the first transfer of possession in
  connection with a remote retail sale of cigars or pipe tobacco by a
  remote retail seller outside this state to a consumer in this state;
                     (C)  the first use or consumption of tobacco
  products in this state; or
                     (D) [(C)]  the loss of tobacco products in this
  state whether through negligence, theft, or other unaccountable
  loss.
               (12)  "Permit holder" means a bonded agent, interstate
  warehouse, distributor, wholesaler, manufacturer, importer, export
  warehouse, remote retail seller, or retailer who obtains a permit
  under Section 155.041.
               (12-a)  "Pipe tobacco" means a tobacco product that,
  because of its appearance, type, packaging, or labeling, is
  suitable for use and is likely to be offered to or purchased by
  consumers as tobacco to be smoked in a pipe.
               (13-b)  "Remote retail sale":
                     (A)  means any sale of cigars or pipe tobacco by a
  person located outside this state to a consumer in this state if:
                           (i)  the consumer submits the order by means
  of a telephone or another method of voice transmission, the mail,
  the Internet or another online service, or by other means where the
  seller is otherwise not in the physical presence of the consumer
  when the order is made; and
                           (ii)  the cigars or pipe tobacco is
  delivered to the consumer by common carrier, private delivery
  service, or other method of remote delivery or the seller is
  otherwise not in the physical presence of the consumer when the
  consumer obtains possession of the cigar or pipe tobacco; and
                     (B)  does not include a delivery sale as defined
  by 15 U.S.C. Section 375.
               (13-c)  "Remote retail seller" means a person located
  outside this state who makes remote retail sales of cigars or pipe
  tobacco. The term does not include a delivery seller as defined by
  15 U.S.C. Section 375.
               (14-a)  "Sale" means any transfer, exchange, or barter
  for consideration. The term includes:
                     (A)  a gift by a person engaged in the business of
  selling tobacco products for advertising, as a means of evading
  this chapter, or for any other purpose;
                     (B)  the solicitation of orders for future
  delivery; and
                     (C)  a sale for future delivery.
         SECTION 2.  Sections 155.021(a) and (c), Tax Code, are
  amended to read as follows:
         (a)  A tax is imposed and becomes due and payable when:
               (1)  a permit holder receives cigars for the purpose of
  making a first sale in this state; or
               (2)  a remote retail seller makes a first sale of cigars
  to a consumer in this state.
         (c)  Cigars taxed under Subsections (b)(3) and (b)(4) of this
  section are presumed to contain a substantial amount of nontobacco
  ingredients unless the report on the cigars required by Section
  155.111 [of this code] is accompanied by an affidavit stating that
  specific cigars described in the report do not contain sheet
  wrapper, sheet binder, or sheet filler.  If the manufacturer
  prepares the report, the manufacturer shall make the affidavit.  If
  the distributor prepares the report, the manufacturer and the
  distributor shall make the affidavit.  If the remote retail seller
  prepares the report, the manufacturer and the remote retail seller
  shall make the affidavit.
         SECTION 3.  Section 155.0211(a), Tax Code, is amended to
  read as follows:
         (a)  A tax is imposed and becomes due and payable when:
               (1)  a permit holder receives tobacco products, other
  than cigars, for the purpose of making a first sale in this state;
  or
               (2)  a remote retail seller makes a first sale of pipe
  tobacco to a consumer in this state.
         SECTION 4.  Subchapter B, Chapter 155, Tax Code, is amended
  by adding Section 155.0235 to read as follows:
         Sec. 155.0235.  REMOTE RETAIL SELLERS: LIABILITY FOR AND
  PAYMENT OF TAX.  (a)  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 shall pay the tax imposed by this chapter.
         (b)  A remote retail seller shall 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.  The
  remote retail seller shall pay the tax by cashier's check payable to
  the comptroller, by electronic funds transfer to the comptroller,
  or by any other method of payment authorized by the comptroller.
         SECTION 5.  Section 155.026(a), Tax Code, is amended to read
  as follows:
         (a)  A distributor or remote retail seller who fails to
  timely pay the tax when due shall pay five percent of the amount of
  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, the distributor or remote retail seller
  shall pay an additional five percent of the amount of tax then due.
         SECTION 6.  Sections 155.041(a), (b), and (h), Tax Code, are
  amended to read as follows:
         (a)  A person may not engage 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)  Each distributor, wholesaler, bonded agent, interstate
  warehouse, manufacturer, export warehouse, importer, remote retail
  seller, or retailer shall obtain a permit for each place of business
  owned or operated by the distributor, wholesaler, bonded agent,
  interstate warehouse, manufacturer, export warehouse, importer,
  remote retail seller, or retailer.
         (h)  Permits for engaging in business as a distributor,
  wholesaler, bonded agent, interstate warehouse, manufacturer,
  export warehouse, importer, remote retail seller, or retailer shall
  be governed exclusively by the provisions of this code.
         SECTION 7.  Section 155.0415, Tax Code, is amended by adding
  Subsection (k) to read as follows:
         (k)  A permitted remote retail seller may sell cigars and
  pipe tobacco only to a consumer in this state.
         SECTION 8.  Subchapter C, Chapter 155, Tax Code, is amended
  by adding Section 155.0416 to read as follows:
         Sec. 155.0416.  REMOTE RETAIL SELLER PERMIT. (a)  A person
  may not make 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)  Unless a remote retail seller is exempt under
  comptroller rule from the requirement to obtain a permit under
  Section 151.201 based on annual revenue from sales to persons in
  this state, the remote retail seller shall:
               (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.
         (c)  A remote retail seller shall 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.  Section 155.048(a), Tax Code, is amended to read
  as follows:
         (a)  The comptroller shall issue a permit to a distributor,
  wholesaler, bonded agent, interstate warehouse, manufacturer,
  importer, remote retail seller, or retailer if the comptroller:
               (1)  has received an application and fee, if required;
               (2)  does not reject the application and deny the
  permit under Section 155.0481; and
               (3)  determines that issuing the permit will not
  jeopardize the administration and enforcement of this chapter.
         SECTION 10.  Section 155.049(b), Tax Code, is amended to
  read as follows:
         (b)  An application for a permit required by this chapter
  must be accompanied by a fee of:
               (1)  $300 for a bonded agent's permit;
               (1-a)  $300 for an interstate warehouse's permit;
               (2)  $300 for a distributor's permit;
               (3)  $200 for a wholesaler's permit;
               (4)  $15 for each permit for a vehicle if the applicant
  is also applying for a permit as a bonded agent, distributor, or
  wholesaler or has received a current permit from the comptroller
  under Sections 155.041 and 155.048; [and]
               (5)  $180 for a retailer's permit; and
               (6)  $180 for a remote retail seller's permit.
         SECTION 11.  Section 155.053, Tax Code, is amended by adding
  Subsection (d) to read as follows:
         (d)  This section does not apply to a remote retail seller
  permit holder.
         SECTION 12.  Section 155.058(a), Tax Code, is amended to
  read as follows:
         (a)  Except as provided by Subsection (b), revenue from the
  sale of permits to distributors, wholesalers, bonded agents, remote
  retail sellers, and interstate warehouses is allocated in the same
  manner that other revenue is allocated by Subchapter H.
         SECTION 13.  Section 155.101, Tax Code, is amended to read as
  follows:
         Sec. 155.101.  RECORD OF PURCHASE OR RECEIPT.  (a) Each
  distributor, wholesaler, bonded agent, interstate warehouse, and
  export warehouse shall keep records at each place of business of all
  tobacco products purchased or received.
         (b)  Each retailer shall keep records at a single commercial
  business location, which the retailer shall designate as its
  principal place of business in the state, of all tobacco products
  purchased and received.
         (c)  Each remote retail seller shall keep records at the
  principal place of business location identified on the permit.
         (d)  The [These] records required by this section must
  include:
               (1)  the name and address of the shipper or carrier and
  the mode of transportation;
               (2)  all shipping records or copies of records,
  including invoices, bills of lading, waybills, freight bills, and
  express receipts;
               (3)  the date and the name of the place of origin of the
  tobacco product shipment;
               (4)  the date and the name of the place of arrival of
  the tobacco product shipment;
               (5)  a statement of the number, kind, and price paid for
  the tobacco products;
               (6)  the name, address, permit number, and tax
  identification number of the seller;
               (7)  in the case of a distributor, the manufacturer's
  list price for the tobacco products;
               (8)  for tobacco products other than cigars, the net
  weight as listed by the manufacturer for each unit; and
               (9)  any other information required by rules of the
  comptroller.
         SECTION 14.  Subchapter D, Chapter 155, Tax Code, is amended
  by adding Section 155.1115 to read as follows:
         Sec. 155.1115.  REMOTE RETAIL SELLERS: RECORDS AND REPORT.  
  (a)  Each remote retail seller shall keep records of the sale or
  other disposition of cigars and pipe tobacco as required by
  comptroller rule.
         (b)  A remote retail seller shall file with the comptroller
  on or before the 25th day of each month a report for the preceding
  month.  The report must 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)  The comptroller shall prescribe the form and content of
  the report under Subsection (b).
         SECTION 15.  Section 155.201(a), Tax Code, is amended to
  read as follows:
         (a)  A person violates this chapter if the person:
               (1)  is a distributor, wholesaler, manufacturer,
  export warehouse, importer, bonded agent, interstate warehouse,
  manufacturer's representative, remote retail seller, or retailer
  and fails to keep records required by this chapter;
               (2)  engages in the business of a bonded agent,
  interstate warehouse, distributor, wholesaler, manufacturer,
  export warehouse, importer, remote retail seller, or retailer
  without a valid permit;
               (3)  is a distributor, wholesaler, manufacturer,
  export warehouse, importer, bonded agent, interstate warehouse,
  remote retail seller, or retailer and fails to make a report
  required by this chapter to the comptroller or makes a false or
  incomplete report or application required by this chapter to the
  comptroller; or
               (4)  is a person affected by this chapter and fails or
  refuses to abide by or violates a provision of this chapter or a
  rule adopted by the comptroller under this chapter.
         SECTION 16.  Section 155.207, Tax Code, is amended to read as
  follows:
         Sec. 155.207.  PERMITS.  A person commits an offense if the
  person acting:
               (1)  as a distributor, interstate warehouse,
  wholesaler, or retailer, receives or possesses tobacco products
  without having a valid permit;
               (2)  as a distributor, interstate warehouse,
  wholesaler, or retailer, receives or possesses tobacco products
  without having a permit posted where it can be easily seen by the
  public;
               (3)  as a distributor, interstate warehouse, or
  wholesaler, does not deliver an invoice to the purchaser as
  required by Section 155.102;
               (4)  as a distributor, interstate
  warehouse,  wholesaler, remote retail seller, or retailer, sells
  tobacco products without having a valid permit; or
               (5)  as a bonded agent, interstate warehouse,  or
  export warehouse, stores, distributes, or delivers tobacco
  products on which the tax has not been paid without having a valid
  permit.
         SECTION 17.  Section 155.211(b), Tax Code, is amended to
  read as follows:
         (b)  This section 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.  Not later than January 1, 2024, the comptroller
  of public accounts shall adopt rules necessary to implement the
  changes in law made by this Act.
         SECTION 19.  Notwithstanding Section 155.0416, Tax Code, as
  added by this Act, a person who makes a remote retail sale of cigars
  or pipe tobacco is not required to hold a permit as a remote retail
  seller before April 1, 2024.
         SECTION 20.  The changes in law made by this Act do not
  affect tax liability accruing before the effective date of this
  Act.  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.  This Act takes effect September 1, 2023.