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S.F. No. 1192 - Cigarette and Tobacco Products State Retail License Establishment and Appropriation
 
Author: Senator Kari Dziedzic
 
Prepared By: Stephanie James, Senate Counsel (651/296-0103)
 
Date: April 7, 2015



 

Section 1 [Notice of Revocation; Hearings] removes retailers purchasing cigarettes from an unlicensed seller from a list of violations for which the Commissioner of Revenue must give notice of intention to revoke a person’s permit to collect sales taxes.

Section 2 [Publication of Revoked Cigarette Licenses] establishes a new process for the Commissioner of Revenue to provide notice that the commissioner will revoke a license to sell cigarettes or tobacco products at retail.  The commissioner must mail a written notice to a license holder that the commissioner may, 30 or more days later, publish a list of people who have had their retail licenses to sell cigarettes or tobacco products revoked.  The commissioner is permitted to publish the name of responsible persons of a license holder, if the license holder is a business. The list may be published by any medium or method and must contain specified information. The commissioner must remove the name of the license holder from the list five years from the date of the license revocation or when the license holder receives a license clearance.

Section 3 [Retailer] is a conforming change to the definition of “retailer.”

Section 4 [License Fees; Cigarettes] raises the fee from $300 to $500 to apply for a license to distribute cigarettes. Raises the fee from $24 to $100 to apply for a license as a cigarette subjobber.  These fee increases are effective December 31, 2015.

Section 5 [License Fees; Tobacco Products] raises the fee from $75 to $500 to apply for a tobacco products distributor’s license.  Raises the fee from $20 to $100 to apply for a tobacco products subjobber’s license.  These fee increases are effective December 31, 2015.

Section 6 [Powers of Commissioner] permits the Commissioner of Revenue to refuse to issue or renew a distributor or subjobber license after the licensee or applicant has committed certain violations.

Section 7 [Retailer and Subjobber to Preserve Purchase Invoices] changes the time that a retailer and subjobber must preserve a legible copy of sales invoices for cigarettes or tobacco products.  Under current law, a retailer and subjobber must preserve invoices for one year from the invoice date; this section requires a retailer and subjobber to preserve an invoice for a period of one year or as long as the cigarette or tobacco product listed on the invoice is available for sale or in their possession, whichever is longer. This section is effective for sales and purchases by subjobbers and retailers made on or after August 1, 2015.

Section 8 [Revocation of Cigarette and Tobacco Retailer License] establishes a process for the Department of Revenue to regulate the issuance by local governments of licenses to sell cigarettes and tobacco.

Subdivision 1 [Cigarette and tobacco retail revocation] precludes a licensing authority (town, county, city, or state agricultural society) from issuing a license to sell cigarettes or tobacco if the Commissioner of Revenue has notified the licensing authority that a license holder has been in possession of contraband cigarettes or tobacco products at the location covered by the license.  Requires a licensing authority to notify a license holder that their license is revoked as a result of sale of contraband products, with information about obtaining a license clearance. Requires the licensing authority to revoke a license within 30 days after receiving notice from the Commissioner of Revenue about the sale of contraband cigarettes or tobacco products, unless the Commissioner of Revenue has cleared the license.  Defines terms for this section.

 Subdivision 2 [New license after revocation] precludes an applicant from applying for a license or seeking reinstatement of a revoked license to sell cigarettes or tobacco products unless the applicant presents a license clearance to the licensing authority. Precludes a licensing authority from issuing a new license to an applicant with a responsible person who has had a license revoked or to an applicant that has had a license revoked, unless the applicant presents a license clearance to the authority.

Permits the Commissioner of Revenue to issue a license clearance if an applicant and all responsible persons of the applicant take specified actions, including paying sales taxes and depositing security or a surety bond of ten times the amount of tax on the contraband cigarettes or tobacco products.

Requires the commissioner to pay interest on the security deposit and refund the deposit after two years unless the applicant has unpaid tax liabilities.  Permits the commissioner to apply the security deposit to the unpaid tax liabilities and to tax on contraband cigarettes or tobacco products owned or offered for sale by the applicant after license clearance.

Permits the commissioner to refund the security deposit before the end of two years if the license holder no longer holds a license issued by a licensing authority in the state.

Permits the commissioner to notify a licensing authority to revoke a license if the license was issued without an applicant submitting a license clearance. Requires the commissioner to send notice of intent to require license revocation to the license holder and to the responsible person of the license holder.

Permits the commissioner to refuse to issue a license clearance for two years after the applicant’s most recent license revocation if the applicant had two or more revocations in a five-year period due to contraband cigarette or tobacco products possession or sales.

 Subdivision 3 [Notice and hearing] provides a process for notice and contested case hearing before the commissioner requires a licensing authority to revoke a license. Specifies that a hearing under this subdivision is in lieu of any other hearing or proceeding provided by law.

Section 9 [Penalty for Retailers Who Fail to Comply] sets fines for a retailer who fails to produce invoices from a licensed seller within one hour of a request by the commissioner, or who offers for sale or holds inventory of cigarettes or tobacco products without a license. The fines escalate for multiple violations within a 36-month period:  $1,000 for a first violation, $2,000 for a second violation, and $5,000 for third and subsequent violations.  Sets fines for a retailer that offers for sale or holds inventory of cigarettes or tobacco products untaxed cigarettes or tobacco projects, equal to the greater of $2,000 or 150 percent of the tax due.

Section 10 [Penalties for Willful Failure to File or Pay] makes it a felony to willfully attempt to evade or defeat a tax by failing to file a required report or other document, or to collect or remit taxes under Minnesota Statutes, chapter 297F, relating to cigarettes, tobacco products, and premium cigars.

Section 11 [Aggregation and Consolidation of Venue] permits the aggregating of the number of unstamped cigarettes or value of untaxed tobacco products in charging a defendant with an offense. Permits prosecution in any county in which an offense is committed, when an individual commits offenses in more than one county.

Section 12 [Contraband Defined] clarifies the definition of cigarette or tobacco products that are contraband because of a failure of a retailer or subjobber to produce an invoice from a licensed seller within one hour of a request from the commissioner. Expands the definition of contraband to include cigarette and tobacco products offered for sale or held as inventory by a retailer operating without a license, regardless of whether tax has been paid.

Section 13 [Notice to Commissioner] adds information that a licensing authority must provide to the Commissioner of Revenue after issuing or renewing a license for the retail sale of tobacco, tobacco-related devices, and electronic delivery devices.

Section 14 [Appropriations] appropriates $1,421,000 in fiscal year 2016, and $1,036,000 in each of fiscal years 2017, 2018, and 2019 (and thereafter added to the base) from the general fund to the Commissioner of Revenue to carry out the provisions of this act.

Section 15 [Repealer] repeals permission for the Commissioner of Revenue to revoke a sales and use tax permit of a retailer who purchased a specified amount of cigarettes or tobacco products from an unlicensed seller or if the retailer purchased for resale cigarettes without the proper stamp.

 

 

 
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