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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO TAXATION - CIGARETTE TAX

     

     Introduced By: Representatives Mattiello, Silva, Johnston, O'Brien, and Ackerman

     Date Introduced: February 27, 2014

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 44-20-12.2, 44-20-17, 44-20-35, 44-20-39, 44-20-45, 44-20-51,

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44-20-51.1, 44-20-51.2 and 44-20-51.3 of the General Laws in Chapter 44-20 entitled "Cigarette

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Tax" are hereby amended to read as follows:

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     44-20-12.2. Prohibited acts -- Penalty. -- (a) No person or other legal entity shall sell or

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distribute in the state,; acquire, hold, own, possess, or transport for sale or distribution in this

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state,; or import, or cause to be imported, into the state for sale or distribution in this state; nor

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shall tax stamps be affixed to any cigarette package:

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      (1) That bears any label or notice prescribed by the United States Department of

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Treasury to identify cigarettes exempt from tax by the United States pursuant to section 5704 of

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title 26 of the United States Code, 26 U.S.C. section 5704(b) (concerning cigarettes intended for

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shipment to a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United

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States), or for consumption beyond the jurisdiction of the internal revenue laws of the United

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States, including any notice or label described in section 44.185 of title 27 of the Code of Federal

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Regulations, 27 CFR 44.185;

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      (2) That is not labeled in conformity with the provisions of the Federal Cigarette

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Labeling and Advertising Act, 15 U.S.C. section 1331 et seq., or any other federal requirement

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for the placement of labels, warnings, and other information, applicable to cigarette packages

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intended for domestic consumption;

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      (3) The packaging of which has been modified or altered by a person other than the

 

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original manufacturer of the cigarettes, including by the placement of a sticker to cover

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information on the package. For purposes of this subsection, a cigarette package shall not be

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construed to have been modified or altered by a person other than the manufacturer if the most

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recent modification to, or alteration of, the package was by the manufacturer or by a person

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authorized by the manufacturer;

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      (4) Imported into the United States in violation of 26 U.S.C. section 5754 or any other

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federal law, or implementing federal regulations;

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      (5) That the person otherwise knows, or has reason to know, the manufacturer did not

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intend to be sold, distributed, or used in the United States; or

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      (6) That has not been submitted to the secretary of the U.S. Department of Health and

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Human Services the list or lists of the ingredients added to tobacco in the manufacture of those

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cigarettes required by the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. section

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1335a.

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      (b) The tax administrator is authorized to obtain and exchange information with the

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United States Customs Service for the purpose of enforcing this section.

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      (c) Any person who affixes or distributes a tax stamp in violation of this section shall be

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fined not more than five hundred dollars ($500) ten thousand dollars ($10,000) for the first

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offense, and for each subsequent offense shall be fined not more than one thousand dollars

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($1,000) twenty thousand dollars ($20,000), or be imprisoned not more than one year five (5)

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years, or be both fined and imprisoned.

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      (d) Any cigarettes found in violation of this section shall be declared to be contraband

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goods and may be seized by the tax administrator, or his or her agents, or by any sheriff, or his or

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her deputy, or any police officer, without a warrant. The tax administrator may promulgate rules

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and regulations for the destruction of contraband goods pursuant to this section, including the

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administrator's right to allow the true holder of the trademark rights in a cigarette brand to inspect

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contraband cigarettes prior to their destruction.

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      (e) The prohibitions of this section do not apply to:

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      (1) Tobacco products that are allowed to be imported or brought into the United States

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free of tax and duty under subsection IV of chapter 98 of the harmonized tariff schedule of the

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United States (see 19 U.S.C. section 1202); or

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      (2) Tobacco products in excess of the amounts described in subdivision (1) of this

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subsection if the excess amounts are voluntarily abandoned to the tax administrator at the time of

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entry, but only if the tobacco products were imported or brought into the United States for

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personal use and not with intent to defraud the United States or any state.

 

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      (f) If any part or provision of this section, or the application of any part to any person or

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circumstance is held invalid, the remainder of the section, including the application of that part or

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provision to other persons or circumstances, shall not be affected by that invalidity and shall

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continue in full force and effect. To this end, the provisions of this section are severable.

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     44-20-17. Penalty for use tax violations. -- Any person who violates the provisions of

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sections §§44-20-13 -- 44-20-14 is guilty of a misdemeanor felony and shall for each offense be

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fined not less than one hundred fifty dollars ($150) and not more than five hundred dollars ($500)

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up to ten thousand dollars ($10,000), or be imprisoned not more than one year three (3) years, or

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be both fined and imprisoned.

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     44-20-35. Penalties for violations as to unstamped cigarettes. – (a) Any person who

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violates any provision of sections §§44-20-33 and 44-20-34 shall be fined or imprisoned, or both

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fined and imprisoned, as follows:

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     (1) For a first offense in a twenty-four (24) month period, fined not more than one

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thousand dollars ($1,000), or not more than five (5) times the retail value of the cigarettes

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involved, whichever is greater, for the first offense, and for each subsequent offense,;

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     (2) For a second or subsequent offense in a twenty-four (24) month period, shall be fined

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one thousand dollars ($1,000), or five (5) fined not more than five thousand dollars ($5,000) or

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not more than twenty-five (25) times the retail value of the cigarettes involved, whichever is

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greater, or be imprisoned not more than three (3) years, or be both fined and imprisoned.

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     (b) When determining the amount of a fine sought or imposed under this section,

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evidence of mitigating factors, including history, severity, and intent shall be considered.

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     44-20-39. Forgery and counterfeiting -- Tampering with meters -- Reuse of stamps

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or containers. -- Any person who fraudulently makes or utters or forges or counterfeits any

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stamp, disc, license, or marker, prescribed by the tax administrator under the provisions of this

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chapter, or who causes or procures this to be done,; or who willfully utters, publishes, passes or

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renders as true, any false, altered, forged, or counterfeited stamp, license, disc, or marker,; or who

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knowingly possesses more than twenty (20) packs of cigarettes containing any false, altered,

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forged, or counterfeited stamp, license, disc, or marker,; or who tampers with, or causes to be

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tampered with, any metering machine authorized to be used under the provisions of this chapter,;

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or who removes or prepares any stamp with intent to use, or cause that stamp to be used, after it

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has already been used,; or who buys, sells, offers for sale, or gives away any washed or removed

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or restored stamp to any person,; or who has in his or her possession any washed or restored or

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removed or altered stamp which that was removed from the article to which it was affixed, or

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who reuses or refills with cigarettes any package, box, or container required to be stamped under

 

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this chapter from which cigarettes have been removed, is deemed guilty of a felony, and, upon

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conviction, shall be fined ten thousand dollars ($10,000) one hundred thousand dollars

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($100,000), or be imprisoned for not more than ten (10) years fifteen (15) years, or both.

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     44-20-45. Importation of cigarettes with intent to evade tax. -- Any person, firm,

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corporation, club, or association of persons who orders any cigarettes for another or pools orders

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for cigarettes from any persons or connives with others for pooling orders, or receives in this state

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any shipment of unstamped cigarettes on which the tax imposed by this chapter has not been paid,

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for the purpose and intention of violating the provisions of this chapter or to avoid payment of the

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tax imposed in this chapter, is guilty of a felony and shall be fined ten thousand dollars ($10,000)

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one hundred thousand dollars ($100,000) or five (5) times the retail value of the cigarettes

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involved, whichever is greater, or imprisoned not more than five (5) years fifteen (15) years, or

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both.

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     44-20-51. Penalty for violations generally. – (a) Except as otherwise provided in this

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chapter, any person who violates any provision of this chapter is guilty of a misdemeanor and

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shall be fined or imprisoned, or both fined and imprisoned, as follows:

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     (1) For a first offense in a twenty-four (24) month period, fined not more than one

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thousand dollars ($1,000).;

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     (2) For a second or subsequent offense in a twenty-four (24) month period, fined not

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more than five thousand dollars ($5,000) or imprisoned for not more than three (3) years, or both

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fined and imprisoned.

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     (b) Whoever knowingly violates any provision of this chapter, or of regulations

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prescribed thereunder, shall, in addition to any other penalty provided in this chapter, for each

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such offense, be fined not more than five thousand dollars ($5,000) or imprisoned not more than

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one year, or both.

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     (c) When determining the amount of a fine sought or imposed under this section,

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evidence of mitigating factors, including history, severity, and intent, shall be considered.

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     44-20-51.1. Civil penalties. -- (a) Whoever omits, neglects, or refuses to comply with

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any duty imposed upon him/her by this chapter, or to do does, or cause to be done, any of the

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things required by this chapter, or does anything prohibited by this chapter, shall, in addition to

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any other penalty provided in this chapter, be liable to as follows:

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     (1) For a first offense in a twenty-four (24) month period, a penalty of not more than one

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thousand dollars ($1,000), or not more than five (5) times the retail value of the cigarettes

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involved, whichever is greater, to be recovered, with costs of suit, in a civil action.;

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     (2) For a second or subsequent offense in a twenty-four (24) month period, a penalty of

 

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not more than five thousand dollars ($5,000), or not more than twenty-five (25) times the retail

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value of the cigarettes involved, whichever is greater, to be recovered, with costs of suit, in a civil

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action.

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      (b) Whoever fails to pay any tax imposed by this chapter at the time prescribed by law or

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regulations, shall, in addition to any other penalty provided in this chapter, be liable to for a

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penalty of not more than five (5) times the tax due but unpaid.

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     (c) When determining the amount of a penalty sought or imposed under this section,

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evidence of mitigating or aggravating factors, including history, severity, and intent, shall be

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considered.

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     44-20-51.2. Criminal penalty for fraudulent offenses. -- Whoever, with intent to

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defraud the state, fails to comply with any requirement of this chapter or regulations prescribed

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thereunder shall, in addition to any other penalty provided in this chapter, for each such offense,

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be fined ten thousand dollars ($10,000) one hundred thousand dollars ($100,000), or imposed

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imprisoned not more than five (5) years fifteen (15) years, or both.

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     44-20-51.3. Counterfeit cigarettes. -- (a) Notwithstanding any other provision of law,

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the sale or possession for sale of counterfeit cigarettes by a manufacturer, importer, distributor, or

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dealer shall result in the seizure of the product and related machinery by the administrator or any

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law enforcement agency and shall be punishable as follows:

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      (1) A knowing violation involving a total quantity of less than two (2) cartons of

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cigarettes shall be punishable by a fine of one thousand dollars ($1,000) ten thousand dollars

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($10,000), or five (5) times the retail value of the cigarettes involved, whichever is greater, or

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imprisonment imprisoned not to exceed five (5) years, or both.

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      (2) A subsequent knowing violation involving a total quantity of less than two (2)

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cartons of cigarettes shall be punishable by a fine of five thousand dollars ($5,000) fifty thousand

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dollars ($50,000), or five (5) times the retail value of the cigarettes involved, whichever is

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greater, or imprisonment imprisoned not to exceed five (5) years ten (10) years, or both, and shall

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also result in the revocation by the administrator of the manufacturer, importer, distributor, or

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dealer license.

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      (3) A first knowing violation involving a total quantity of two (2) cartons of cigarettes or

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more shall be punishable by a fine of two thousand dollars ($2,000) twenty thousand dollars

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($20,000), or five (5) times the retail value of the cigarettes involved, whichever is greater, or

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imprisonment imprisoned not to exceed five (5) years, or both.

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      (4) A subsequent knowing violation involving a quantity of two (2) cartons of cigarettes

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or more shall be punishable by a fine of fifty thousand dollars ($50,000) one hundred thousand

 

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dollars ($100,000), or five (5) times the retail value of the cigarettes involved, whichever is

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greater, or imprisonment imprisoned not to exceed five (5) years fifteen (15) years, or both, and

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shall also result in the revocation by the administrator of the manufacturer, importer, distributor,

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or dealer license.

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      (b) For purposes of this section, counterfeit cigarettes includes cigarettes that have false

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manufacturing labels or packages of cigarettes bearing counterfeit tax stamps. Any counterfeit

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cigarettes seized by the administrator shall be destroyed.

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     SECTION 2. Section 11-9-13.15 of the General Laws in Chapter 11-9 entitled "Children"

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is hereby amended to read as follows:

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     11-9-13.15. Penalty for operating without a dealer license. -- (a) Any individual or

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business who violates this chapter by selling or conveying a tobacco product without a retail

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tobacco products dealer license shall be cited for that violation and shall be required to appear in

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court for a hearing on the citation.

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      (b) Any individual or business cited for a violation under this section of this chapter

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shall:

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      (1) Either post a five hundred dollar ($500) two thousand five hundred dollar ($2,500)

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bond with the court within ten (10) days of the citation; or

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      (2) Sign and accept the citation indicating a promise to appear in court.

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      (c) An individual or business who has accepted the citation may:

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      (1) Pay the five hundred dollar ($500) a ten thousand dollar ($10,000) fine, either by

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mail or in person, within ten (10) days after receiving the citation; or

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      (2) If that individual or business has posted a bond, forfeit the bond by not appearing at

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the scheduled hearing. If the individual or business cited pays the five hundred dollar ($500) ten

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thousand dollar ($10,000) fine or forfeits the bond, that individual or business is deemed to have

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admitted the cited violation and to have waived the right to a hearing on the issue of commission

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on the violation.

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      (d) The court after a hearing on a citation shall make a determination as to whether a

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violation has been committed. If it is established that the violation did occur, the court shall

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impose a five hundred dollar ($500) ten thousand dollar ($10,000) fine, in addition to any court

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costs or other court fees.

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     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - CIGARETTE TAX

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     This act would increase the penalty for violating state laws regulating the illicit sale of

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cigarettes.

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     This act would take effect upon passage.

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