2014 -- S 2380 SUBSTITUTE A

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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: Senators Pearson, Picard, Jabour, Miller, and Nesselbush

     Date Introduced: February 12, 2014

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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

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

Tax" are hereby amended to read as follows:

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

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

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

shall tax stamps be affixed to any cigarette package:

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

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

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

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

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

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

Regulations, 27 CFR 44.185;

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

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

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

intended for domestic consumption;

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

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

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

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

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

authorized by the manufacturer;

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

federal law, or implementing federal regulations;

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

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

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

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

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

1335a.

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

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

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

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

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

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

years, or be both fined and imprisoned.

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

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

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

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

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

contraband cigarettes prior to their destruction.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

be both fined and imprisoned.

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

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

fined and imprisoned, as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

both.

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

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

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

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

thousand dollars ($1,000).;

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

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

fined and imprisoned.

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

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

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

one year, or both.

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

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

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

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

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

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

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

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

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

     (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

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

action.

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

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

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

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

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

considered.

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

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

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

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

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

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

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

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

law enforcement agency and shall be punishable as follows:

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

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

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

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

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

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

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

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

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

dealer license.

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

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

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

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

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

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

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

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

or dealer license.

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

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

cigarettes seized by the administrator shall be destroyed.

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

is hereby amended to read as follows:

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

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

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

court for a hearing on the citation.

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

shall:

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

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

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

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

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

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

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

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

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

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

on the violation.

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

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

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

costs or other court fees.

     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

cigarettes.

     This act would take effect upon passage.

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