87R2175 SRA-D     By: Johnson S.B. No. 216       A BILL TO BE ENTITLED   AN ACT   relating to the regulation of, and taxes imposed on the sale or use   of, cigarettes, tobacco products, and e-cigarettes; imposing   taxes; requiring a permit; imposing a fee; providing administrative   penalties.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Sections 161.081(1-a), (2), and (4), Health and   Safety Code, are amended to read as follows:                (1-a)  "E-cigarette" means an electronic cigarette or   any other device that simulates smoking by using a mechanical   heating element, battery, or electronic circuit to deliver nicotine   or other substances to the individual inhaling from the device or a   consumable liquid solution or other material aerosolized or   vaporized during the use of an electronic cigarette or other device   described by this subdivision, regardless of whether the liquid or   other material contains nicotine.  The term does not include a   prescription medical device unrelated to the cessation of smoking.     The term includes:                      (A)  a device described by this subdivision   regardless of whether the device is manufactured, distributed, or   sold as an e-cigarette, e-cigar, or e-pipe or under another product   name or description; and                      (B)  a component, part, or accessory for the   device, regardless of whether the component, part, or accessory is   sold separately from the device.                (2)  "Permit holder" has the meaning assigned by   Section 154.001, [or] 155.001, or 164.0001, Tax Code, as   applicable.                (4)  "Retailer" means a person who engages in the   practice of selling cigarettes, e-cigarettes, or tobacco products   to consumers and includes the owner of a coin-operated cigarette,   e-cigarette, or tobacco product vending machine. The term includes   a retailer as that term is defined by Section 154.001, [or] 155.001,   or 164.0001, Tax Code, as applicable.          SECTION 2.  Section 161.083(d), Health and Safety Code, is   amended to read as follows:          (d)  Notwithstanding any other provision of law, a violation   of this section is not a violation of this subchapter for purposes   of Section 161.0901 [154.1142 or 155.0592, Tax Code].          SECTION 3.  Subchapter H, Chapter 161, Health and Safety   Code, is amended by adding Section 161.0901 to read as follows:          Sec. 161.0901.  DISCIPLINARY ACTION AGAINST CIGARETTE,   E-CIGARETTE, AND TOBACCO PRODUCTS RETAILERS. (a)  A retailer is   subject to disciplinary action as provided by this section if an   agent or employee of the retailer commits an offense under this   subchapter or Subchapter K.          (b)  If the comptroller finds, after notice and an   opportunity for a hearing as provided by Chapter 2001, Government   Code, that a permit holder has violated this subchapter or   Subchapter K at a place of business for which a permit is issued,   the comptroller may suspend the permit for that place of business   and administratively assess a fine as follows:                (1)  if the permit holder has not been found to have   violated this subchapter or Subchapter K at that place of business   during the 24-month period preceding the violation, the comptroller   may require the permit holder to pay a fine in an amount not to   exceed $1,000;                (2)  if the permit holder has been found to have   violated this subchapter or Subchapter K at that place of business   once during the 24-month period preceding the violation, the   comptroller may require the permit holder to pay a fine in an amount   not to exceed $2,000; and                (3)  if the permit holder has been found to have   violated this subchapter or Subchapter K at that place of business   at least twice during the 24-month period preceding the violation,   the comptroller may:                      (A)  require the permit holder to pay a fine in an   amount not to exceed $3,000; and                      (B)  suspend the permit for that place of business   for not more than five days.          (c)  Except as provided by Subsection (e), if the permit   holder has been found to have violated this subchapter or   Subchapter K on four or more previous and separate occasions at the   same place of business during the 24-month period preceding the   violation, the comptroller shall revoke the permit issued under   Chapter 154, 155, or 164, Tax Code, as applicable.  If the permit   holder does not hold a permit under Chapter 154, 155, or 164, Tax   Code, the comptroller shall revoke the permit issued under Section   151.201, Tax Code.          (d)  A permit holder whose permit has been revoked under this   section may not apply for a permit for the same place of business   before the expiration of six months after the effective date of the   revocation.          (e)  For purposes of this section, the comptroller may   suspend a permit but may not revoke the permit under Subsection (c)   if the comptroller finds that:                (1)  the employer has not violated this subchapter or   Subchapter K more than seven times at the place of business for   which the permit is issued in the 48-month period preceding the   violation in question;                (2)  the employer requires its employees to attend a   comptroller-approved seller training program;                (3)  the employees have actually attended a   comptroller-approved seller training program; and                (4)  the employer has not directly or indirectly   encouraged the employees to violate the law.          (f)  The comptroller may adopt rules to implement this   section.          SECTION 4.  Section 111.00455(b), Tax Code, is amended to   read as follows:          (b)  The following are not contested cases under Subsection   (a) and Section 2003.101, Government Code:                (1)  a show cause hearing or any hearing not related to   the collection, receipt, administration, or enforcement of the   amount of a tax or fee imposed, or the penalty or interest   associated with that amount, except for a hearing under Section   151.157(f), 151.1575(c), or 151.712(g) of this code or Section   161.0901, Health and Safety Code [, 154.1142, or 155.0592];                (2)  a property value study hearing under Subchapter M,   Chapter 403, Government Code;                (3)  a hearing in which the issue relates to:                      (A)  Chapters 72-75, Property Code;                      (B)  forfeiture of a right to do business;                      (C)  a certificate of authority;                      (D)  articles of incorporation;                      (E)  a penalty imposed under Section 151.703(d);                      (F)  the refusal or failure to settle under   Section 111.101; or                      (G)  a request for or revocation of an exemption   from taxation; and                (4)  any other hearing not related to the collection,   receipt, administration, or enforcement of the amount of a tax or   fee imposed, or the penalty or interest associated with that   amount.          SECTION 5.  Section 154.1135(b), Tax Code, is amended to   read as follows:          (b)  The payment must be made in cash or by money order, [or]   check, or credit card.          SECTION 6.  Section 154.121(b), Tax Code, is amended to read   as follows:          (b)  Revenue from the sale of retailer's permits shall be   deposited to the general revenue fund and may be appropriated only   as provided by this section. The money may be appropriated first to   the comptroller for administering:                (1)  permitting [administration of licensing] of   retailers under this chapter and Chapters [or Chapter] 155 and 164;   and                (2)  disciplinary actions taken under Section   161.0901, Health and Safety Code.          SECTION 7.  Section 155.050(b), Tax Code, is amended to read   as follows:          (b)  The payment must be made in cash or by money order, [or]   check, or credit card.          SECTION 8.  Section 155.058(b), Tax Code, is amended to read   as follows:          (b)  Revenue from the sale of retailer's permits shall be   deposited to the general revenue fund and may be appropriated only   as provided by this section. The money may be appropriated first to   the comptroller for administering:                (1)  permitting [administration of licensing] of   retailers under this chapter and Chapters [or Chapter] 154 and 164;   and                (2)  disciplinary actions taken under Section   161.0901, Health and Safety Code.          SECTION 9.  Subtitle E, Title 2, Tax Code, is amended by   adding Chapter 164 to read as follows:   CHAPTER 164. TAX ON E-CIGARETTES   SUBCHAPTER A. GENERAL PROVISIONS          Sec. 164.0001.  DEFINITIONS. In this chapter:                (1)  "E-cigarette" has the meaning assigned by Section   161.081, Health and Safety Code.                (2)  "Marketplace" has the meaning assigned by Section   151.0242.                (3)  "Permit holder" means a person who obtains a   permit under Section 164.0102.                (4)  "Retailer" means a person who engages in the   business of selling e-cigarettes to consumers, including a person   who sells e-cigarettes to consumers through a marketplace.          Sec. 164.0002.  INAPPLICABILITY TO CERTAIN PRODUCTS. This   chapter does not apply to a product described by Section 161.0815,   Health and Safety Code.          Sec. 164.0003.  RULES. The comptroller may adopt rules to   implement this chapter, including rules exempting a person who   sells e-cigarettes to consumers through a marketplace from the   requirements of this chapter.   SUBCHAPTER B. IMPOSITION AND ADMINISTRATION OF E-CIGARETTE SALES   AND USE TAXES          Sec. 164.0051.  E-CIGARETTE SALES TAX. (a)  A tax is imposed   on each sale of an e-cigarette in this state, including a sale made   through a marketplace, except that the tax does not apply to a sale   unless the tax imposed under Subchapter C, Chapter 151, applies to   the sale.          (b)  The tax under this section is imposed at the rate   determined under Section 164.0053.          (c)  The tax imposed under this section is in addition to the   tax imposed under Subchapter C, Chapter 151.          Sec. 164.0052.  E-CIGARETTE USE TAX. (a)  A tax is imposed   on the storage, use, or other consumption in this state of an   e-cigarette purchased from a retailer for storage, use, or other   consumption in this state, except that the tax does not apply to the   storage, use, or other consumption unless the tax imposed under   Subchapter D, Chapter 151, applies to the storage, use, or other   consumption.          (b)  The tax under this section is imposed at the rate   determined under Section 164.0053.          (c)  The tax imposed under this section is in addition to the   tax imposed under Subchapter D, Chapter 151.          Sec. 164.0053.  TAX RATE. (a)  In this section:                (1)  "Cigarette" means a roll for smoking described by   Section 154.001(2) weighing three pounds or less per thousand.                (2)  "Federal excise tax rate on cigarettes" means the   tax rate imposed on cigarettes under 26 U.S.C Section 5701(b)(1).                (3)  "First sale" has the meaning assigned by Section   154.001.                (4)  "State excise tax rate on cigarettes" means the   tax rate imposed on cigarettes under Section 154.021(b)(1).          (b)  The rate of the taxes imposed under this chapter in a   calendar year is the rate the comptroller computes and publishes in   the Texas Register not later than December 1 of the preceding   calendar year as required by Subsection (c).          (c)  As soon as practicable after the end of each state   fiscal year but not later than December 1 of each year, the   comptroller shall:                (1)  determine the tax rate to be imposed under this   chapter in the subsequent calendar year that is proportionate to   the state excise tax rate imposed on cigarettes in this state during   the preceding state fiscal year by:                      (A)  determining the estimated mean price of 1,000   cigarettes on first sale in this state during the preceding state   fiscal year, including the amount of the federal excise tax imposed   on cigarettes and excluding the amount of the state excise tax   imposed on cigarettes, using available data and generally accepted   statistical methods in making that determination as necessary;                      (B)  dividing the state excise tax rate on   cigarettes by the estimated mean price of 1,000 cigarettes on first   sale in this state as determined under Paragraph (A); and                      (C)  converting the amount computed under   Paragraph (B) into a percentage and rounding that percentage down   to the nearest quarter percentage point; and                (2)  publish the tax rate determined under Subdivision   (1) in the Texas Register.          Sec. 164.0054.  APPLICATION OF OTHER PROVISIONS OF CODE.   (a)  Except as provided by this chapter:                (1)  the taxes imposed under this chapter are   administered, imposed, collected, and enforced in the same manner   as the taxes under Chapter 151 are administered, imposed,   collected, and enforced; and                (2)  the provisions of Chapter 151 applicable to the   sales tax imposed under Subchapter C, Chapter 151, and the use tax   imposed under Subchapter D, Chapter 151, apply to the sales and use   taxes imposed under this chapter.          (b)  A change in law relating to the taxation of the sale or   use of an e-cigarette under Chapter 151 also applies to the sales or   use tax imposed under this chapter.          Sec. 164.0055.  REPORTS. (a)  A person required to file a   report under Section 151.403 who is also required to collect or pay   a tax under this chapter shall file with the comptroller a report   stating:                (1)  for e-cigarette sales tax purposes, the amount of   total receipts from e-cigarettes sold by the retailer during the   reporting period, if the person is a retailer;                (2)  for e-cigarette use tax purposes, the amount of   total receipts from e-cigarettes sold by the retailer during the   reporting period for storage, use, or other consumption in this   state, if the person is a retailer described by Section 151.403(b);                (3)  the amount of the total sales prices of   e-cigarettes subject to the e-cigarette use tax that were acquired   during the reporting period for storage, use, or other consumption   in this state, if the person is a purchaser who did not pay the tax   to a retailer;                (4)  the amount of the taxes due under this chapter for   the reporting period; and                (5)  any other information the comptroller requires.          (b)  The report required by this section for a reporting   period is due on the same date the tax payment for the period is due.          Sec. 164.0056.  RECORDS. (a)  A person required to file a   report under Section 151.403 who is also required to collect or pay   a tax under this chapter shall keep a complete record of:                (1)  all gross receipts from each sale to which this   chapter applies occurring during each reporting period, along with   documentation relating to those receipts;                (2)  all purchases of e-cigarettes, including the   constituent parts of e-cigarettes, from every source during each   reporting period, along with documentation relating to those   purchases;                (3)  all sales and use taxes, and any money represented   to be sales or use tax, collected under this chapter during each   reporting period; and                (4)  any other information the comptroller requires.          (b)  A person shall keep the records required by Subsection   (a) for the period required by Section 151.025(b).   SUBCHAPTER C. E-CIGARETTE RETAILER PERMITS          Sec. 164.0101.  PERMITS REQUIRED. (a)  A person may not   engage in business as a retailer in this state unless the person has   been issued a permit from the comptroller.  A person shall obtain a   permit for each place of business the person owns or operates at   which sales of e-cigarettes are made.          (b)  The comptroller shall prescribe the form and content of   an application for a permit and provide the form on request.          (c)  The applicant shall accurately complete all information   required by the application and provide the comptroller with   additional information the comptroller considers necessary.          (d)  The comptroller may require each corporation,   association, joint venture, syndicate, partnership, or   proprietorship to provide:                (1)  financial information regarding the applicant;   and                (2)  the identity of each officer, director,   stockholder owning 10 percent or more of the outstanding stock,   partner, member, owner, or managing employee.          (e)  Each applicant that applies for a permit to sell   e-cigarettes from a vehicle must provide the make, model, vehicle   identification number, registration number, and any other   information concerning the vehicle the comptroller requires.          (f)  All financial information provided under this section   is confidential and not subject to Chapter 552, Government Code.          (g)  Permits for engaging in business as an e-cigarette   retailer are governed exclusively by the provisions of this code.          Sec. 164.0102.  ISSUANCE OF PERMIT. (a)  The comptroller   shall issue a permit to an applicant if the comptroller:                (1)  has received an application and fee, if required;                (2)  does not reject the application and deny the   permit under Section 164.0103; and                (3)  determines that issuing the permit will not   jeopardize the administration and enforcement of this chapter.          (b)  The permit shall be issued for a designated place of   business, except as provided by Section 164.0106.          (c)  The permits are nonassignable.          (d)  The permit must indicate the type of permit that it is   and authorize the sale of e-cigarettes in this state. The permit   must show that it is revocable and shall be forfeited or suspended   if the conditions of issuance, provisions of this chapter, or rules   of the comptroller are violated.          Sec. 164.0103.  DENIAL OF PERMIT. The comptroller may   reject an application and deny a permit if the comptroller finds,   after notice and opportunity for hearing, any of the following:                (1)  the premises where business will be conducted are   not adequate to protect the e-cigarettes; or                (2)  the applicant or managing employee, or if the   applicant is a corporation, an officer, director, manager, or any   stockholder who holds directly or through family or partner   relationship 10 percent or more of the corporation's stock, or, if   the applicant is a partnership, a partner or manager:                      (A)  has failed to disclose any information   required by Sections 164.0101(c), (d), and (e), including previous   business experience, financial condition of the applicant, present   or previous business affiliations, previous employment, and any   conviction of a felony, or has made a false statement in the   application; or                      (B)  has previously violated provisions of this   chapter.          Sec. 164.0104.  PERMIT YEAR; FEES. (a)  A permit required   by this chapter expires on the last day of May of each even-numbered   year.          (b)  An application for a permit required by this chapter   must be accompanied by a fee of:                (1)  one-half of the amount of the fee for a retailer's   permit required by Section 154.111(b) if the applicant holds a   valid retailer's permit under Section 154.101, 154.102, or 155.041;   or                (2)  the amount of the fee for a retailer's permit   required by Section 154.111(b).          (c)  For a new or renewal permit required by Section   164.0101, the comptroller shall prorate the fee according to the   number of months remaining during the calendar year that the permit   is to be in effect.          (d)  A person who does not obtain a permit each year in a   timely manner must pay a late fee of $50 in addition to the   application fee for the permit.          (e)  If on the date of issuance a permit will expire within   three months, the comptroller may collect the prorated permit fee   or the fee for the current year and, with the consent of the permit   holder, may collect the fee for the next permit year and issue a   permit or permits for both periods, as applicable.          (f)  A person issued a permit for a place of business that   permanently closes before the permit expiration date is not   entitled to a refund of the permit fee.          Sec. 164.0105.  PAYMENT FOR PERMITS. (a)  An applicant for a   permit required by Section 164.0101 shall send the required fee   with the application.          (b)  The payment must be made in cash or by money order,   check, or credit card.          (c)  The comptroller may not issue a permit in exchange for a   check until after the comptroller receives full payment on the   check.          Sec. 164.0106.  DISPLAY OF PERMIT. (a)  A permit holder   shall keep the permit on public display at the place of business for   which the permit was issued.          (b)  A permit holder who has a permit assigned to a vehicle   shall post the permit in a conspicuous place on the vehicle.          Sec. 164.0107.  REVENUE. Revenue from the sale of   retailer's permits shall be deposited to the general revenue fund   and may be appropriated only as provided by this section. The money   may be appropriated first to the comptroller for administering:                (1)  permitting of retailers under this chapter and   Chapters 154 and 155; and                (2)  disciplinary actions taken under Section   161.0901, Health and Safety Code.          Sec. 164.0108.  FINAL SUSPENSION OR REVOCATION OF PERMIT.   (a)  The comptroller may revoke or suspend a permit holder's permit   if the comptroller finds, after notice and hearing as provided by   this section, that the permit holder violated this chapter or a rule   adopted under this chapter.          (b)  If the comptroller intends to suspend or revoke a   permit, the comptroller shall provide the permit holder with   written notice that includes a statement:                (1)  of the reason for the intended revocation or   suspension;                (2)  that the permit holder is entitled to a hearing by   the comptroller on the proposed suspension or revocation; and                (3)  of the date, time, and place of the hearing.          (c)  The comptroller shall deliver the written notice by   personal service or by mail to the permit holder's mailing address   as it appears in the comptroller's records. Service by mail is   complete when the notice is deposited with the United States Postal   Service.          (d)  The comptroller shall give the permit holder notice   before the 10th day before the final hearing.          (e)  A permit holder may appeal the comptroller's decision to   a district court in Travis County not later than the 30th day after   the date the comptroller's decision becomes final.          (f)  A person whose permit is suspended or revoked may not   sell, offer for sale, or distribute e-cigarettes from the place of   business to which the permit applied until a new permit is granted   or the suspension is removed.          Sec. 164.0109.  SUMMARY SUSPENSION OF PERMIT. (a)  The   comptroller may suspend a permit holder's permit without notice or   a hearing for the permit holder's failure to comply with this   chapter or a rule adopted under this chapter if the permit holder's   continued operation constitutes an immediate and substantial   threat to the collection of taxes imposed by this chapter and   attributable to the permit holder's operation.          (b)  If the comptroller summarily suspends a permit holder's   permit, proceedings for a preliminary hearing before the   comptroller or the comptroller's representative must be initiated   simultaneously with the summary suspension. The preliminary   hearing shall be set for a date not later than the 10th day after the   date of the summary suspension, unless the parties agree to a later   date.          (c)  At the preliminary hearing, the permit holder must show   cause why the permit should not remain suspended pending a final   hearing on suspension or revocation.          (d)  Chapter 2001, Government Code, does not apply to a   summary suspension under this section.          (e)  To initiate a proceeding to suspend summarily a permit   holder's permit, the comptroller shall serve notice on the permit   holder informing the permit holder of the right to a preliminary   hearing before the comptroller or the comptroller's representative   and of the time and place of the preliminary hearing. The notice   must be personally served on the permit holder or an officer,   employee, or agent of the permit holder or sent by certified or   registered mail, return receipt requested, to the permit holder's   mailing address as it appears in the comptroller's records. The   notice must state the alleged violations that constitute the   grounds for summary suspension. The suspension is effective at the   time the notice is served. If notice is served in person, the   permit holder shall immediately surrender the permit to the   comptroller.  If notice is served by mail, the permit holder shall   immediately return the permit to the comptroller.          (f)  Section 164.0108, governing hearings for final   suspension or revocation of a permit under this subchapter, governs   a final administrative hearing.          Sec. 164.0110.  HEARINGS. Unless otherwise provided by this   chapter, the comptroller shall conduct all hearings required by   this subchapter in accordance with Chapter 2001, Government Code.   The comptroller may designate one or more representatives to   conduct the hearings and may prescribe the rules of procedure   governing the hearings.   SUBCHAPTER D. DISPOSITION OF PROCEEDS          Sec. 164.0151.  DEPOSIT AND USE OF PROCEEDS. The   comptroller shall deposit the proceeds from taxes imposed under   this chapter as follows:                (1)  25 percent to the credit of an account in the   general revenue fund that may be appropriated only to the   Department of State Health Services for the purposes of tobacco and   e-cigarette use prevention, control, and enforcement; and                (2)  the remainder to the credit of the general revenue   fund.          SECTION 10.  The following provisions of the Tax Code are   repealed:                (1)  Section 154.1142;                (2)  Section 154.1143;                (3)  Section 155.0592; and                (4)  Section 155.0593.          SECTION 11.  Section 161.0901, Health and Safety Code, as   added by this Act, applies only to a violation that occurs on or   after the effective date of this Act.  A violation that occurs   before the effective date of this Act is governed by the law in   effect on the date the violation occurred, and the former law is   continued in effect for that purpose.          SECTION 12.  (a)  Notwithstanding Sections 164.0051 and   164.0052, Tax Code, as added by this Act, the taxes imposed under   those sections apply only to a sale, storage, use, or other   consumption of e-cigarettes that occurs on or after January 1,   2022.          (b)  The comptroller of public accounts shall determine and   publish the initial tax rate for the taxes imposed under Sections   164.0051 and 164.0052, Tax Code, as added by this Act, in the manner   required by Section 164.0053, Tax Code, as added by this Act, not   later than December 1, 2021. The initial tax rate applies beginning   January 1, 2022.          SECTION 13.  (a)  Notwithstanding Section 164.0101, Tax   Code, as added by this Act, a person is not required to hold a permit   under that section to engage in business as a retailer of   e-cigarettes in this state until January 1, 2022.          (b)  The comptroller of public accounts shall prescribe the   form and content of an application for a permit under Section   164.0101, Tax Code, as added by this Act, and begin accepting   applications for the permit not later than October 1, 2021.          SECTION 14.  This Act takes effect September 1, 2021.