SENATE BILL 25

53rd legislature - STATE OF NEW MEXICO - second session, 2018

INTRODUCED BY

Howie C. Morales

FOR THE TOBACCO SETTLEMENT REVENUE OVERSIGHT COMMITTEE

AN ACT

RELATING TO TAXATION; INCREASING THE CIGARETTE TAX RATES; INCREASING THE TOBACCO PRODUCTS TAX RATE; INCLUDING E-CIGARETTES IN THE DEFINITION OF "TOBACCO PRODUCTS" IN THE TOBACCO PRODUCTS TAX ACT; DISTRIBUTING THE NEW REVENUE FROM THE INCREASES IN THE CIGARETTE TAX AND THE TOBACCO PRODUCTS TAX TO THE PUBLIC SCHOOL FUND FOR THE STATE EQUALIZATION GUARANTEE DISTRIBUTION; AMENDING AND ENACTING SECTIONS OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 7-1-6.11 NMSA 1978 (being Laws 1983, Chapter 211, Section 16, as amended by Laws 2017, Chapter 34, Section 2 and by Laws 2017, Chapter 63, Section 9) is amended to read:

"7-1-6.11. DISTRIBUTIONS OF CIGARETTE TAXES.--

A. A distribution pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the comprehensive cancer center at the university of New Mexico health sciences center in an amount equal to [eighty-three] forty-six hundredths percent of the net receipts, exclusive of penalties and interest, attributable to the cigarette tax.

B. A distribution pursuant to Section 7-1-6.1 NMSA 1978 in an amount equal to [eight and eighty-nine] four and eighty-three hundredths percent of the net receipts, exclusive of penalties and interest, attributable to the cigarette tax, shall be made, on behalf of and for the benefit of the university of New Mexico health sciences center, to the New Mexico finance authority.

C. A distribution pursuant to Section 7-1-6.1 NMSA 1978 in an amount equal to [three and seventy-four] two and four-hundredths percent of the net receipts, exclusive of penalties and interest, attributable to the cigarette tax shall be made to the New Mexico finance authority for land acquisition and the planning, designing, construction and equipping of department of health facilities or improvements to such facilities.

D. A distribution pursuant to Section 7-1-6.1 NMSA 1978 in an amount equal to [nine and seventy-seven hundredths] five and three-tenths percent of the net receipts, exclusive of penalties and interest, attributable to the cigarette tax shall be made to the New Mexico finance authority for deposit in the credit enhancement account created in the authority.

E. A distribution pursuant to Section 7-1-6.1 NMSA 1978 in an amount equal to [sixty-two] thirty-five hundredths percent of the net receipts, exclusive of penalties and interest, attributable to the cigarette tax shall be made, on behalf of and for the benefit of the rural county cancer treatment fund, to the New Mexico finance authority.

F. A distribution pursuant to Section 7-1-6.1 NMSA 1978 in an amount equal to forty-five and fifty-six hundredths percent of the net receipts, exclusive of penalties and interest, attributable to the cigarette tax shall be made to the public school fund for the state equalization guarantee distribution."

SECTION 2. A new section of the Tax Administration Act is enacted to read:

"[NEW MATERIAL] DISTRIBUTION--TOBACCO PRODUCTS TAX TO THE PUBLIC SCHOOL FUND FOR THE STATE EQUALIZATION GUARANTEE DISTRIBUTION.--A distribution pursuant to Section 7-1-6.1 NMSA 1978 in an amount equal to sixty percent of the net receipts, exclusive of penalties and interest, attributable to the tobacco products tax shall be made to the public school fund for the state equalization guarantee distribution."

SECTION 3. Section 7-12-2 NMSA 1978 (being Laws 1971, Chapter 77, Section 2, as amended) is amended to read:

"7-12-2. DEFINITIONS.--As used in the Cigarette Tax Act:

A. "cigarette" means:

(1) any roll of tobacco or any substitute for tobacco wrapped in paper or in any substance not containing tobacco;

(2) any roll of tobacco that is wrapped in any substance containing tobacco, other than one hundred percent natural leaf tobacco, which, because of its appearance, the type of tobacco used in the filler, its packaging and labeling, or its marketing and advertising, is likely to be offered to, or purchased by, consumers as a cigarette, as described in Paragraph (1) of this subsection;

(3) bidis and kreteks; or

(4) any other roll of tobacco that is defined as a "cigarette" in Subsection D of Section 6-4-12 NMSA 1978;

B. "close of business" means that time when a business ceases to operate for the remainder of the day or 12:00 a.m., if the business is open and conducting business at 12:00 a.m.;

C. "contraband cigarettes" means cigarette packages with counterfeit stamps, counterfeit cigarettes, cigarettes that have false or fraudulent manufacturing labels, cigarettes not sold in packages of five, ten, twenty or twenty-five, cigarette packages without the tax, tax-credit or tax-exempt stamps required by the Cigarette Tax Act and cigarettes produced by a manufacturer or in a brand family not included in the directory;

D. "department" means the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee;

E. "directory" means a listing of tobacco product manufacturers and brand families that is developed, maintained and published by the attorney general under the Tobacco Escrow Fund Act;

F. "distributor" means a person licensed pursuant to the Cigarette Tax Act to sell or distribute cigarettes in New Mexico. "Distributor" does not include:

(1) a retailer;

(2) a cigarette manufacturer, export warehouse proprietor or importer with a valid permit pursuant to 26 U.S.C. 5713, if that person sells cigarettes in New Mexico only to distributors that hold valid licenses under the laws of a state or sells to an export warehouse proprietor or to another manufacturer; or

(3) a common or contract carrier transporting cigarettes pursuant to a bill of lading or freight bill, or a person who ships cigarettes through the state by a common or contract carrier pursuant to a bill of lading or freight bill;

G. "license" means a license granted pursuant to the Cigarette Tax Act that authorizes the holder to conduct business as a manufacturer or distributor of cigarettes;

H. "manufacturer" means a person that manufactures, fabricates, assembles, processes or labels a cigarette or that imports from outside the United States, directly or indirectly, a finished cigarette for sale or distribution in the United States;

I. "master settlement agreement" means the settlement agreement and related documents entered into on November 23, 1998 by the state and leading United States tobacco product manufacturers;

J. "package" means an individual pack, box or other container; "package" does not include a container that itself contains other containers, such as a carton of cigarettes;

K. "qualifying tribal cigarette tax" means an excise, privilege or similar tax at a minimum rate of:

(1) [three and seventy-five hundredths cents ($.0375)] eleven and one-fourth cents ($.1125) per cigarette if the cigarettes are packaged in lots of twenty or twenty-five;

(2) [seven and one-half cents ($.075)] twenty-two and one-half cents ($.225) per cigarette if the cigarettes are packaged in lots of ten; or

(3) [fifteen cents ($.15)] forty-five cents ($.45) per cigarette if the cigarettes are packaged in lots of five;

L. "retailer" means a person, whether located within or outside of New Mexico, that sells cigarettes at retail to a consumer in New Mexico and the sale is not for resale;

M. "stamp" means an adhesive label issued and authorized by the department to be affixed to cigarette packages for excise tax purposes and upon which is printed a serial number and the words "State of New Mexico" and "tobacco tax";

N. "tax stamp" means a stamp that has a specific cigarette tax value pursuant to the Cigarette Tax Act;

O. "tax-credit stamp" means a stamp that indicates the cigarette package bearing the stamp is to be or has been sold by a retailer located on land of a tribe that has imposed a qualifying tribal cigarette tax;

P. "tax-exempt stamp" means a stamp that indicates a tax-exempt status pursuant to the Cigarette Tax Act;

Q. "tribal member" means a person who is recognized by the governing body of an Indian tribe to be an enrolled member of that Indian tribe;

R. "tribe" means a federally recognized Indian nation, tribe or pueblo located wholly or partially in New Mexico, including:

(1) a political subdivision, agency or department of a tribe;

(2) an incorporated or unincorporated enterprise of a tribe, one or more tribes or a political subdivision of a tribe; or

(3) a corporation considered to be an Indian or a tribe by the federal government or the state; and

S. "tribe's land" means the reservation, pueblo grant or trust land of a tribe and property held by the United States in trust jointly for the nineteen New Mexico Indian pueblos pursuant to Public Law 95-232."

SECTION 4. Section 7-12-3 NMSA 1978 (being Laws 1971, Chapter 77, Section 3, as amended) is amended to read:

"7-12-3. EXCISE TAX ON CIGARETTES--RATES.--

A. For the privilege of selling, giving or consuming cigarettes in New Mexico, there is levied an excise tax at the following rates for each cigarette sold, given or consumed in this state:

(1) [eight and three-tenths cents ($.083)] fifteen and eight-tenths cents ($.158) if the cigarettes are packaged in lots of twenty or twenty-five;

(2) [sixteen and six-tenths cents ($.166)] thirty-one and six-tenths cents ($.316) if the cigarettes are packaged in lots of ten; or

(3) [thirty-three and two-tenths cents ($.332)] sixty-three and two-tenths cents ($.632) if the cigarettes are packaged in lots of five.

B. The tax imposed by this section shall be referred to as the "cigarette tax"."

SECTION 5. Section 7-12A-2 NMSA 1978 (being Laws 1986, Chapter 112, Section 3, as amended) is amended to read:

"7-12A-2. DEFINITIONS.--As used in the Tobacco Products Tax Act:

A. "department" means the taxation and revenue department, the secretary or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

B. "distribute" means to sell or to give;

C. "e-cigarette":

(1) means any electronic oral device that can be used to provide a vapor or aerosol of nicotine or any other substance to the person inhaling from the device; and

(2) includes any such device, or any part thereof, whether manufactured, distributed, marketed or sold as an e-cigarette, e-cigar, e-pipe or any other product name or descriptor;

[C.] D. "engaging in business" means carrying on or causing to be carried on any activity with the purpose of direct or indirect benefit;

[D.] E. "first purchaser" means a person engaging in business in New Mexico [who] that manufactures tobacco products or [who] that purchases or receives on consignment tobacco products from any person outside of New Mexico, which tobacco products are to be distributed in New Mexico in the ordinary course of business;

[E.] F. "person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, joint venture, syndicate, limited liability company, limited liability partnership, other association or gas, water or electric utility owned or operated by a county or municipality or other entity of the state; "person" also means, to the extent permitted by law, a federal, state or other governmental unit or subdivision or an agency, department or instrumentality;

[F.] G. "product value" means the amount paid, net of any discounts taken and allowed, for tobacco products or, in the case of tobacco products received on consignment, the value of the tobacco products received or, in the case of tobacco products manufactured and sold in New Mexico, the proceeds from the sale by the manufacturer of the tobacco products; and

[G.] H. "tobacco product" means:

(1) any product, other than cigarettes, made of or derived from [or containing] tobacco or nicotine that is intended for human consumption, whether smoked, heated, chewed, absorbed, dissolved, inhaled, snorted, sniffed or ingested by any other means, including cigars, chewing tobacco, e-cigarettes, pipe tobacco or snuff; and

(2) any component, part or accessory used to consume tobacco but does not include any product that has been approved by the United States food and drug administration for sale as a tobacco cessation product or for other therapeutic purposes where such product is marketed and sold solely for such an approved use."

SECTION 6. Section 7-12A-3 NMSA 1978 (being Laws 1986, Chapter 112, Section 4, as amended) is amended to read:

"7-12A-3. IMPOSITION AND RATE OF TAX--DENOMINATION AS "TOBACCO PRODUCTS TAX"--DATE PAYMENT OF TAX DUE.--

A. For the privilege of engaging in business to manufacture [or acquisition of], acquire or distribute tobacco products [in New Mexico to be distributed] in the ordinary course of business and for the [consumption of] privilege of consuming tobacco products in New Mexico, there is imposed an excise tax at the rate of [twenty-five] seventy-six percent of the product value of the tobacco products.

B. The tax imposed by Subsection A of this section may be referred to as the "tobacco products tax".

C. The tobacco products tax shall be paid by the first purchaser on or before the twenty-fifth day of the month following the month in which the taxable event occurs."

SECTION 7. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2018.

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