REPORT TITLE: 
Cigarette Stamp Tax


DESCRIPTION:
Provides for an excise tax on cigarettes to be imposed and
collected through the use of stamps purchased by wholesalers and
dealers, and affixed to cigarette packages.  Includes provisions
for civil and criminal penalties, and for forfeitures of
cigarettes, to be enforced by the police departments, liquor
commissions, attorney general, and prosecuting attorneys.
Mandates repeal of the law in 2005 upon a finding by the
legislative auditor that the law has not reduced the loss of tax
revenue due to the illegal sale of untaxed cigarettes.  Makes
appropriation to DOT for stamps. (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        176
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                S.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TOBACCO TAX.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 245, Hawaii Revised Statutes, is amended
 
 2 by adding a new part to be appropriately designated and to read
 
 3 as follows:
 
 4                 "PART   .  STAMPING OF CIGARETTES
 
 5      245-A  Payment of tax through use of stamps.(a)  The tax
 
 6 imposed under section 245-3 upon the sale, use, or possession of
 
 7 cigarettes shall be paid by licensees through the use of stamps.
 
 8      (b)  The department shall furnish stamps for sale.
 
 9      245-B  Sales through financial institutions; rules.  The
 
10 department may enter into agreements to permit the sale of stamps
 
11 by designated financial institutions located within the State.  A
 
12 list of financial institutions designated to sell stamps shall be
 
13 made available at the department.  The department may adopt rules
 
14 as necessary for this purpose pursuant to chapter 91.
 
15      245-C  Designs, specifications, and denominations of
 
16 stamps; affixation; cancellation.  Stamps shall be of such
 
17 designs, specifications, and denominations as may be prescribed
 
18 by the department.  The department shall adopt rules pursuant to
 
19 chapter 91, on the method and manner in which stamps are to be
 

 
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                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 affixed to packages of cigarettes, and may provide for the
 
 2 cancellation of stamps.
 
 3      245-D  Affixation prior to distribution.(a)  Beginning
 
 4 April 15, 2000, a licensee, or designee of a licensee, may apply
 
 5 to the department for stamps as provided in this section.
 
 6      (b)  Beginning May 1, 2000, a licensee or the authorized
 
 7 agent or designee of a licensee, shall affix a stamp to the
 
 8 bottom of each individual package of cigarettes, prior to
 
 9 distribution.
 
10      (c)  Beginning September 1, 2000, an individual package of
 
11 cigarettes, not affixed with the stamp required under this
 
12 section, shall not be sold or offered for sale to the general
 
13 public.
 
14      (d)  Beginning September 1, 2000, a cigarette package, not
 
15 affixed with the stamp required under this section, shall not be
 
16 placed or stored in a vending machine. 
 
17      245-E  Approval of department required for transfer of
 
18 stamps.  Unaffixed stamps shall not be sold, exchanged, or in any
 
19 manner transferred by a licensee to another person without prior
 
20 written approval of the department.  Any person who violates this
 
21 section shall be fined not less than $500 and not more than
 
22 $1,000 for each violation.
 
23      245-F  Authority to order purchases for licensee; duration;
 

 


 

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                                     H.B. NO.           H.D. 2
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 1 revocation.  A licensee, in writing, shall authorize those
 
 2 persons who may order purchases of stamps for the licensee at a
 
 3 location where stamps are sold.  The authorization shall continue
 
 4 in effect until written notice of revocation of the authority is
 
 5 delivered to the sales location in the manner prescribed by rules
 
 6 adopted by the department pursuant to chapter 91.
 
 7      245-G  Payment of tax without use of stamps in certain
 
 8 transactions; rules.  The department may provide by rule pursuant
 
 9 to chapter 91 that the tax imposed by this chapter with respect
 
10 to cigarettes may be paid without the use of stamps in connection
 
11 with a particular type of transaction.
 
12      245-H  Price; payment; deferred payment purchases.(a)
 
13 Stamps shall be sold to licensees at their denominated values,
 
14 plus a state stamp fee of 0.2 per cent of the denominated value
 
15 of the stamp (which is equal to $1 per stamp per package of
 
16 twenty cigarettes) to pay for the cost to the State of providing
 
17 the stamps; provided that the department may adopt rules,
 
18 pursuant to chapter 91, to modify the state stamp fee to reflect
 
19 the actual costs incurred by the State in providing the stamps.
 
20      (b)  Payment for stamps shall be made at the time of
 
21 purchase; provided that the department may adopt rules pursuant
 
22 to chapter 91 to permit a licensee to defer payments therefor as
 
23 provided for in section 245-I.
 

 
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                                     H.B. NO.           H.D. 2
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 1      245-I  Application to fix maximum amount and time of
 
 2 deferred-payment purchases; bonding.(a)  A licensee may apply
 
 3 to the department to set the maximum amount of deferred-payment
 
 4 purchases of stamps that may remain unpaid by the licensee during
 
 5 the time specified under section 245-J.  Upon receipt of the
 
 6 application and any bond required pursuant to subsection (b), the
 
 7 department shall set the amount for deferred-payment purchases.
 
 8      (b)  The department may require that a licensee who submits
 
 9 an application for deferred-payment purchases of stamps post a
 
10 bond in an amount of up to one hundred per cent of the maximum
 
11 amount of allowed deferred-payment purchases as a condition of
 
12 approval of the application by the department.
 
13      245-J  Time for payment of deferred-payment purchases;
 
14 manner of payment.  Amounts owing for stamps purchased on the
 
15 deferred-payment basis in any calendar month shall be due and
 
16 payable on or before the last day of the following calendar
 
17 month.  Payment shall be made by a remittance payable to the
 
18 department.
 
19      245-K  Suspension of privilege to purchase on deferred-
 
20 payment basis or reduction of amount of permissible purchases.
 
21 The department may suspend, without prior notice, a licensee's
 
22 privilege to purchase stamps on the deferred-payment basis, or
 
23 may reduce the amount of deferred-payment purchases allowed the
 

 
Page 5                                                     176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 licensee, if:
 
 2      (1)  The licensee fails to promptly pay for stamps when
 
 3           payment is due;
 
 4      (2)  The bond or bonds required of the licensee are
 
 5           canceled, become void, impaired, or unenforceable for
 
 6           any reason; or
 
 7      (3)  In the opinion of the department, collection of any
 
 8           amounts unpaid or due from the licensee under this
 
 9           chapter is jeopardized.
 
10      245-L  Penalty for failure to make timely payment.  A
 
11 licensee who fails to pay any amount owing for the purchase of
 
12 stamps within the time required shall pay a penalty of ten per
 
13 cent of the amount due in addition to the amount due plus
 
14 interest at the rate specified in section 231-39, from the date
 
15 on which the amount became due and payable until the date of
 
16 payment.
 
17      245-M  Unused stamps.  The department shall adopt rules
 
18 pursuant to chapter 91 for a refund or credit to a licensee in
 
19 the amount of the denominated values of any unused stamps.
 
20      245-N  Cigarettes and tobacco products shipped outside the
 
21 State for sale or use outside the State; refund or credit of
 
22 taxes.(a)  The department shall adopt rules pursuant to chapter
 
23 91 to provide a tobacco tax refund or credit to a licensee who
 

 
Page 6                                                     176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 has paid a tobacco tax on the distribution of cigarettes or
 
 2 tobacco products that are shipped to a point outside the State
 
 3 for subsequent sale or use outside the State.
 
 4      (b)  This section shall not apply to cigarettes or tobacco
 
 5 products that are distributed in this State to consumers and that
 
 6 are subsequently taken outside the State.
 
 7      245-O  Counterfeiting stamps.  Any person who:
 
 8      (1)  Falsely or fraudulently makes, forges, alters, reuses,
 
 9           or counterfeits any stamp provided for or authorized
 
10           under this part;
 
11      (2)  Causes any stamp to be falsely or fraudulently made,
 
12           forged, altered, reused, or counterfeited; or
 
13      (3)  Knowingly and wilfully utters, publishes, passes, or
 
14           tenders as genuine, any false, forged, altered, reused,
 
15           or counterfeited stamp,
 
16 is guilty of a class B felony and shall be imprisoned for not
 
17 less than one year and not more than ten years, and may be fined
 
18 not more than $50,000, or both.
 
19      245-P  Sale or purchase of packages of cigarettes without
 
20 stamps; fines and penalties.(a)  Beginning September 1, 2000, a
 
21 person who knowingly possesses, keeps, stores, acquires,
 
22 transports, or retains for the purpose of sale, or sells or
 
23 offers to sell, three thousand or more cigarettes with an
 

 
Page 7                                                     176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 aggregate wholesale price of $250 or more, to which there are not
 
 2 affixed the stamps required under this part, regardless of the
 
 3 source of, or method of obtaining the cigarettes, is guilty of a
 
 4 class C felony, and upon conviction thereof, shall be fined not
 
 5 more than $10,000, and may be imprisoned not less than one year
 
 6 and not more than five years, or both; provided that a
 
 7 corporation shall be fined not more than $50,000.
 
 8      (b)  Beginning September 1, 2000, a person who knowingly
 
 9 possesses, keeps, stores, acquires, transports, or retains for
 
10 the purpose of sale, or sells or offers to sell, one thousand two
 
11 hundred or more, but not more than two thousand nine hundred
 
12 ninety-nine, cigarettes with an aggregate wholesale value of $100
 
13 or more, but less than $250, to which there are not affixed the
 
14 stamps required under this part, regardless of the source of, or
 
15 method of obtaining the cigarettes, is guilty of a misdemeanor,
 
16 and upon conviction thereof, shall be fined not more than $5,000,
 
17 and may be imprisoned not more than one year, or both; provided
 
18 that a corporation shall be fined not more than $25,000.
 
19      (c)  Beginning September 1, 2000, a person who knowingly
 
20 violates a provision of this part for which a criminal punishment
 
21 is not otherwise provided is guilty of a misdemeanor, and may be
 
22 fined not more than $2,000 or imprisoned not more than one year,
 
23 or both.
 

 
Page 8                                                     176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1      245-Q  Vending unstamped cigarettes; offense; punishment.
 
 2 Beginning September 1, 2000, a person in possession or control
 
 3 of, or having access to, a cigarette vending machine, who
 
 4 knowingly or wilfully places for sale in the vending machine any
 
 5 cigarettes not contained in packages to which are affixed Hawaii
 
 6 tax stamps, shall be guilty of a class C felony, and upon
 
 7 conviction thereof, shall be fined not more than $10,000, and may
 
 8 be imprisoned not less than one year and not more than ten years,
 
 9 or both; provided that a corporation shall be fined not more than
 
10 $50,000.
 
11      245-R  Enforcement; injunction; disposition of fines.(a)
 
12 Enforcement of this part shall be under the concurrent
 
13 jurisdiction of the county liquor commissions, attorney general,
 
14 prosecuting attorney, and police department of each county.
 
15      (b)  Notwithstanding the existence of other remedies at law,
 
16 the attorney general or prosecuting attorney may apply for, and
 
17 the court may grant, a temporary or permanent injunction
 
18 restraining any person from violating or continuing to violate
 
19 this part.  The injunction shall be issued without bond.
 
20      (c)  Where a county police department, working with either
 
21 the attorney general or prosecuting attorney, initiates and
 
22 conducts an investigation resulting in the imposition and
 
23 collection of a criminal fine pursuant to this part, one hundred
 

 
Page 9                                                     176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 per cent of the fine shall be equally distributed between the
 
 2 police department whose officers or employees initiated and
 
 3 conducted the investigation, and either the office of the
 
 4 attorney general or of the prosecuting attorney, whichever
 
 5 obtained the underlying conviction.
 
 6      245-S  Liquor commission hearing, counterfeiting stamps,
 
 7 or selling, purchasing, or vending unstamped cigarettes.(a)
 
 8 The liquor commission or liquor control adjudication board may
 
 9 assess and collect a fine against, or reprimand any person who
 
10 counterfeits Hawaii tax stamps, or sells, purchases, or vends
 
11 unstamped cigarettes in violation of this part or of any rule
 
12 applicable thereto.  Any reprimand or fine imposed by the
 
13 commission or board pursuant to this section shall be in addition
 
14 to any other fine that may be imposed by law.  The fine assessed
 
15 and collected pursuant to this section shall not exceed the sum
 
16 of $2,000 for each violation.
 
17      (b)  In every case where proceedings under this section in
 
18 which a fine may be imposed are conducted, the person subject to
 
19 those proceedings shall be entitled to notice and hearing in
 
20 conformity with chapter 91.  The person shall be entitled to be
 
21 heard in person or through counsel, and shall be given a full and
 
22 fair opportunity to present facts showing that the alleged cause
 
23 or causes for the proposed action do not exist, or to show any
 

 
Page 10                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 other reason why no fine should be imposed.  Testimony taken at
 
 2 the hearing shall be under oath and recorded stenographically, or
 
 3 by machine.  The parties shall not be bound by strict rules of
 
 4 evidence.  At the request of the person subject to the
 
 5 proceedings, certified copies of any transcript and of any other
 
 6 record made of, or at the hearing, shall be provided upon payment
 
 7 by the requester of the costs of providing the certified copies.
 
 8      (c)  The notice required by this section shall be served in
 
 9 the following manner:
 
10      (1)  Written notice of the violation shall be given to the
 
11           person charged with the violation within a reasonable
 
12           period of time after the alleged violation is
 
13           discovered, and the person charged shall be requested
 
14           to acknowledge receipt of the notice;
 
15      (2)  If the person charged cannot be found after diligent
 
16           search, notice may be served by leaving a certified
 
17           copy of the written notice at the person's dwelling
 
18           house or usual place of abode with any person of
 
19           suitable age and discretion residing therein;
 
20      (3)  If the person charged cannot be found after diligent
 
21           search, and service cannot be made, then service may be
 
22           made by mailing a certified copy of the written notice
 
23           by way of the United States post office certified mail,
 

 
Page 11                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1           postage prepaid, and addressed to the person at the
 
 2           person's last known residence address; and
 
 3      (4)  Where a partnership, corporation, unincorporated
 
 4           association, or limited liability company is charged,
 
 5           service may be made upon any partner, officer, or
 
 6           member thereof.
 
 7      245-T  Seizure and confiscation of unstamped cigarettes.
 
 8 The county liquor commissions, attorney general, prosecuting
 
 9 attorney, and the police department of each of the counties may
 
10 seize and confiscate any cigarette, package of cigarettes, or
 
11 carton of cigarettes which is possessed, kept, stored, acquired,
 
12 transported, or retained for the purpose of sale, or sold or
 
13 offered for sale in violation of this part, subject to the
 
14 requirements of chapter 281.
 
15      245-U  Arrest; abetters.  The owner, keeper, and any person
 
16 having possession of any cigarette, package of cigarettes, or
 
17 carton of cigarettes that were seized under section 245-T, may be
 
18 arrested without necessity of warrant and brought before the
 
19 district court of the circuit in which the seizure occurred.  If
 
20 the owner or keeper of the cigarette, package of cigarettes, or
 
21 carton of cigarettes seized is unknown to the police officer
 
22 making the seizure, or if no person is found in apparent
 
23 possession or custody of them, the police officer may arrest and
 

 
Page 12                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 bring before the court the owner or occupant of the building,
 
 2 place, or premises, or the driver, operator, owner, or other
 
 3 person in charge of the conveyance in which the cigarette,
 
 4 package of cigarettes, or carton of cigarettes is found, if such
 
 5 person is known or can be ascertained.  Any person who has
 
 6 knowingly engaged in, aided, assisted, or abetted the obtaining,
 
 7 keeping, or sale of any cigarette, package of cigarettes, or
 
 8 carton of cigarettes seized as provided in section 245-T, or has
 
 9 been privy thereto, or has knowingly permitted the use of any
 
10 place, building, premises, or conveyance for such unlawful
 
11 purpose, shall be guilty of a misdemeanor and be punished as
 
12 provided in section 245-P(c).
 
13      245-V  Forfeitures; disposition.(a)  Any cigarette,
 
14 package of cigarettes, or carton of cigarettes unlawfully
 
15 possessed, kept, stored, acquired, transported, or retained for
 
16 the purpose of sale, or sold or offered for sale, in violation of
 
17 this part, may be ordered forfeited pursuant to chapter 281 by an
 
18 appropriate administrative or judicial proceeding. 
 
19      (b)  Any cigarette, package of cigarettes, or carton of
 
20 cigarettes forfeited pursuant to this section shall be sold to a
 
21 licensed wholesaler or dealer.
 
22      (c)  All proceeds from the sale of any cigarette, package of
 
23 cigarettes, or carton of cigarettes forfeited as provided in this
 

 
Page 13                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 section, after payment of expenses of administration and sale,
 
 2 shall be distributed equally between:
 
 3      (1)  Either the county police department or county liquor
 
 4           commission whose officers or investigators and
 
 5           employees initiated and conducted an investigation
 
 6           resulting in the forfeiture and sale of cigarettes
 
 7           pursuant to this section; and
 
 8      (2)  The attorney general or prosecuting attorney who
 
 9           instituted the action producing the forfeiture.
 
10      (d)  Money distributed to the county liquor commissions,
 
11 county police departments, attorney general, or prosecuting
 
12 attorney shall be used for law enforcement purposes, and shall
 
13 complement but not supplant the funds regularly appropriated for
 
14 such purposes.
 
15      245-W  Appeals.  A claimant of a cigarette, package of
 
16 cigarettes, or carton of cigarettes forfeited pursuant to section
 
17 245-V, may appeal the forfeiture in the same manner as appeals
 
18 are allowed in other cases governed by chapter 281.  If the
 
19 claimant fails to appear, or to diligently prosecute the appeal,
 
20 or fails to secure a reversal of the judgment in the appellate
 
21 court, the judgment appealed from shall be carried out.  Section
 
22 245-10 shall not apply to an appeal under this section.
 
23      245-X  Claims.  If the owner or possessor of any cigarette,
 

 
Page 14                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 package of cigarettes, or carton of cigarettes seized under this
 
 2 part appears and makes claim to the item, the owner or possessor
 
 3 shall file with the court before whom the proceedings are
 
 4 pending, a claim in writing, setting forth the claimant's
 
 5 interest therein, and the reason why the items claimed should not
 
 6 be forfeited.  The claimant shall also give bond in favor of the
 
 7 State, sufficient in amount and sureties, as required by the
 
 8 court, and conditioned so that if the claim is diligently
 
 9 prosecuted and decided against the claimant, the claimant shall
 
10 pay the costs of the proceedings conducted to resolve the claim.
 
11 If the judgment is against the claimant, the cigarette, package
 
12 of cigarettes, carton of cigarettes, and all containers thereof
 
13 shall be forfeited and shall be disposed of as provided in
 
14 section 245-V.
 
15      245-Y  Prosecutions not to exclude other remedies affecting
 
16 goods.  The criminal penalties and administrative fines
 
17 authorized under this part shall be in addition to any
 
18 forfeitures imposed pursuant to section 245-V.
 
19      245-Z  Treatment of certain unstamped cigarettes.(a)
 
20 Beginning September 1, 2000, all persons in possession or control
 
21 of unstamped cigarettes or packages of cigarettes shall destroy
 
22 the unstamped cigarettes or packages or return the unstamped
 
23 cigarettes or packages to the manufacturers.
 

 
Page 15                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1      (b)  Failure to comply with subsection (a) shall subject the
 
 2 violator to criminal penalties or administrative fines, or both,
 
 3 under sections 245-P, 245-Q, 245-S, 245-T, 245-U, and 245-V."
 
 4      SECTION 2.  Section 245-1, Hawaii Revised Statutes, is
 
 5 amended by adding eight new definitions to be appropriately
 
 6 inserted and to read as follows:
 
 7      ""Attorney general" means the attorney general or deputy
 
 8 attorneys general of the State of Hawaii.
 
 9      "Department" means the department of taxation.
 
10      "License" means any license granted under this chapter.
 
11      "Licensee" means a holder of a license granted under this
 
12 chapter.
 
13      "Liquor commission" means the liquor commission of each
 
14 county.
 
15      "Liquor control adjudication board" or "board" means a board
 
16 established by county charter, within a county, that shall have
 
17 the jurisdiction to hear and determine complaints or violations
 
18 of chapter 281 and to impose penalties as may be provided in
 
19 chapter 281.
 
20      "Prosecuting attorney" means the prosecuting attorney or
 
21 deputy prosecuting attorneys of the various counties.
 
22      "Stamp" means a stamp printed, manufactured, or made by
 
23 authority of the department, as provided in part II, which is
 

 
Page 16                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 issued, sold, or circulated by the department, and by the use of
 
 2 which the tax levied under this chapter is paid."
 
 3      SECTION 3.  Section 245-3, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "245-3  Taxes[; limitations].(a)  Every [wholesaler or
 
 6 dealer,] licensee, in addition to any other taxes provided by
 
 7 law, shall pay for the privilege of conducting business and other
 
 8 activities in the State an:
 
 9      (1)  Excise tax equal to[:
 
10           (A)  4.00 cents for each cigarette sold, used, or
 
11                possessed by the wholesaler or dealer, after
 
12                August 31, 1997; and
 
13           (B)] 5.00 cents for each cigarette sold, used, or
 
14                possessed by a [wholesaler or dealer] licensee
 
15                after June 30, 1998,
 
16           whether or not sold at wholesale, or if not sold then
 
17           at the same rate upon the use by the wholesaler or
 
18           dealer; and
 
19      (2)  Excise tax equal to forty per cent of the wholesale
 
20           price of each article or item of tobacco products sold
 
21           by the [wholesaler or dealer,] licensee, whether or not
 
22           sold at wholesale, or if not sold then at the same rate
 
23           upon the use by the [wholesaler or dealer.] licensee.
 

 
Page 17                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1      Where the tax imposed has been paid on cigarettes or tobacco
 
 2 products which thereafter become the subject of a casualty loss
 
 3 deduction allowable under chapter 235, the tax paid shall be
 
 4 refunded or credited to the account of the [wholesaler or
 
 5 dealer.] licensee.   In applying the tax[,] to tobacco products,
 
 6 the tax shall be applied against the latest of the activities of
 
 7 selling, using, or possessing.  The tax shall be imposed at the
 
 8 time of the last of the following activities to occur:  the sale;
 
 9 the use; or the possession of [cigarettes or] tobacco products.
 
10 The tax shall be applied to cigarettes through the use of stamps,
 
11 except as provided by section 245-G.
 
12      (b)  The taxes, however, are subject to the following
 
13 limitations:
 
14      (1)  The measure of the taxes shall not include any
 
15           cigarettes or tobacco products exempted, and so long as
 
16           the same are exempted, from the imposition of taxes by
 
17           the Constitution or laws of the United States; and
 
18      (2)  The taxes shall be paid only once in respect of the
 
19           same cigarettes or tobacco product.  This limitation
 
20           shall not prohibit the imposition of the excise tax on
 
21           receipts from sales of tobacco products under
 
22           subsection (a)(2); provided that the amount subject to
 
23           the tax on each sale shall not include amounts
 

 
Page 18                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1           previously taxed under this chapter.
 
 2      (c)       cents of the cigarette tax assessed after May 1,
 
 3 2000, shall be paid to the county liquor commissions as follows:
 
 4           (1)       per cent shall be paid to the liquor
 
 5                commission for the city and county of Honolulu;
 
 6           (2)       per cent shall be paid to the liquor
 
 7                commission for the county of Hawaii;
 
 8           (3)       per cent shall be paid to the liquor
 
 9                commission for the county of Maui; and
 
10           (4)      per cent shall be paid to the liquor
 
11                commission for the county of Kauai."
 
12      SECTION 4.  Section 245-5, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "245-5  Returns.  Every licensee, on or before the last day
 
15 of each month, shall file with the department [of taxation] a
 
16 return showing the cigarettes and tobacco products sold,
 
17 possessed, distributed, or used by the licensee during the
 
18 preceding calendar month and of the taxes chargeable against the
 
19 taxpayer in accordance with this chapter.  The form of the return
 
20 shall be prescribed by the department and shall [contain such
 
21 information, including] include a separate statement of the
 
22 number and wholesale price of cigarettes, the amount of stamps
 
23 purchased and used, and the wholesale price of tobacco products,
 

 
Page 19                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 sold, possessed, or used, [as it] and any other information that
 
 2 the department may deem necessary for the proper administration
 
 3 of this chapter."
 
 4      SECTION 5.  Section 245-6, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "245-6  Payment of taxes; penalties.  At the time of the
 
 7 filing of the return required under section 245-5 and within the
 
 8 time prescribed therefor, each licensee shall pay to the
 
 9 department [of taxation] the taxes imposed by this chapter,
 
10 required to be shown by the return[.], including the unpaid
 
11 amount of taxes imposed by this chapter.
 
12      Penalties and interest shall be added to and become a part
 
13 of the taxes, when and as provided by section 231-39."
 
14      SECTION 6.  Section 245-8, Hawaii Revised Statutes, is
 
15 amended by amending subsection (a) to read as follows:
 
16      "(a)  Every [wholesaler and dealer] licensee shall keep a
 
17 record of [every]:
 
18      (1)  Every sale or use of cigarettes and tobacco products by
 
19           the [wholesaler or dealer, the] licensee;
 
20      (2)  The number and wholesale price of cigarettes[, and
 
21           the];
 
22      (3)  The wholesale price of tobacco products, sold,
 
23           possessed, or used[, and of the];
 

 
Page 20                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1      (4)  The taxes payable [thereon,] on tobacco products sold,
 
 2           possessed, or used, if any[,]; and
 
 3      (5)  The amount of stamps purchased and used,
 
 4 in such form as the department [of taxation] may prescribe.  The
 
 5 records shall be offered for inspection and examination at any
 
 6 time upon demand by the department or liquor commission and shall
 
 7 be preserved for a period of five years, except that the
 
 8 department, in writing, may consent to their destruction within
 
 9 the five-year period or may require that they be kept longer.
 
10 The department, by rule, may require the licensee to keep such
 
11 other records as it may deem necessary for the proper enforcement
 
12 of this chapter."
 
13      SECTION 7.  Section 245-15, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "245-15  Disposition of revenues.  All moneys collected
 
16 pursuant to this chapter shall be paid into the state treasury as
 
17 state realizations to be kept and accounted for as provided by
 
18 law[.], except for the amounts designated by:
 
19      (1)  Sections 245-R, 245-S, and 245-U, for distribution to
 
20           the county liquor commissions, the county police
 
21           departments, or the prosecuting attorney; and
 
22      (2)  Section 245-3(c) to be paid to the county liquor
 
23           commissions."
 

 
Page 21                                                    176
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1      SECTION 8.  Section 281-17, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "281-17  Jurisdiction and powers.  The liquor commission,
 
 4 within its own county, shall have the sole jurisdiction, power,
 
 5 authority, and discretion, subject only to this chapter[:] and
 
 6 chapter 245:
 
 7      (1)  To grant, refuse, suspend, and revoke any licenses for
 
 8           the manufacture, importation, and sale of liquors;
 
 9      (2)  To take appropriate action against a person who,
 
10           directly or indirectly, manufactures or sells any
 
11           liquor without being authorized pursuant to this
 
12           chapter; provided that in counties which have
 
13           established by charter a liquor control adjudication
 
14           board, the board shall have the jurisdiction, power,
 
15           authority, and discretion to hear and determine
 
16           administrative complaints of the director regarding
 
17           violations of the liquor laws of the State or of the
 
18           rules of the liquor commission, and impose penalties
 
19           [[]for[]] violations thereof as may be provided by law;
 
20      (3)  To take appropriate action against a person who
 
21           counterfeits stamps, or sells, purchases, or vends
 
22           unstamped cigarette packages in violation of chapter
 
23           245 or any rule thereof;
 

 
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 1     [(3)] (4)  To control, supervise, and regulate the
 
 2           manufacture, importation, and sale of liquors by
 
 3           investigation, enforcement, and education; provided
 
 4           that any educational program shall be limited to
 
 5           licensees and their employees and shall be financed
 
 6           through the money collected from the assessment of
 
 7           fines against licensees;
 
 8     [(4)] (5)  From time to time to make, amend, and repeal such
 
 9           rules, not inconsistent with this chapter, as in the
 
10           judgment of the commission seem appropriate for
 
11           carrying out this chapter and for the efficient
 
12           administration thereof, and the proper conduct of the
 
13           business of all licensees, including every matter or
 
14           thing required to be done or which may be done with the
 
15           approval or consent or by order or under the direction
 
16           or supervision of or as prescribed by the commission;
 
17           which rules, when adopted as provided in chapter 91
 
18           shall have the force and effect of law;
 
19     [(5)] (6)  Subject to chapters 76 and 77, to appoint and
 
20           remove an administrator, who may also be appointed an
 
21           investigator and who shall be responsible for the
 
22           operations and activities of the staff.  The
 
23           administrator may hire and remove hearing officers,
 

 
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                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1           investigators, and clerical or other assistants as its
 
 2           business may from time to time require, to prescribe
 
 3           their duties, and fix their compensation; to engage the
 
 4           services of experts and persons engaged in the practice
 
 5           of a profession, if deemed expedient.  Every
 
 6           investigator, within the scope of the investigator's
 
 7           duties, shall have the powers of a police officer.  No
 
 8           employee of any commission, aside from exercising the
 
 9           right to vote, shall support, advocate, or aid in the
 
10           election or defeat of any candidate for public office,
 
11           and upon satisfactory proof of such prohibited activity
 
12           the offender shall be summarily dismissed;
 
13     [(6)] (7)  To limit the number of licenses of any class or
 
14           kind within the county, or the number of licenses of
 
15           any class or kind to do business in any given locality,
 
16           when in the judgment of the commission such limitations
 
17           are in the public interest;
 
18     [(7)] (8)  To prescribe the nature of the proof to be
 
19           furnished, the notices to be given, and the conditions
 
20           to be met or observed in case of the issuance of a
 
21           duplicate license in place of one alleged to have been
 
22           lost or destroyed, including a requirement of any
 
23           indemnity deemed appropriate to the case;
 

 
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                                     H.B. NO.           H.D. 2
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 1     [(8)] (9)  To fix the hours between which licensed premises
 
 2           of any class or classes may regularly be open for the
 
 3           transaction of business, which shall be uniform
 
 4           throughout the county as to each class respectively;
 
 5     [(9)] (10)  To prescribe all forms to be used for the
 
 6           purposes of this chapter not otherwise provided for in
 
 7           this chapter[,] or in chapter 245, and the character
 
 8           and manner of keeping of books, records, and accounts
 
 9           to be kept by chapter 281 or 245 licensees in any
 
10           matter pertaining to their business;
 
11    [(10)] (11)  To investigate violations of this chapter,
 
12           chapter 244D, and chapter 245 and, notwithstanding any
 
13           law to the contrary, violations of the applicable
 
14           department of health's allowable noise levels, through
 
15           its investigators or otherwise, to include covert
 
16           operations, and to report violations to the prosecuting
 
17           officer for prosecution and, where appropriate, the
 
18           director of taxation to hear and determine complaints
 
19           against any licensee;
 
20    [(11)] (12)  To prescribe, by rule, the terms, conditions, and
 
21           circumstances under which persons or any class of
 
22           persons may be employed by holders of licenses;
 
23    [(12)] (13)  To prescribe, by rule, the term of any license or
 

 
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                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1           solicitor's and representative's permit authorized by
 
 2           this chapter, the annual or prorated amount, the manner
 
 3           of payment of fees for the licenses and permits, and
 
 4           the amount of filing fees; and
 
 5    [(13)] (14)  To prescribe, by rule, the circumstances and
 
 6           penalty for the unauthorized manufacturing or selling
 
 7           of any liquor.
 
 8      Subject only to this chapter, the commission or board and
 
 9 each member thereof shall have the same powers respecting the
 
10 administering of oaths, compelling the attendance of witnesses
 
11 and the production of documentary evidence, and examining the
 
12 witnesses as are possessed by a circuit court, except that the
 
13 commission or board and each member thereof shall not be bound by
 
14 the strict legal rules of evidence.  In addition, the commission
 
15 or board shall have the power to require the production of, and
 
16 to examine any books, papers, and records of any [licensee]
 
17 person licensed under this chapter or chapter 245, which may
 
18 pertain to the licensee's business under the license or which may
 
19 pertain to a matter at a hearing before the commission or board
 
20 or to an investigation by the commission or board.
 
21      The exercise by the commission or board of the power,
 
22 authority, and discretion vested in it pursuant to this chapter
 
23 shall be final and shall not be reviewable by or appealable to
 

 
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                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 any court or tribunal, except as otherwise provided in this
 
 2 chapter or chapter 91."
 
 3      SECTION 9.  Chapter 245, Hawaii Revised Statutes, is amended
 
 4 by designating sections 245-1 to 245-15 as part I and inserting a
 
 5 title before section 245-1 to read as follows:
 
 6                   "PART I.  GENERAL PROVISIONS"
 
 7      SECTION 10.  This Act does not affect the rights and duties
 
 8 that matured, penalties that were incurred, and proceedings that
 
 9 were begun, before its effective date.
 
10      SECTION 11.  In codifying the new part added to chapter 245,
 
11 Hawaii Revised Statutes, by section 1 of this Act, and referred
 
12 to in this Act, the revisor of statutes shall substitute
 
13 appropriate section numbers for the letters used in designating
 
14 the new sections in this Act.
 
15      SECTION 12.  There is appropriated out of the general
 
16 revenues of the State of Hawaii the sum of $35,000, or so much
 
17 thereof as may be necessary, for fiscal year 1999-2000, for
 
18 start-up costs for implementing the cigarette stamp tax system,
 
19 including a one year supply of stamps and stamp cylinder.
 
20      The sum appropriated shall be expended by the Department of
 
21 Taxation for purposes of this Act.
 
22      SECTION 13.  The director of taxation shall conduct a study
 
23 to determine if this Act has the effect of reducing the loss of
 

 
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                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        

 
 1 cigarette tax revenue to the State from the sale of untaxed
 
 2 cigarettes.  The director shall report findings and
 
 3 recommendations to the legislature no later than twenty days
 
 4 prior to the convening of the Regular Session of 2005 or an
 
 5 earlier session if circumstances warrant an earlier report in the
 
 6 discretion of the director.
 
 7      SECTION 14.  Statutory material to be repealed is bracketed.
 
 8 New statutory material is underscored.
 
 9      SECTION 15.  This Act shall take effect upon its approval;
 
10 provided that section 12 shall take effect on July 1, 1999;
 
11 provided further that this Act shall be repealed on June 30,
 
12 2005, and sections 245-1, 245-3, 245-5, 245-6, 245-8, 245-15, and
 
13 281-17, Hawaii Revised Statutes, shall be reenacted in the form
 
14 in which they read on the day before the approval of this Act.