REPORT TITLE: 
Cigarette Stamp Tax


DESCRIPTION:
Establishes a system for imposing the tax upon cigarettes
through the use of stamps.  Regulates the sale, possession, and
handling of export and foreign cigarettes in the State.  (SB2486
HD1).


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2486
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  Chapter 245, Hawaii Revised Statutes, is amended
 
 2 by adding two new parts to be appropriately designated and to
 
 3 read as follows:
 
 4                 "PART   .  STAMPING OF CIGARETTES
 
 5      245-A  Payment of tax through use of stamps; exemptions.
 
 6 (a)  The tax imposed under section 245-3 upon the sale or use of
 
 7 cigarettes shall be paid by licensees through the use of stamps.
 
 8      (b) The department may provide by rule that the tax imposed
 
 9 under section 245-3 upon the sale or use of cigarettes may be
 
10 paid without the use of stamps in connection with a particular
 
11 type of transaction.
 
12      245-B  Affixation; required prior to distribution; method
 
13 and manner.(a)  Beginning January 1, 2001, a licensee or the
 
14 authorized agent or designee of a licensee shall affix a stamp to
 
15 the bottom of each individual package of cigarettes prior to
 
16 distribution.
 
17      (b)  Beginning April 1, 2001, no individual package of
 
18 cigarettes may be sold or offered for sale to the general public
 
19 unless affixed with the stamp required under this section.
 

 
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 1      (c)  Beginning April 1, 2001, no cigarette package may be
 
 2 placed or stored in a vending machine unless affixed with the
 
 3 stamp required under subsection (a).
 
 4      (d)  The department shall adopt rules describing the method
 
 5 and manner in which stamps are to be affixed to packages of
 
 6 cigarettes.
 
 7      245-C  Department to furnish stamps; designs,
 
 8 specifications, and denominations; procurement.  The department
 
 9 shall furnish stamps for sale to licensees.  Stamps shall be of
 
10 such designs, specifications, and denominations as may be
 
11 prescribed by the department.  Purchase by the department of
 
12 stamps from a vendor shall be exempt from the requirements of
 
13 chapter 103D.
 
14      245-D  Sales through financial institutions.  The
 
15 department may enter into agreements to permit the sale of stamps
 
16 by designated financial institutions located within the State.  A
 
17 list of financial institutions designated to sell stamps shall be
 
18 made available at the department.
 
19      245-E  Purchase of stamps; when; by licensee or designee.
 
20 (a)  A licensee may apply to the department to purchase stamps
 
21 beginning December 15, 2000.
 
22      (b)  A licensee may authorize a designee to order purchases
 
23 of stamps for the licensee at a location where stamps are sold.
 

 
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 1 Authorization of a designee shall be in writing.  The written
 
 2 authorization shall continue in effect until written notice of
 
 3 revocation of the authority is delivered at the sales location in
 
 4 the manner prescribed by rule.
 
 5      245-F  Price; payment; deferred payment purchases.(a)
 
 6 Stamps shall be sold at their denominated values, plus a stamp
 
 7 fee of 1.7 per cent of the denominated value of each stamp sold,
 
 8 composed of the aggregate of:
 
 9      (1)  .2 per cent of the denominated value of the stamp to
 
10           pay for the cost to the State of providing the stamps;
 
11           and
 
12      (2)  1.5 per cent of the denominated value of the stamp to
 
13           pay for the cost of enforcing the stamp tax;
 
14 provided that the department by rule may modify the stamp fee to
 
15 reflect actual costs incurred by the State in providing the
 
16 stamps.
 
17      (b)  Payment for stamps shall be made at the time of
 
18 purchase; provided that a licensee may defer payments pursuant to
 
19 section 245-G.
 
20      245-G  Maximum amount of deferred-payment purchases; bond.
 
21 (a)  A licensee may apply to the department to set the maximum
 
22 amount of deferred-payment purchases of stamps that may remain
 
23 unpaid by the licensee during the time specified under section
 

 
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 1 245-H.  Upon receipt of the application and any bond required
 
 2 pursuant to subsection (b), the department shall set the amount
 
 3 for deferred-payment purchases.
 
 4      (b)  The department may require that a licensee who submits
 
 5 an application for deferred-payment purchases of stamps post a
 
 6 bond in an amount of up to one hundred per cent of the maximum
 
 7 amount of allowed deferred-payment purchases as a condition of
 
 8 department approval of the application.
 
 9      245-H  Time for payment of deferred-payment purchases;
 
10 manner of payment.  Amounts owing for stamps purchased on the
 
11 deferred-payment basis in any calendar month shall be due and
 
12 payable on or before the last day of the following calendar
 
13 month.  Payment shall be made by a remittance payable to the
 
14 department.
 
15      245-I  Suspension or reduction of privilege to purchase on
 
16 deferred-payment basis.  The department may suspend, without
 
17 prior notice, the privilege to purchase stamps on the deferred-
 
18 payment basis, or may reduce the amount of deferred-payment
 
19 purchases allowed the licensee, if:
 
20      (1)  The licensee fails to promptly pay for stamps when
 
21           payment is due;
 
22      (2)  The bond or bonds required of the licensee are
 
23           canceled, become void, impaired, or unenforceable for
 
24           any reason; or
 

 
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 1      (3)  In the opinion of the department, collection of any
 
 2           amounts unpaid or due from the licensee under this
 
 3           chapter is jeopardized.
 
 4      245-J  Penalty for failure to make timely payment.  A
 
 5 licensee who fails to pay any amount owing for the purchase of
 
 6 stamps within the time required shall pay a penalty of ten per
 
 7 cent of the amount due in addition to the amount due plus
 
 8 interest at the rate specified in section 231-39, from the date
 
 9 on which the amount became due and payable until the date of
 
10 payment.
 
11      245-K  Monthly report on distributions of cigarettes and
 
12 tobacco products, and purchases of stamps.(a)  On or before the
 
13 last day of each month, every licensee shall file on forms
 
14 prescribed by the department:
 
15      (1)  A report of the licensee's distributions of cigarettes
 
16           and purchases of stamps during the preceding month; and
 
17      (2)  Any other information that the department may require
 
18           to carry out this part.
 
19      (b)  On or before the last day of each month, every licensee
 
20 shall file on forms prescribed by the department:
 
21      (1)  A report of the licensee's distributions of tobacco
 
22           products and the wholesale costs of tobacco products
 
23           during the preceding month; and
 

 
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 1      (2)  Any other information that the department may require
 
 2           to carry out this part.
 
 3      245-L  Tax refund or credit for cigarettes and tobacco
 
 4 products shipped for sale or use outside the State.(a)  The
 
 5 department shall adopt rules to provide a tobacco tax refund or
 
 6 credit to a licensee who has paid a tobacco tax on the
 
 7 distribution of cigarettes or tobacco products that are shipped
 
 8 to a point outside the State for subsequent sale or use outside
 
 9 the State.
 
10      (b)  This part shall not apply to cigarettes or tobacco
 
11 products that are distributed in this State to consumers and that
 
12 are subsequently taken outside the State.
 
13      245-M  Unused stamps; cancellation of stamps.  The
 
14 department shall adopt rules for a refund or credit to a licensee
 
15 in the amount of the denominated values of any unused stamps.
 
16 The department may provide by rule for the cancellation of
 
17 stamps.
 
18      245-N  Approval of department required for transfer of
 
19 stamps.  Unaffixed stamps shall not be sold, exchanged, or in any
 
20 manner transferred by a licensee to another person without prior
 
21 written approval of the department.  Any person who violates this
 
22 section shall be subject to a fine of not less than $500 and not
 
23 more than $1,000 for each violation.
 

 
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 1      245-O  Unlicensed possession or use of stamps.  A person
 
 2 who is not licensed under this chapter and who knowingly possess
 
 3 or uses a stamp shall be guilty of a class B felony.
 
 4      245-P  Counterfeiting stamps.  A person shall be guilty of
 
 5 a class B felony if the person:
 
 6      (1)  Intentionally or knowingly makes, alters, or reuses a
 
 7           stamp as defined in section 245-1; or
 
 8      (2)  Knowingly possesses or distributes a stamp that has
 
 9           been falsely made, altered, or reused.
 
10      245-Q  Sale or purchase of packages of cigarettes without
 
11 stamps; fines and penalties.(a) Beginning April 1, 2001, a
 
12 person shall be guilty of a class C felony if the person:
 
13      (1)  Is not a licensee, and knowingly possesses, keeps,
 
14           stores, acquires, or transports three thousand or more
 
15           cigarettes that do not have stamps affixed to the
 
16           cigarette packages as required by this part; or
 
17      (2)  Knowingly sells one thousand or more cigarettes that do
 
18           not have stamps affixed to the cigarette packages as
 
19           required by this part.
 
20      (b)  Beginning April 1, 2001, a person shall be guilty of a
 
21 misdemeanor if the person:
 
22      (1)  Is not a licensee, and knowingly possesses, keeps,
 
23           stores, acquires, or transports one thousand or more
 

 
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 1           cigarettes that do not have stamps affixed to the
 
 2           cigarette packages as required by this part; or
 
 3      (2)  Knowingly sells less than one thousand cigarettes that
 
 4           do not have stamps affixed to the cigarette packages as
 
 5           required by this part.
 
 6      (c)  In addition to any other authorized disposition, a
 
 7 corporation found in violation of:
 
 8      (1)  Subsection (a) is subject to a fine in an amount not to
 
 9           exceed $50,000; and
 
10      (2)  Subsection (b) is subject to a fine in an amount not to
 
11           exceed $25,000. 
 
12      245-R  Vending unstamped cigarettes.(a)  Beginning April
 
13 1, 2001, any person who knowingly places for sale in a cigarette
 
14 vending machine any cigarettes not contained in cigarette
 
15 packages to which are affixed stamps as required by this part,
 
16 shall be guilty of a class C felony.
 
17      (b)  In addition to any other authorized disposition, a
 
18 corporation found in violation of subsection (a) may be fined in
 
19 an amount not to exceed $50,000.
 
20      245-S Penalty exemptions.(a)  Sections 245-Q and 245-R
 
21 shall not apply to cigarettes that are exempt from taxes as
 
22 provided by section 245-3(b).
 

 
 
 
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 1      (b)  Sections 245-Q and 245-R shall not apply to the resale
 
 2 of tax-exempt cigarettes that were purchased from sales outlets
 
 3 operated under the regulations of the Armed Services of the
 
 4 United States.
 
 5      245-T  Forfeitures; disposition.(a)  Any cigarette,
 
 6 package of cigarettes, or carton of cigarettes unlawfully
 
 7 possessed, kept, stored, acquired, transported, or sold in
 
 8 violation of this part may be ordered forfeited pursuant to
 
 9 chapter 712A.
 
10      245-U  Enforcement; injunction; disposition of fines.(a)
 
11 Enforcement of this part shall be under the jurisdiction of the
 
12 attorney general.
 
13      (b)  Notwithstanding the existence of other remedies at law,
 
14 the attorney general may apply for a temporary or permanent
 
15 injunction restraining any person from violating or continuing to
 
16 violate this part.  The injunction shall be issued without bond.
 
17      (c)  Where the attorney general initiates and conducts an
 
18 investigation resulting in the imposition and collection of a
 
19 criminal fine pursuant to this part, one hundred per cent of the
 
20 fine shall be distributed to the attorney general; provided that
 
21 if the attorney general engages the prosecuting attorney for the
 
22 investigation or prosecution, or both, resulting in the
 
23 imposition and collection of a criminal fine under this part, the
 

 
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 1 fine shall be shared equally between the attorney general and the
 
 2 prosecuting attorney.
 
 3      245-V  Rules.  The department shall adopt rules pursuant to
 
 4 chapter 91 to implement this part.
 
 5               PART .  EXPORT AND FOREIGN CIGARETTES
 
 6      245-AA  Sale of export cigarettes prohibited.  It shall be
 
 7 unlawful for a person to sell or distribute in the State, or to
 
 8 acquire, hold, own, possess, or transport for sale or
 
 9 distribution in the State, or to import or cause to be imported
 
10 into the State for sale or distribution in the State any of the
 
11 following:
 
12      (1)  Cigarettes the package of which bears any statement,
 
13           label, stamp, sticker, or notice indicating that the
 
14           manufacturer did not intend the cigarettes to be sold,
 
15           distributed, or used in the United States, including
 
16           but not limited to labels stating "for export only,"
 
17           "U.S. tax-exempt," "for use outside U.S.," or similar
 
18           wording;
 
19      (2)  Cigarettes the package of which does not comply with
 
20           all requirements imposed by federal law regarding
 
21           warnings and other information on packages of
 
22           cigarettes manufactured, packaged, or imported for
 
23           sale, distribution, or use in the United States,
 

 
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 1           including but not limited to the specific warning
 
 2           labels specified in the Federal Cigarette Labeling and
 
 3           Advertising Act, 15 U.S.C. 1333;
 
 4      (3)  Cigarettes the package of which does not comply with
 
 5           all federal trademark and copyright laws;
 
 6      (4)  Cigarettes imported into the United States on or after
 
 7           January 1, 2000, in violation of 26 U.S.C. 5754 or any
 
 8           other federal law or regulation;
 
 9      (5)  Cigarettes that the person knows or has reason to know
 
10           the manufacturer did not intend to be sold,
 
11           distributed, or used in the United States; or
 
12      (6)  Cigarettes for which there has not been submitted to
 
13           the Secretary of the United States Department of Health
 
14           and Human Services the list of the ingredients added to
 
15           tobacco in the manufacture of the cigarettes required
 
16           by the Federal Cigarette Labeling and Advertising Act,
 
17           15 U.S.C. 1335a.
 
18      245-BB  Alteration of packaging prohibited.  It shall be
 
19 unlawful for any person to alter the package of any cigarettes,
 
20 prior to sale or distribution to remove, conceal, or obscure:
 
21      (1)  Any statement, label, stamp, sticker, or notice
 
22           indicating that the manufacturer did not intend the
 
23           cigarettes to be sold, distributed, or used in the
 

 
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 1           United States, including but not limited to labels
 
 2           stating "for export only," "U.S. tax-exempt," "for use
 
 3           outside U.S.," or similar wording; or      
 
 4      (2)  Any health warning that is not specified in or does not
 
 5           conform with the requirements of the Federal Cigarette
 
 6           Labeling and Advertising Act, 15 U.S.C. 1333.
 
 7      245-CC  Affixing of cigarette tax stamps to export
 
 8 cigarettes or altered packages prohibited.  It shall be unlawful
 
 9 for any person to affix any cigarette tax stamp required under
 
10 this chapter to the package of any cigarettes described in
 
11 section 245-AA or altered in violation of section 245-BB.
 
12      245-DD  Documentation of foreign cigarettes.  On the first
 
13 business day of each month, each licensee shall file the
 
14 following documents with the department and the attorney general
 
15 for all cigarettes imported into the United States to which the
 
16 licensee or licensee's agent has affixed a cigarette tax stamp in
 
17 the preceding month:
 
18      (1)  A copy of a permit issued pursuant to the Internal
 
19           Revenue Code, 26 U.S.C. 5713, to the person importing
 
20           the cigarettes into the United States, permitting such
 
21           person to import the cigarettes;
 
22      (2)  A copy of the United States Customs Service form
 
23           containing, with respect to the cigarettes, the
 

 
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 1           internal revenue tax information required by the United
 
 2           States Bureau of Alcohol, Tobacco and Firearms;
 
 3      (3)  A statement, signed by the licensee under penalty of
 
 4           perjury, that shall be treated as confidential by the
 
 5           department and shall be exempt from disclosure under
 
 6           chapter 92F, identifying:
 
 7           (A)  The brand and brand styles of all cigarettes;
 
 8           (B)  The quantity of each brand style of the
 
 9                cigarettes;
 
10           (C)  The supplier of the cigarettes; and
 
11           (D)  The person or persons, if any, to whom the
 
12                cigarettes have been conveyed for resale; and
 
13      (4)  A statement, signed under penalty of perjury by an
 
14           officer of the manufacturer or importer of the
 
15           cigarettes, certifying that the manufacturer or
 
16           importer has complied with:
 
17           (A)  The package health warning and ingredient
 
18                reporting requirements of the Federal Cigarette
 
19                Labeling and Advertising Act, 15 U.S.C. 1333 and
 
20                1335a, with respect to the cigarettes; and
 
21           (B)  Chapter 675, including a statement of whether the
 
22                manufacturer is or is not a participating
 
23                manufacturer within the meaning of section 675-3.
 

 
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 1      245-EE  Illegal sale of export or foreign cigarettes;
 
 2 revocation or suspension of license; civil penalties.  If any
 
 3 licensee violates this part or any rule adopted pursuant to this
 
 4 part, the director may:
 
 5      (1)  Revoke or suspend the licensee's license pursuant to
 
 6           procedures complying with chapter 91; and
 
 7      (2)  Impose a civil penalty in an amount not to exceed the
 
 8           greater of five times the retail value of the
 
 9           cigarettes involved, or $5,000.
 
10      245-FF  Unfair trade practices.  Any violation of this part
 
11 shall constitute an unfair method of competition and unfair or
 
12 deceptive act or practice in the conduct of any trade or commerce
 
13 under section 480-2 and shall be subject to a civil penalty as
 
14 provided in section 480-3.1.  Each package of cigarettes sold in
 
15 violation of this part shall constitute a separate violation. 
 
16      245-GG  Deceptive cigarette sales.  The importation or
 
17 reimportation of cigarettes into the United States for sale or
 
18 distribution under any trade name, trade dress, or trademark,
 
19 that is the same as, or is confusingly similar to, any trade
 
20 name, trade dress, or trademark, used for cigarettes manufactured
 
21 in the United States for sale or distribution in the United
 
22 States, shall be deemed to violate section 481A-3.
 

 
 
 
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 1      245-HH  Private right of action.  In addition to any other
 
 2 remedy provided by law, any person may bring an action for
 
 3 appropriate injunctive or other equitable relief for a violation
 
 4 of this part and for damages sustained by the person as a result
 
 5 of the violation.  The plaintiff shall be awarded the greater of:
 
 6      (1)  A sum not less than $1,000; or
 
 7      (2)  Threefold damages.
 
 8 The plaintiff shall also be awarded reasonable attorney's fees,
 
 9 together with the costs of suit.
 
10      245-II  Applicability.  This part shall not apply to:      
 
11      (1)  Cigarettes allowed to be imported or brought into the
 
12           United States for personal use free of federal tax or
 
13           duty or voluntarily abandoned to the U.S. Secretary of
 
14           Treasury at the time of entry; or
 
15      (2)  Cigarettes sold or intended to be sold as duty-free
 
16           merchandise by a duty-free sales enterprise in
 
17           accordance with the provisions of 19 U.S.C. 1555(b)
 
18           and any implementing regulations; provided that this
 
19           part shall apply to any such cigarettes that are
 
20           brought back into the customs territory for resale
 
21           within the customs territory.
 
22      245-JJ  Penalties cumulative.  The penalties provided in
 
23 this part are in addition to any other penalties provided by
 
24 law."
 

 
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 1      SECTION 2.  Chapter 245, Hawaii Revised Statutes, is amended
 
 2 by designating sections 245-1 to 245-15 as part I and inserting a
 
 3 title before section 245-1 to read as follows:
 
 4                   "PART I.  GENERAL PROVISIONS"
 
 5      SECTION 3.  Section 245-1, Hawaii Revised Statutes, is
 
 6 amended by adding twelve new definitions to be appropriately
 
 7 inserted and to read as follows:
 
 8      ""Attorney general" means the state attorney general or
 
 9 deputy attorneys general.
 
10      "Cigarette package" means a sealed package of cigarettes
 
11 originating from the manufacturer and bearing the health warning
 
12 required by law.
 
13      "Department" means the department of taxation.
 
14      "Falsely alter" means to change a stamp in any manner so
 
15 that the altered stamp falsely appears or purports to have a
 
16 value or validity that is not authorized or consented to by the
 
17 department.
 
18      "Falsely make" means to print, manufacture, or make what
 
19 purports to be a stamp without the authority or consent of the
 
20 department.
 
21      "Falsely reuse" means to affix a stamp that was previously
 
22 affixed to a package of cigarettes, to another package of
 
23 cigarettes.
 

 
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 1      "License" means a license granted under this chapter, that
 
 2 authorizes the holder to engage in the business of a wholesaler
 
 3 or dealer of cigarettes or tobacco products in the State.
 
 4      "Licensee" means the holder of a license granted under this
 
 5 chapter.
 
 6      "Prosecuting attorney" means the prosecuting attorney or the
 
 7 deputy prosecuting attorneys of each of the respective counties.
 
 8      "Sale" includes every act of selling.
 
 9      "Sell" means to:
 
10      (1)  Solicit and receive an order for;
 
11      (2)  Have, keep, offer, or expose for sale;
 
12      (3)  Deliver for value or deliver in any other way than
 
13           purely gratuitously;
 
14      (4)  Peddle;
 
15      (5)  Keep with intent to sell; and
 
16      (6)  Traffic in.
 
17      "Stamp" means a stamp printed, manufactured, or made by
 
18 authority of the department, as provided in this chapter, that is
 
19 issued, sold, or circulated by the department, and by the use of
 
20 which the tax levied under this chapter is paid."
 
21      SECTION 4.  Section 245-3, Hawaii Revised Statutes, is
 
22 amended by amending the title and subsection (a) to read as
 
23 follows:
 

 
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 1      "245-3  Taxes[; limitations].(a)  Every wholesaler, or
 
 2 dealer, in addition to any other taxes provided by law, shall pay
 
 3 for the privilege of conducting business and other activities in
 
 4 the State[, an]:
 
 5      (1)  [Excise] An excise tax equal to[:
 
 6           (A)  4.00 cents for each cigarette sold, used, or
 
 7                possessed by the wholesaler or dealer, after
 
 8                August 31, 1997; and
 
 9           (B)] 5.00 cents for each cigarette sold, used, or
 
10           possessed by a wholesaler or dealer after June 30,
 
11           1998, whether or not sold at wholesale, or if not sold
 
12           then at the same rate upon the use by the wholesaler or
 
13           dealer; and
 
14      (2)  [Excise] An excise tax equal to forty per cent of the
 
15           wholesale price of each article or item of tobacco
 
16           products sold by the wholesaler or dealer, whether or
 
17           not sold at wholesale, or if not sold then at the same
 
18           rate upon the use by the wholesaler or dealer.
 
19 Where the tax imposed has been paid on cigarettes or tobacco
 
20 products which thereafter become the subject of a casualty loss
 
21 deduction allowable under chapter 235, the tax paid shall be
 
22 refunded or credited to the account of the wholesaler, or dealer.
 

 
 
 
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 1 [In applying the tax, the tax shall be applied against the latest
 
 2 of the activities of selling, using, or possessing.  The tax
 
 3 shall be imposed at the time of the last of the following
 
 4 activities to occur:  the sale; the use; or the possession of
 
 5 cigarettes or tobacco products.] The tax shall be applied to
 
 6 cigarettes through the use of stamps."
 
 7      SECTION 5.  Section 245-5, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "245-5  Returns.  Every [licensee,] wholesaler or dealer,
 
10 on or before the last day of each month, shall file with the
 
11 department [of taxation] a return showing the cigarettes and
 
12 tobacco products sold, possessed, or used by the [licensee,]
 
13 wholesaler or dealer during the preceding calendar month and of
 
14 the taxes chargeable against the taxpayer in accordance with this
 
15 chapter.  The form of the return shall be prescribed by the
 
16 department and shall [contain such information including a]
 
17 include:
 
18      (1)  A separate statement of the number and wholesale price
 
19           of cigarettes[,];
 
20      (2)  The amount of stamps purchased and used; [and the]
 
21      (3)  The wholesale price of tobacco products, sold,
 
22           possessed, or used[, as it]; and
 

 
 
 
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 1      (4)  Any other information that the department may deem
 
 2           necessary, for the proper administration of this
 
 3           chapter."
 
 4      SECTION 6.  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,] wholesaler or dealer
 
 9 shall pay to the department [of taxation] the taxes imposed by
 
10 this chapter, required to be shown by the return[.], including
 
11 the unpaid 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 7.  Section 245-7, Hawaii Revised Statutes, is
 
15 amended by amending subsections (b) and (c) to read as follows:
 
16      "(b)  If it should appear upon such examination or
 
17 thereafter within five years after the filing of the return, or
 
18 at any time if no return has been filed, as a result of the
 
19 examination or as a result of any examination of the records of
 
20 the [licensee] wholesaler or dealer or of any other inquiry or
 
21 investigation, that the correct amount of the taxes is greater
 
22 than that shown on the return, or that any taxes imposed by this
 
23 chapter have not been paid, an assessment of such taxes may be
 

 
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 1 made, in the manner provided in section 235-108(b).  The amount
 
 2 of the taxes for the period covered by the assessment shall not
 
 3 be reduced below the amount determined by an assessment so made,
 
 4 except upon appeal or in a proceeding brought pursuant to section
 
 5 40-35.
 
 6      (c)  If the [licensee] wholesaler or dealer has paid or
 
 7 returned with respect to any month more than the amount
 
 8 determined to be the correct amount of taxes for the month, the
 
 9 amount of the taxes so returned and any assessment of taxes made
 
10 pursuant to the return may be reduced, and any overpayment of
 
11 taxes may be credited upon the taxes imposed by this chapter, or
 
12 at the election of the [licensee,] wholesaler or dealer, the
 
13 [licensee] wholesaler or dealer not being delinquent in the
 
14 payment of any taxes owing to the State, may be refunded in the
 
15 manner provided in section 231-23(c); provided that no reduction
 
16 of taxes may be made when forbidden by subsection (b) or more
 
17 than five years after the filing of the return."
 
18      SECTION 8.  Section 245-8, Hawaii Revised Statutes, is
 
19 amended by amending subsection (a) to read as follows: 
 
20      "(a)  [Every] Each wholesaler [and] or dealer shall keep a
 
21 record of [every]:
 
22      (1)  Every sale or use of cigarettes and tobacco products by
 
23           the wholesaler or dealer[, the];
 

 
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 1      (2)  The number and wholesale price of cigarettes[, and
 
 2           the];
 
 3      (3)  The wholesale price of tobacco products, sold,
 
 4           possessed, or used[, and of the];
 
 5      (4)  The taxes payable [thereon,] on tobacco products sold,
 
 6           possessed, or used, if any[,]; and
 
 7      (5)  The amounts of stamps purchased and used,
 
 8 in such form as the department [of taxation] may prescribe.  The
 
 9 records shall be offered for inspection and examination at any
 
10 time upon demand by the department or the attorney general, and
 
11 shall be preserved for a period of five years, except that the
 
12 department and the attorney general, in writing, shall both
 
13 consent to their destruction within the five-year period, or
 
14 either the department or the attorney general may require that
 
15 such records be kept longer.  The department, by rule, may
 
16 require the [licensee,] wholesaler or dealer to keep such other
 
17 records as it may deem necessary for the proper enforcement of
 
18 this chapter."
 
19      SECTION 9.  Section 245-9, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "245-9  Inspection.  The department [of taxation] and the
 
22 attorney general may examine all records, including tax returns
 
23 and reports under section 245-K, required to be kept or filed
 

 
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 1 under this chapter, and books, papers, and records of any person
 
 2 engaged in the business of wholesaling or dealing cigarettes and
 
 3 tobacco products, to verify the accuracy of the payment of the
 
 4 taxes imposed by this chapter.  Every person in possession of any
 
 5 books, papers, and records, and the person's agents and
 
 6 employees, are directed and required to give to the department
 
 7 and the attorney general the means, facilities, and opportunities
 
 8 for the examinations."
 
 9      SECTION 10.  Section 245-15, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "245-15  Disposition of revenues.  All moneys collected
 
12 pursuant to this chapter shall be paid into the state treasury as
 
13 state realizations to be kept and accounted for as provided by
 
14 law[.], except for the amounts designated by section 245-U for
 
15 distribution to the attorney general."
 
16      SECTION 11.  Section 712-1257, Hawaii Revised Statutes, is
 
17 amended by amending subsection (4) to read as follows:
 
18      "(4)  Any person who violates subsection (1) shall be [fined
 
19 not more than $2,500 for the first offense.  An subsequent
 
20 offense shall subject the person to a fine of not less than $100
 
21 and not more than $5,000.] guilty of a class C felony."
 
22      SECTION 12.  Section 712A-5, Hawaii Revised Statutes, is
 
23 amended by amending subsection (1) to read as follows:
 

 
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 1      "(1)  The following is subject to forfeiture:
 
 2      (a)  Property described in a statute authorizing forfeiture;
 
 3      (b)  Property used or intended for use in the commission of,
 
 4           attempt to commit, or conspiracy to commit a covered
 
 5           offense, or which facilitated or assisted such
 
 6           activity;
 
 7      (c)  Any firearm which is subject to forfeiture under any
 
 8           other subsection of this section or which is carried
 
 9           during, visible, or used in furtherance of the
 
10           commission, attempt to commit, or conspiracy to commit
 
11           a covered offense, or any firearm found in proximity to
 
12           contraband or to instrumentalities of an offense;
 
13      (d)  Contraband[, which] or untaxed cigarettes in violation
 
14           of chapter 245, shall be seized and summarily forfeited
 
15           to the State without regard to the procedures set forth
 
16           in this chapter;
 
17      (e)  Any proceeds or other property acquired, maintained, or
 
18           produced by means of or as a result of the commission
 
19           of the covered offense;
 
20      (f)  Any property derived from any proceeds which were
 
21           obtained directly or indirectly from the commission of
 
22           a covered offense; 
 

 
 
 
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 1      (g)  Any interest in, security of, claim against, or
 
 2           property or contractual right of any kind affording a
 
 3           source of influence over any enterprise which has been
 
 4           established, participated in, operated, controlled, or
 
 5           conducted in order to commit a covered offense;
 
 6      (h)  All books, records, bank statements, accounting
 
 7           records, microfilms, tapes, computer data, or other
 
 8           data which are used, intended for use, or which
 
 9           facilitated or assisted in the commission of a covered
 
10           offense, or which document the use of the proceeds of a
 
11           covered offense."
 
12      SECTION 13.  Section 712A-16, Hawaii Revised Statutes, is
 
13 amended by amending subsection (1) to read as follows:
 
14      "(1)  All property forfeited to the State under this chapter
 
15 shall be transferred to the attorney general who:
 
16      (a)  May transfer property, other than currency, which shall
 
17           be distributed in accordance with subsection (2) to any
 
18           local or state government entity, municipality, or law
 
19           enforcement agency within the State;
 
20      (b)  May sell forfeited property to the public by public
 
21           sale; provided that for leasehold real property:
 
22           (i)  The attorney general shall first offer the holder
 
23                of the immediate reversionary interest the right
 

 
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 1                to acquire the leasehold interest and any
 
 2                improvements built or paid for by the lessee for
 
 3                the then fair market value of the leasehold
 
 4                interest and improvements.  The holder of the
 
 5                immediate reversionary interest shall have thirty
 
 6                days after receiving written notice within which
 
 7                to accept or reject the offer in writing; provided
 
 8                that the offer shall be deemed to be rejected if
 
 9                the holder of the immediate reversionary interest
 
10                has not communicated acceptance to the attorney
 
11                general within the thirty-day period.  The holder
 
12                of the immediate reversionary interest shall have
 
13                thirty days after acceptance to tender to the
 
14                attorney general the purchase price for the
 
15                leasehold interest and any improvements, upon
 
16                which tender the leasehold interest and
 
17                improvements shall be conveyed to the holder of
 
18                the immediate reversionary interest.
 
19          (ii)  If the holder of the immediate reversionary
 
20                interest fails to exercise the right of first
 
21                refusal provided in subparagraph (i), the attorney
 
22                general may proceed to sell the leasehold interest
 
23                and any improvements by public sale.
 

 
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 1         (iii)  Any dispute between the attorney general and the
 
 2                holder of the immediate reversionary interest as
 
 3                to the fair market value of the leasehold interest
 
 4                and improvements shall be settled by arbitration
 
 5                pursuant to chapter 658;
 
 6      (c)  May sell or destroy all raw materials, products, and
 
 7           equipment of any kind used or intended for use in
 
 8           manufacturing, compounding, or processing a controlled
 
 9           substance[;] or any untaxed cigarettes in violation of
 
10           chapter 245;
 
11      (d)  May compromise and pay valid claims against property
 
12           forfeited pursuant to this chapter; or
 
13      (e)  May make any other disposition of forfeited property
 
14           authorized by law."
 
15      SECTION 14.  The director of taxation shall submit findings
 
16 and recommendations to the legislature no later than twenty days
 
17 prior to the regular session of 2006 as to the effectiveness of
 
18 this Act in reducing the loss of cigarette tax revenue to the
 
19 State from illegal sales of untaxed cigarettes.  The director of
 
20 taxation may submit an interim report to the legislature on any
 
21 findings relating to the effectiveness of this Act before 2006.
 
22      SECTION 15.  The attorney general shall report to the
 
23 legislature no later than twenty days before the convening of
 

 
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 1 each of the regular sessions of 2002 and 2003 on its activities
 
 2 relating to this Act, including expenses, fines, and penalties
 
 3 collected, and forfeitures.
 
 4      SECTION 16.  There is appropriated out of the general
 
 5 revenues of the State of Hawaii the sum of $           or so much
 
 6 thereof as may be necessary for fiscal year 2000-2001 for start-
 
 7 up costs for implementing the cigarette stamp tax system,
 
 8 including a one-year supply of stamps and stamp cylinders. 
 
 9      The sum appropriated shall be expended by the department of
 
10 taxation for the purposes of this Act.
 
11      SECTION 17.  There is appropriated out of the general
 
12 revenues of the State of Hawaii the sum of $           or so much
 
13 thereof as may be necessary for fiscal year 2000-2001 for the
 
14 attorney general to effectuate the provisions of this Act,
 
15 including the hiring of necessary staff.  
 
16      The sum appropriated shall be expended by the attorney
 
17 general for the purposes of this Act.
 
18      SECTION 18.  This Act does not affect the rights and duties
 
19 that matured, penalties that were incurred, and proceedings that
 
20 were begun, before its effective date.
 
21      SECTION 19.  In codifying the new sections added to chapter
 
22 245, Hawaii Revised Statutes, by section 1 of this Act, the
 
23 revisor of statutes shall substitute appropriate section numbers
 
24 for the letters used in designating the new sections in this Act.
 

 
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 1      SECTION 20.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 21.  This Act shall take effect on July 1, 2050;
 
 4 provided that:
 
 5      (1)  Sections 16 and 17 shall take effect on July 1, 2000;
 
 6           and
 
 7      (2)  On June 30, 2006, this Act shall be repealed and
 
 8           sections 245-1, 245-3, 245-5, 245- 6, 245-8, 245-9,
 
 9           245-15, 712-1257, 712A-5, and 712A-16, Hawaii Revised
 
10           Statutes, shall be reenacted in the form in which they
 
11           read on the day before the approval of this Act.