1.1 	A bill for an act
1.2 	relating to health; imposing a cigarette cost
1.3 	mitigation fee; providing a funds transfer; amending
1.4 	Minnesota Statutes 2004, section 325D.32, subdivision
1.5 	9; proposing coding for new law in Minnesota Statutes,
1.6 	chapter 62J.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. [62J.27] CIGARETTE COST MITIGATION FEE.
1.9 		Subdivision 1.Imposition of fee. A cigarette cost
1.10 	mitigation fee is imposed on and collected from cigarette
1.11 	distributors to recover for the state health costs related to or
1.12 	caused by smoking and to reduce smoking, particularly by youths.
1.13 		Subd. 2.Definitions. The definitions under section
1.14 	297F.01 apply to this section.
1.15 		Subd. 3.Computation of fee. (a) The legislature shall
1.16 	biennially set the amount of the fee by law based on an estimate
1.17 	of the health costs to the state of cigarette smoking.  The fee
1.18 	for fiscal year 2006 and for each succeeding fiscal year is
1.19 	$225,000,000 until modified by law.
1.20 	(b) For each fiscal year, the commissioner shall determine
1.21 	each cigarette distributor's fee and notify the distributor by
1.22 	the first day of May preceding the beginning of the fiscal
1.23 	year.  A distributor's fee is determined by multiplying the
1.24 	total fee under paragraph (a) by a fraction, the numerator of
1.25 	which is the number of tax stamps purchased by the distributor
1.26 	under chapter 297F in the calendar year ending during the
2.1 	previous fiscal year and the denominator of which is the total
2.2 	number of tax stamps purchased under chapter 297F in that period
2.3 	by all distributors.
2.4 		Subd. 4.Successors in interest; new entrants. (a) A
2.5 	"distributor" includes any individual or entity that is the
2.6 	successor in interest to a distributor, including any entity
2.7 	that has substantially acquired the business assets of a
2.8 	distributor.  The successor in interest is liable for the fee
2.9 	under this section.  The commissioner shall calculate and impose
2.10 	the fee on a successor in interest on a basis that includes the
2.11 	purchases of tax stamps by its predecessor, as well as any
2.12 	purchases made by the successor entity or person itself, during
2.13 	the relevant period.
2.14 	(b) If a distributor did not purchase tax stamps for at
2.15 	least 500,000 cigarettes in each month of the calendar year
2.16 	ending during the previous fiscal year, the fee under this
2.17 	section must be applied at the rate under subdivision 6 for the
2.18 	fiscal year.  The commissioner shall notify the distributor that
2.19 	its fee will be calculated and imposed under this paragraph by
2.20 	the first day of May preceding the fiscal year and the
2.21 	distributor shall pay the fee with each of its monthly tax
2.22 	returns filed under section 297F.09 for the fiscal year.
2.23 		Subd. 5.Payment. A distributor must pay the fee in
2.24 	equal monthly installments in the same time and manner as
2.25 	provided for payment of tax under chapter 297F.  The
2.26 	commissioner shall bill distributors for the fee.  This may be
2.27 	done at the time the commissioner notifies the distributor of
2.28 	its annual liability for the fee or at another time or in a
2.29 	manner the commissioner determines to be adequate and
2.30 	appropriate.
2.31 		Subd. 6.Fee on use of unstamped cigarettes. (a) The
2.32 	commissioner shall estimate the average rate of the fee under
2.33 	this section on a per cigarette basis for each fiscal year to
2.34 	which the fee applies.  The commissioner shall publish this rate
2.35 	in the State Register by June 15 preceding the beginning of the
2.36 	fiscal year.
3.1 	(b) Any person, other than a distributor, that purchases or
3.2 	possesses cigarettes that have not been stamped or taxed under
3.3 	chapter 297F is liable for the fee under this section on the
3.4 	possession or use of those cigarettes at the rate published in
3.5 	the State Register for the fiscal year.
3.6 		Subd. 7.Administration. The audit, assessment,
3.7 	interest, appeal, refund, and collection provisions applicable
3.8 	to the taxes imposed under chapter 297F apply to the fee imposed
3.9 	under this section.
3.10 		Subd. 8.License revocation. (a) The commissioner may
3.11 	revoke or suspend the license of a distributor for failure to
3.12 	pay the fee or otherwise comply with the requirements under this
3.13 	section.  The provisions and procedures under section 297F.04
3.14 	apply to a suspension or revocation under this subdivision.
3.15 	(b) The commissioner may revoke a retailer's sales or use
3.16 	tax permit under section 297F.185 if:
3.17 	(1) the retailer, directly or indirectly, purchases for
3.18 	resale 20,000 cigarettes or more from a distributor that has not
3.19 	paid the fee under this section; and 
3.20 	(2) the commissioner has notified the person that the
3.21 	distributor has not paid the fee before the purchase was made or
3.22 	the commissioner has posted notice that the distributor is in
3.23 	violation of the fee law on the department's Web site at least
3.24 	15 days before the sale was made.
3.25 		Subd. 9.Deposit of revenues. The commissioner shall
3.26 	deposit the revenues from the fee under this section in the
3.27 	health care access fund.
3.28 		Subd. 10.Exemption; administrative procedure act. The
3.29 	commissioner's calculations of the fee amounts under this
3.30 	section are not subject to the provisions of the Administrative
3.31 	Procedure Act, chapter 14.
3.32 		Subd. 11.General fund adjustment. (a) The commissioner
3.33 	shall add to the fee set under subdivision 3 for the year the
3.34 	amount that the commissioner estimates is necessary to prevent a
3.35 	reduction in general fund revenues from the taxes imposed under
3.36 	section 297F.05 that will result from imposition of the fee
4.1 	under this section.
4.2 	(b) The commissioner of finance shall transfer from the
4.3 	health care access fund to the general fund the amount of the
4.4 	increased fee under paragraph (a).  This revenue is allocated to
4.5 	accounts under section 297F.10 in the amounts that the
4.6 	commissioner estimates were reduced as a result of reduced
4.7 	cigarette consumption because the fee was imposed.
4.8 	
EFFECTIVE DATE. This section is effective July 1, 2005.
4.9 	The fee for fiscal year 2006 applies at five-sixths the amount
4.10 	under section 62J.27, subdivision 3, and payments are due in ten
4.11 	equal monthly installments beginning in September 2005.  The
4.12 	commissioner of revenue shall notify distributors of their
4.13 	liability for the fee and monthly payment schedule by no later
4.14 	than August 15, 2005.

4.15 	Sec. 2. Minnesota Statutes 2004, section 325D.32,
4.16 	subdivision 9, is amended to read:
4.17 		Subd. 9.Basic cost of cigarettes.  "Basic cost of
4.18 	cigarettes" means the gross invoice cost of cigarettes to the
4.19 	wholesaler or retailer plus (1) the full face value of any
4.20 	stamps which may be required by any cigarette tax act of this
4.21 	state, unless included by the manufacturer in the list price and
4.22 	(2) the greater of the amount of the published fee under section
4.23 	62J.27, subdivision 6, or the actual per cigarette fee paid by
4.24 	the wholesaler for the fiscal year.
4.25 	
EFFECTIVE DATE. This section is effective September 1,
4.26 	2005.