1.1 	A bill for an act
1.2 	relating to taxation; increasing the cigarette tax;
1.3 	modifying the dedication of cigarette tax revenues;
1.4 	imposing a floor stocks tax; amending Minnesota
1.5 	Statutes 2004, sections 297F.05, subdivision 1;
1.6 	297F.10, subdivision 1.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2004, section 297F.05,
1.9 	subdivision 1, is amended to read:
1.10 		Subdivision 1.Rates; cigarettes.  A tax is imposed upon
1.11 	the sale of cigarettes in this state, upon having cigarettes in
1.12 	possession in this state with intent to sell, upon any person
1.13 	engaged in business as a distributor, and upon the use or
1.14 	storage by consumers, at the following rates:
1.15 	(1) on cigarettes weighing not more than three pounds per
1.16 	thousand, 24 74 mills on each such cigarette; and
1.17 	(2) on cigarettes weighing more than three pounds per
1.18 	thousand, 48 148 mills on each such cigarette.
1.19 	
EFFECTIVE DATE. This section is effective July 1, 2005.

1.20 	Sec. 2. Minnesota Statutes 2004, section 297F.10,
1.21 	subdivision 1, is amended to read:
1.22 		Subdivision 1.Tax and use tax on cigarettes.  Revenue
1.23 	received from cigarette taxes, as well as related penalties,
1.24 	interest, license fees, and miscellaneous sources of revenue
1.25 	shall be deposited by the commissioner in the state treasury and
1.26 	credited as follows:
2.1 	(1) the revenue produced by 3.25 3.97 mills of the tax on
2.2 	cigarettes weighing not more than three pounds a thousand and
2.3 	6.5 7.94 mills of the tax on cigarettes weighing more than three
2.4 	pounds a thousand must be credited to the Academic Health Center
2.5 	special revenue fund hereby created and is annually appropriated
2.6 	to the Board of Regents at the University of Minnesota for
2.7 	Academic Health Center funding at the University of Minnesota;
2.8 	and
2.9 	(2) the revenue produced by 1.25 1.53 mills of the tax on
2.10 	cigarettes weighing not more than three pounds a thousand and
2.11 	2.5 3.06 mills of the tax on cigarettes weighing more than three
2.12 	pounds a thousand must be credited to the medical education and
2.13 	research costs account hereby created in the special revenue
2.14 	fund and is annually appropriated to the commissioner of health
2.15 	for distribution under section 62J.692, subdivision 4; and
2.16 	(3) the balance of the revenues derived from taxes,
2.17 	penalties, and interest (under this chapter) and from license
2.18 	fees and miscellaneous sources of revenue shall be credited to
2.19 	the general fund.
2.20 	
EFFECTIVE DATE. This section is effective for revenues
2.21 	received for taxes subject to the rate increase in section 1, as
2.22 	determined by the commissioner of revenue.

2.23 	Sec. 3. FLOOR STOCKS TAX.
 2.24 		Subdivision 1.Cigarettes. (a) A floor stocks tax is
2.25 	imposed on every person engaged in business in this state as a
2.26 	distributor, retailer, subjobber, vendor, manufacturer, or
2.27 	manufacturer's representative of cigarettes, on the stamped
2.28 	cigarettes and unaffixed stamps in the person's possession or
2.29 	under the person's control at 12:01 a.m. on July 1, 2005.  The
2.30 	tax is imposed at the following rates:
2.31 	(1) on cigarettes weighing not more than three pounds per
2.32 	thousand, 50 mills on each cigarette; and 
2.33 	(2) on cigarettes weighing more than three pounds per
2.34 	thousand, 100 mills on each cigarette.
2.35 	(b) Each distributor, by July 8, 2005, shall file a report
2.36 	with the commissioner of revenue, in the form the commissioner
3.1 	prescribes, showing the stamped cigarettes and unaffixed stamps
3.2 	on hand at 12:01 a.m. on July 1, 2005, and the amount of tax due
3.3 	on the cigarettes and unaffixed stamps.  The tax imposed by this
3.4 	section is due and payable by August 1, 2005, and after that
3.5 	date bears interest as provided in Minnesota Statutes, section
3.6 	270.75.  Each retailer, subjobber, vendor, manufacturer, or
3.7 	manufacturer's representative shall file a return with the
3.8 	commissioner, in the form the commissioner prescribes, showing
3.9 	the cigarettes on hand at 12:01 a.m. on July 1, 2005, and pay
3.10 	the tax due on them by August 1, 2005.  Tax not paid by the due
3.11 	date bears interest as provided in Minnesota Statutes, section
3.12 	270.75.
3.13 		Subd. 2.Audit and enforcement. The tax imposed by this
3.14 	section is subject to the audit, assessment, and collection
3.15 	provisions applicable to the taxes imposed under Minnesota
3.16 	Statutes, chapter 297F.  The commissioner shall deposit the
3.17 	revenues from this tax in the general fund.
3.18 	
EFFECTIVE DATE. This section is effective July 1, 2005.