relating to taxation; tobacco; increasing the excise tax; repealing the health
impact fee; appropriating money;amending Minnesota Statutes 2012, sections
270C.56, subdivision 1; 297F.01, subdivisions 3, 19, by adding a subdivision;
297F.05, subdivisions 1, 3, 4, by adding a subdivision; 297F.24, subdivision 1;
297F.25, subdivision 1; 325D.32, subdivision 2; repealing Minnesota Statutes
2012, sections 16A.725; 256.9658.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 2012, section 270C.56, subdivision 1, is amended to read:
Subdivision 1. Liability imposed.
A person who, either singly or jointly with
others, has the control of, supervision of, or responsibility for filing returns or reports,
paying taxes, or collecting or withholding and remitting taxes and who fails to do so, or a
person who is liable under any other law, is liable for the payment of taxes arising under
chapters 295, 296A, 297A, 297F, and 297G, or sections
and the applicable penalties and interest on those taxes.
1.16EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 2. Minnesota Statutes 2012, section 297F.01, subdivision 3, is amended to read:
Subd. 3. Cigarette.
"Cigarette" means any roll for smoking made wholly or in part
, that weighs 4.5 pounds or less per thousand:
the wrapper or cover of which is made of paper or another substance or material
except tobacco; or
1.22(2) wrapped in any substance containing tobacco, however labeled or named, which,
1.23because of its appearance, size, the type of tobacco used in the filler, or its packaging,
1.24pricing, marketing, or labeling, is likely to be offered to or purchased by consumers as
2.1a cigarette, as defined in clause (1), unless it is wrapped in whole tobacco leaf and does
2.2not have a cellulose acetate or other cigarette-like filter
2.3EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 3. Minnesota Statutes 2012, section 297F.01, is amended by adding a subdivision
2.6 Subd. 10b. Moist Snuff. "Moist snuff" means any finely cut, ground, or powdered
2.7smokeless tobacco that is intended to be placed or dipped in the mouth.
Sec. 4. Minnesota Statutes 2012, section 297F.01, subdivision 19, is amended to read:
Subd. 19. Tobacco products.
"Tobacco products" means any product containing,
made, or derived from tobacco that is intended for human consumption, whether chewed,
smoked, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means,
or any component, part, or accessory of a tobacco product, including, but not limited
cheroots; stogies; periques; granulated, plug cut, crimp cut,
ready rubbed, and other smoking tobacco; snuff; snuff flour; cavendish; plug and twist
tobacco; fine-cut and other chewing tobacco; shorts; refuse scraps, clippings, cuttings
and sweepings of tobacco, and other kinds and forms of tobacco; but does not include
cigarettes as defined in this section. Tobacco products excludes any tobacco product
that has been approved by the United States Food and Drug Administration for sale as
a tobacco cessation product, as a tobacco dependence product, or for other medical
purposes, and is being marketed and sold solely for such an approved purpose.
2.21EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 5. Minnesota Statutes 2012, section 297F.05, subdivision 1, is amended to read:
Subdivision 1. Rates; cigarettes.
A tax is imposed upon the sale of cigarettes in
this state, upon having cigarettes in possession in this state with intent to sell, upon any
person engaged in business as a distributor, and upon the use or storage by consumers, at
the following rates:
(1) on cigarettes weighing not more than three pounds per thousand,
on each such cigarette; and
(2) on cigarettes weighing more than three pounds per thousand,
each such cigarette.
2.31EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 6. Minnesota Statutes 2012, section 297F.05, is amended by adding a subdivision
3.3 Subd. 1a. Annual indexing. Each year the commissioner shall adjust the dollar
3.4amounts under subdivision 1 by the annual percentage change that the commissioner
3.5determines applies to the tax rate under the adjustment procedure in section 297F.25,
3.6subdivision 1, for the following calendar year. The commissioner shall publish the
3.7resulting rate by November 1 and the rate applies to sales made on or after January 1 of
3.8the following year.
3.9EFFECTIVE DATE.This section is effective July 1, 2014.
Sec. 7. Minnesota Statutes 2012, section 297F.05, subdivision 3, is amended to read:
Subd. 3. Rates; tobacco products. (a)
A tax is imposed upon all tobacco products
in this state and upon any person engaged in business as a distributor, at the rate of
percent of the wholesale sales price of the tobacco products. The tax is imposed at
the time the distributor:
(1) brings, or causes to be brought, into this state from outside the state tobacco
products for sale;
(2) makes, manufactures, or fabricates tobacco products in this state for sale in
this state; or
(3) ships or transports tobacco products to retailers in this state, to be sold by those
3.21(b) Notwithstanding paragraph (a), a minimum tax equal to the rate imposed on a
3.22pack of 20 cigarettes weighing not more than three pounds per thousand, as established
3.23under section 297F.05, subdivision 1, is imposed on:
3.24(1) each ounce of loose, granulated, plug cut, crimp cut, or other tobacco intended
3.25for smoking; and
3.26(2) each container of moist snuff.
3.27For purposes of this subdivision, a "container" means a container marketed or packaged
3.28by the manufacturer, distributor, or retailer for separate sale to a retail purchaser.
3.29EFFECTIVE DATE.This section is effective July 1, 2013, except the minimum
3.30tax under paragraph (b) is effective January 1, 2014.
Sec. 8. Minnesota Statutes 2012, section 297F.05, subdivision 4, is amended to read:
Subd. 4. Use tax; tobacco products.
A tax is imposed upon the use or storage by
consumers of tobacco products in this state, and upon such consumers, at the rate of
percent of the cost to the consumer of the tobacco products or the minimum tax under
4.2subdivision 3, paragraph (b), whichever is greater
4.3EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 9. Minnesota Statutes 2012, section 297F.24, subdivision 1, is amended to read:
Subdivision 1. Fee imposed.
(a) A fee is imposed upon the sale of nonsettlement
cigarettes in this state, upon having nonsettlement cigarettes in possession in this state
with intent to sell, upon any person engaged in business as a distributor, and upon the use
or storage by consumers of nonsettlement cigarettes. The fee equals a rate of
cents per cigarette.
(b) The purpose of this fee is to:
(1) ensure that manufacturers of nonsettlement cigarettes pay fees to the state that
are comparable to costs attributable to the use of the cigarettes;
(2) prevent manufacturers of nonsettlement cigarettes from undermining the state's
policy of discouraging underage smoking by offering nonsettlement cigarettes at prices
substantially below the cigarettes of other manufacturers; and
(3) fund such other purposes as the legislature determines appropriate.
Sec. 10. Minnesota Statutes 2012, section 297F.25, subdivision 1, is amended to read:
Subdivision 1. Imposition.
(a) A tax is imposed on distributors on the sale of
cigarettes by a cigarette distributor to a retailer or cigarette subjobber for resale in this
state. The tax is equal to
6.5 percent of the combined tax rate under section 297A.62,
the weighted average retail price and must be expressed in cents per pack
rounded to the nearest one-tenth of a cent. The weighted average retail price must be
determined annually, with new rates published by November 1, and effective for sales
on or after January 1 of the following year. The weighted average retail price must be
established by surveying cigarette retailers statewide in a manner and time determined by
the commissioner. The commissioner shall make an inflation adjustment in accordance
with the Consumer Price Index for all urban consumers inflation indicator as published in
the most recent state budget forecast. The commissioner shall use the inflation factor for
the calendar year in which the new tax rate takes effect. If the survey indicates that the
average retail price of cigarettes has not increased relative to the average retail price in
the previous year's survey, then the commissioner shall not make an inflation adjustment.
The determination of the commissioner pursuant to this subdivision is not a "rule" and is
not subject to the Administrative Procedure Act contained in chapter 14. For packs of
cigarettes with other than 20 cigarettes, the tax must be adjusted proportionally.
(b) Notwithstanding paragraph (a), and in lieu of a survey of cigarette retailers, the
tax calculation of the weighted average retail price for the sales of cigarettes from August
1, 2011, through December 31, 2011, shall be calculated by: (1) increasing the average
retail price per pack of 20 cigarettes from the most recent survey by the percentage change
in a weighted average of the presumed legal prices for cigarettes during the year after
completion of that survey, as reported and published by the Department of Commerce
; (2) subtracting the sales tax included in the retail price; and (3)
adjusting for expected inflation. The rate must be published by May 1 and is effective for
sales after July 31. If the weighted average of the presumed legal prices indicates that the
average retail price of cigarettes has not increased relative to the average retail price in the
most recent survey, then no inflation adjustment must be made. For packs of cigarettes
with other than 20 cigarettes, the tax must be adjusted proportionally.
5.13EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 11. Minnesota Statutes 2012, section 325D.32, subdivision 2, is amended to read:
Subd. 2. Cigarettes.
"Cigarettes" means and includes any roll for smoking, made
wholly or in part of tobacco, irrespective of size and shape and whether or not such
tobacco is flavored, adulterated or mixed with any other ingredient, the wrapper or cover
of which is made of paper or any other substance or material except whole
5.19and includes any cigarette as defined in section 297F.01, subdivision 3
5.20EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 12. FLOOR STOCKS TAX.
5.22 Subdivision 1. Cigarettes. (a) A floor stocks tax is imposed on every person
5.23engaged in the business in this state as a distributor, retailer, subjobber, vendor,
5.24manufacturer, or manufacturer's representative of cigarettes, on the stamped cigarettes and
5.25unaffixed stamps in the person's possession or under the person's control at 12:01 a.m. on
5.26July 1, 2013. The tax is imposed at the rate of 80 mills on each cigarette.
5.27(b) Each distributor, on or before July 11, 2013, shall file a return with the
5.28commissioner of revenue, in the form the commissioner prescribes, showing the stamped
5.29cigarettes and unaffixed stamps on hand at 12:01 a.m. on July 1, 2013, and the amount
5.30of tax due on the cigarettes and unaffixed stamps. Each retailer, subjobber, vendor,
5.31manufacturer, or manufacturer's representative, on or before July 11, 2013, shall file
5.32a return with the commissioner, in the form the commissioner prescribes, showing the
5.33cigarettes on hand at 12:01 a.m. on July 1, 2013, and the amount of tax due on the
6.1cigarettes. The tax imposed by this section is due and payable on or before August 8,
6.22013, and after that date bears interest at the rate of one percent per month.
6.3 Subd. 2. Audit and enforcement. The tax imposed by this section is subject to
6.4the audit, assessment, interest, appeal, refund, penalty, enforcement, administrative, and
6.5collection provisions of Minnesota Statutes, chapters 270C and 297F. The commissioner
6.6of revenue may require a distributor to receive and maintain copies of floor stocks fee
6.7returns filed by all persons requesting a credit for returned cigarettes.
6.8 Subd. 3. Deposit of proceeds. The commissioner of revenue shall deposit the
6.9revenues from the tax under this section in the state treasury and credit them to the
6.11EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 13. INTERIM SALES TAX RATE.
6.13Notwithstanding the provisions of Minnesota Statutes, section 297F.25, the
6.14commissioner shall adjust the weighted average retail price in section 297F.25, subdivision
6.151, on July 1, 2013, to reflect the price changes under this act. This weighted average
6.16shall be used to compute cigarette sales tax under Minnesota Statutes, section 297F.25,
6.17subdivision 1, until December 31, 2013, when the commissioner shall resume annual
6.18adjustments to the weighted average sales price. The commissioner's determination of
6.19the adjustment that takes effect on January 1, 2014, must be limited to the change in the
6.20weighted average retail that occurs during calendar year 2013 but after July 15, 2013.
6.21EFFECTIVE DATE.This section is effective July 1, 2013.
Sec. 14. TOBACCO TAX COLLECTION REPORT.
6.23 Subdivision 1. Report to legislature. (a) The commissioner of revenue shall report
6.24to the 2014 legislature on the tobacco tax collection system, including recommendations
6.25to improve compliance under the excise tax for both cigarettes and other tobacco products.
6.26The purpose of the report is to provide information and guidance to the legislature on
6.27improvements to the tobacco tax collection system to:
6.28(1) provide a unified system of collecting both the cigarette and other tobacco
6.29taxes, regardless of category, size, or shape, that ensures the highest reasonable rates of
6.31(2) discourage tax evasion; and
6.32(3) help to prevent illegal sale of tobacco products, which may make these products
6.33more accessible to youth.
7.1(b) In the report, the commissioner shall:
7.2(1) provide a detailed review of the present excise tax collection and compliance
7.3system as it applies to both cigarettes and other tobacco products. This must include
7.4an assessment of the levels of compliance for each category of products and the effect
7.5of the stamping requirement on compliance for each category of products and the effect
7.6of the stamping requirement on compliance rates for cigarettes relative to other tobacco
7.7products. It also must identify any weaknesses in the system;
7.8(2) survey the methods of collection and enforcement used by other states or nations,
7.9including identifying and discussing emerging best practices that ensure tracking of both
7.10cigarettes and other tobacco products and result in the highest rates of tax collection and
7.11compliance. These best practices must consider high-technology alternatives, such as use
7.12of bar codes, radio-frequency identification tags, or similar mechanisms for tracking
7.14(3) evaluate the adequacy and effectiveness of the existing penalties and other
7.15sanctions for noncompliance;
7.16(4) evaluate the adequacy of the resources allocated by the state to enforce the
7.17tobacco tax and prevention laws; and
7.18(5) make recommendations on implementation of a comprehensive tobacco tax
7.19collection system for Minnesota that can be implemented by January 1, 2014, including:
7.20(i) recommendations on the specific steps needed to institute and implement the new
7.21system, including estimates of the state's costs of doing so and any additional personnel
7.23(ii) recommendations on methods to recover the cost of implementing the system
7.24from the industry;
7.25(iii) evaluation of the extent to which the proposed system is sufficiently flexible
7.26and adaptable to adjust to modifications in the construction, packaging, formatting, and
7.27marketing of tobacco products by the industry; and
7.28(iv) recommendations to modify existing penalties or to impose new penalties or
7.29other sanctions to ensure compliance with the system.
7.30 Subd. 2. Due date. The report required by subdivision 1 is due January 1, 2014.
7.31 Subd. 3. Procedure. The report required under this section must be made in the
7.32manner provided under Minnesota Statutes, section 3.195. In addition, copies must be
7.33provided to the chairs and ranking minority members of the legislative committees and
7.34divisions with jurisdiction over taxation.
8.1 Subd. 4. Appropriation. (a) $100,000 is appropriated from the general fund to the
8.2commissioner of revenue for fiscal year 2014 for the cost of preparing the report under
8.4(b) The appropriation under this subdivision is a onetime appropriation and is not
8.5included in the base budget.
8.6EFFECTIVE DATE.This section is effective the day following final enactment.
Sec. 15. REPEALER.
8.8Minnesota Statutes 2012, sections 16A.725; and 256.9658, are repealed.
8.9EFFECTIVE DATE.This section is effective July 1, 2013.