SF 1192

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 03/26/2015 08:25am

A bill for an act
relating to taxation; tobacco; providing penalties; appropriating money;
amending Minnesota Statutes 2014, sections 270C.722, subdivision 1; 270C.728,
by adding a subdivision; 297F.01, subdivision 14; 297F.03, subdivisions 5,
6; 297F.04, subdivision 1; 297F.13, subdivision 4; 297F.19, by adding a
subdivision; 297F.20, by adding subdivisions; 297F.21, subdivision 1; 461.12,
subdivision 8; proposing coding for new law in Minnesota Statutes, chapter
297F; repealing Minnesota Statutes 2014, section 297F.185.

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

Section 1.

Minnesota Statutes 2014, section 270C.722, subdivision 1, is amended to
read:

Subdivision 1.

Notice of revocation; hearings.

(a) If deleted text begin : (1) deleted text end a person fails to comply
with chapter 297A or the sales and use tax provisions of chapter 289A or the rules related
to sales tax, deleted text begin or (2) any retailer purchases for resale from an unlicensed seller more than
20,000 cigarettes or $500 or more worth of tobacco products, without reasonable cause, deleted text end
the commissioner may give the person 30 days' notice in writing, specifying the violations,
and stating that based on the violations the commissioner intends to revoke the person's
permit issued under section 297A.84. The notice must also advise the person of the right to
contest the revocation under this subdivision. It must also explain the general procedures
for a contested case hearing under chapter 14. The notice may be served personally or by
mail in the manner prescribed for service of an order of assessment.

(b) If the person does not request a hearing within 30 days after the date of the
notice of intent, the commissioner may serve a notice of revocation of permit upon the
person, and the permit is revoked. If a hearing is timely requested, and held, the permit
is revoked after the commissioner serves an order of revocation of permit under section
14.62, subdivision 1.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 270C.728, is amended by adding a
subdivision to read:

new text begin Subd. 8. new text end

new text begin Publication of revoked retail cigarette licenses. new text end

new text begin (a) Notwithstanding
any other law, the commissioner may publish a list of persons who have had their retail
licenses to sell cigarettes or tobacco products revoked under section 297F.186. In the case
of a license holder that is a business entity, the commissioner may also publish the name
of responsible persons of the license holder, as defined in section 297F.186, subdivision 1.
new text end

new text begin (b) At least 30 days before publishing the name of a license holder or responsible
person, the commissioner shall mail a written notice to the license holder and to
responsible persons of the license holder of the commissioner's intent to publish. This
notice may be included as part of the notice of intent to revoke a license as required under
section 297F.186, subdivision 3.
new text end

new text begin (c) The list may be published by any medium or method. The list must contain the
name and address of the license holder and name of the responsible person and the date
the license was revoked.
new text end

new text begin (d) The commissioner shall remove the name of a license holder or responsible
person from the list five years from the date of the license revocation or upon the license
holder or responsible person receiving a license clearance under section 297F.186.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end

Sec. 3.

Minnesota Statutes 2014, section 297F.01, subdivision 14, is amended to read:

Subd. 14.

Retailer.

"Retailer" means a person deleted text begin required to be licensed under chapter
461 deleted text end new text begin located in this state new text end engaged deleted text begin in this state deleted text end in the business of selling, or offering to sell,
cigarettes or tobacco products to consumers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end

Sec. 4.

Minnesota Statutes 2014, section 297F.03, subdivision 5, is amended to read:

Subd. 5.

License fees; cigarettes.

Each application for a cigarette distributor's
license must be accompanied by a fee of deleted text begin $300 deleted text end new text begin $500 new text end . Each application for a cigarette
subjobber's license must be accompanied by a fee of deleted text begin $24 deleted text end new text begin $100 new text end . A distributor or subjobber
applying for a license during the second year of a two-year licensing period is required to
pay only one-half of the license fee.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for license periods beginning after
December 31, 2015.
new text end

Sec. 5.

Minnesota Statutes 2014, section 297F.03, subdivision 6, is amended to read:

Subd. 6.

License fees; tobacco products.

Each application for a tobacco products
distributor's license must be accompanied by a fee of deleted text begin $75 deleted text end new text begin $500 new text end . Each application for
a tobacco products subjobber's license must be accompanied by a fee of deleted text begin $20 deleted text end new text begin $100 new text end . A
distributor or subjobber applying for a license during the second year of a two-year
licensing period is required to pay only one-half of the license fee.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for license periods beginning after
December 31, 2015.
new text end

Sec. 6.

Minnesota Statutes 2014, section 297F.04, subdivision 1, is amended to read:

Subdivision 1.

Powers of commissioner.

The commissioner may revoke deleted text begin or deleted text end new text begin , new text end
suspend new text begin , or refuse to renew new text end the license or licenses of any distributor or subjobber new text begin , or
refuse to issue a license to an applicant for a distributor or subjobber license, new text end for violation
of this chapter, any other act applicable to the sale of cigarettes or tobacco products, or any
rule promulgated by the commissioner, in furtherance of this chapter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end

Sec. 7.

Minnesota Statutes 2014, section 297F.13, subdivision 4, is amended to read:

Subd. 4.

Retailer and subjobber to preserve purchase invoices.

Every retailer and
subjobber shall procure itemized invoices of all cigarettes or tobacco products purchased.

The retailer and subjobber shall preserve a legible copy of each invoice for one
year from the date of the invoice new text begin or as long as the cigarette or tobacco product listed on
the invoice is available for sale or in their possession, whichever period is longer new text end . The
retailer and subjobber shall preserve copies of the invoices at each retail location or at a
central location provided that the invoice must be produced and made available at a retail
location within one hour when requested by the commissioner or duly authorized agents
and employees. Copies should be numbered and kept in chronological order.

To determine whether the business is in compliance with the provisions of this
chapter, at any time during usual business hours, the commissioner, or duly authorized
agents and employees, may enter any place of business of a retailer or subjobber without
a search warrant and inspect the premises, the records required to be kept under this
chapter, and the packages of cigarettes, tobacco products, and vending devices contained
on the premises.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases by subjobbers
and retailers made on or after August 1, 2015.
new text end

Sec. 8.

new text begin [297F.186] REVOCATION OF CIGARETTE AND TOBACCO RETAIL
LICENSE.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarette and tobacco retail revocation. new text end

new text begin (a) A licensing authority
must not issue, transfer, or renew, and must revoke, a license if the commissioner notifies
the licensing authority that the license holder has been in possession of contraband
cigarettes or tobacco products under section 297F.21 at the location covered by the license.
new text end

new text begin (b) Within ten days after receipt of the notification from the commissioner under
paragraph (a), the licensing authority must notify the license holder by mail of the
revocation of the license. The notice must include a copy of the commissioner's notice to
the licensing authority and information, in the form specified by the commissioner, on the
licensee's option for receiving a license clearance from the commissioner. The licensing
authority must revoke the license within 30 days after receiving the notice from the
commissioner, unless it receives a license clearance from the commissioner as provided
in subdivision 2, paragraph (b).
new text end

new text begin (c) For purposes of this section, the following terms have the meanings given.
new text end

new text begin (1) "License holder" means an individual or legal entity who has a license to sell
cigarettes or tobacco products issued under chapter 461.
new text end

new text begin (2) "License" means a license to sell cigarettes or tobacco products under chapter 461.
new text end

new text begin (3) "Licensing authority" means a town board, county board, governing body of a
home rule charter or statutory city, or state agricultural society authorized to issue licenses
under chapter 461.
new text end

new text begin (4) "Applicant" is any individual, corporation, partnership, or any other legal entity
that is a holder of a license or that has filed an application to obtain a license.
new text end

new text begin (5) "Responsible person" means any individual who, either singly or jointly with
others, has the control of, supervision of, or responsibility for filing tax returns or reports,
paying taxes, or collecting or withholding and remitting taxes to the commissioner for
a license holder, or who has authority to purchase cigarettes or tobacco products, or
supervises a person who has authority to purchase cigarettes or tobacco products for
the license holder.
new text end

new text begin Subd. 2. new text end

new text begin New licenses after revocation. new text end

new text begin (a) An applicant who has had a
license revoked under this section, or an applicant with a responsible person who was
a responsible person for another entity for which a license was revoked under this
section, may not apply for a license or seek the reinstatement of a revoked license
unless the applicant presents to the licensing authority a license clearance issued by the
commissioner. A licensing authority must not issue a new license to an applicant with
such a responsible person or to an applicant who has had a license revoked under this
section or reinstate a revoked license unless the applicant presents to the authority a
license clearance issued by the commissioner.
new text end

new text begin (b) Except as provided in paragraph (f), the commissioner may issue a license
clearance if the applicant and all responsible persons of the applicant:
new text end

new text begin (1) sign an agreement that acknowledges that the applicant and the responsible
person will follow all laws related to the taxation of cigarettes and tobacco products,
including the requirements to:
new text end

new text begin (i) purchase all cigarettes and tobacco products from distributors and subjobbers
licensed by the commissioner;
new text end

new text begin (ii) maintain invoices of all cigarettes or tobacco products purchased as required
under section 297F.13, subdivision 4, and produce those invoices within one hour when
requested by the commissioner or duly authorized agents and employees; and
new text end

new text begin (iii) timely file and pay to the commissioner all returns and all sales taxes related to
the sale of tobacco products; and
new text end

new text begin (2) deposit with the commissioner security or a surety bond in an amount equal
to ten times the amount of tax on the contraband cigarettes or tobacco products. The
commissioner must hold the security deposit for two years.
new text end

new text begin (c) The commissioner must pay interest on any money deposited as security. The
interest is calculated from the date of deposit to the date of refund, or date of application
to any outstanding tax liability, at a rate specified in section 270C.405. The commissioner
must refund the security deposit to the applicant at the end of the two-year period
unless the applicant has any unpaid tax liabilities payable to the commissioner. The
commissioner may apply the security deposit to any unpaid tax liabilities of the applicant
owed to the commissioner as well as the tax on any contraband cigarettes or tobacco
products owned, possessed, sold, or offered for sale by the applicant after the license
clearance has been issued.
new text end

new text begin (d) The commissioner may refund the security deposit before the end of the two-year
holding period if the license holder no longer has a license to sell cigarettes or tobacco
products issued by any licensing authority in the state.
new text end

new text begin (e) If the commissioner determines that a licensing authority has issued a new license
or reinstated a revoked license without the applicant submitting a license clearance, the
commissioner may notify the licensing authority to revoke the license. Revocations under
this subdivision are controlled by the provisions of subdivision 1, paragraph (b), and
subdivision 3. Notice of intent to require revocation from the commissioner must be sent
to the license holder and to the responsible person of the license holder.
new text end

new text begin (f) If an applicant has had, or if a person has been a responsible person to, a
cumulative number of two licenses revoked under this subdivision in a five-year period
by all licensing authorities within the state, the commissioner may refuse to issue a
license clearance until 24 months have elapsed after the last revocation and the applicant
has satisfied the conditions for reinstatement of a revoked license or issuance of a new
license imposed by this subdivision.
new text end

new text begin Subd. 3. new text end

new text begin Notice and hearing. new text end

new text begin (a) Prior to notifying a licensing authority pursuant
to subdivision 1 to revoke a license, the commissioner must send a notice to the license
holder and to any known responsible person of the license holder of the commissioner's
intent to require revocation of the license and of the license holder's or responsible person's
right to a hearing. If the license holder or responsible person requests a hearing in writing
within 30 days of the date of the notice, a contested case hearing must be held. The hearing
must be held within 45 days of the date the commissioner refers the case to the Office of
Administrative Hearings. Notwithstanding any law to the contrary, the license holder or
responsible person must be served within 20 days' notice in writing specifying the time
and place of the hearing and the allegations against the license holder or responsible
person. The notice may be served personally or by mail. A license is subject to revocation
when 30 days have passed following the date of the notice in this paragraph without
the license holder requesting a hearing, or, if a hearing is timely requested, upon final
determination of the hearing under section 14.62, subdivision 1.
new text end

new text begin (b) The commissioner may notify a licensing authority under subdivision 1 only
after the requirements of paragraph (a) have been satisfied.
new text end

new text begin (c) A hearing under this subdivision is in lieu of any other hearing or proceeding
provided by law arising from any action taken under subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end

Sec. 9.

Minnesota Statutes 2014, section 297F.19, is amended by adding a subdivision
to read:

new text begin Subd. 10. new text end

new text begin Penalty for retailers who fail to comply. new text end

new text begin (a) A retailer who fails to
produce an itemized invoice from a licensed seller within one hour of being requested by
the commissioner to do so as required under section 297F.13, subdivision 4, or who offers
for sale or holds in inventory cigarettes or tobacco products without a license required
under chapter 461 is subject to a penalty of $1,000 for the first violation, $2,000 for the
second violation, and $5,000 for the third and each subsequent violation occurring during
any 36-month period.
new text end

new text begin (b) A retailer who offers for sale or holds in inventory untaxed cigarettes or tobacco
products is subject to a penalty equal to the greater of $2,000, or 150 percent of the tax
due on the cigarettes or tobacco products.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for violations occurring on or after
August 1, 2015.
new text end

Sec. 10.

Minnesota Statutes 2014, section 297F.20, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Penalties for willful failure to file or pay. new text end

new text begin (a) A person or consumer
required to file a return, report, or other document with the commissioner who willfully
attempts in any manner to evade or defeat a tax by failing to do so when required is
guilty of a felony.
new text end

new text begin (b) A person or consumer required to pay or to collect and remit a tax under this
chapter, who willfully attempts to evade or defeat a tax by failing to do so when required,
is guilty of a felony.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offenses committed on or after
August 1, 2015.
new text end

Sec. 11.

Minnesota Statutes 2014, section 297F.20, is amended by adding a subdivision
to read:

new text begin Subd. 13. new text end

new text begin Aggregation and consolidation of venue. new text end

new text begin In any prosecution under this
section, the number of unstamped cigarettes or the value of the untaxed tobacco products
possessed, received, transported, sold, offered to be sold, or purchased in violation of
this section within any six-month period may be aggregated and the defendant charged
accordingly in applying the provisions of this section. When two or more offenses are
committed by the same individual in two or more counties, the accused may be prosecuted
in any county in which one of the offenses was committed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for offenses committed on or after
August 1, 2015.
new text end

Sec. 12.

Minnesota Statutes 2014, section 297F.21, subdivision 1, is amended to read:

Subdivision 1.

Contraband defined.

The following are declared to be contraband
and therefore subject to civil and criminal penalties under this chapter:

(a) Cigarette packages which do not have stamps affixed to them as provided in this
chapter, including but not limited to (i) packages with illegible stamps and packages with
stamps that are not complete or whole even if the stamps are legible, and (ii) all devices
for the vending of cigarettes in which packages as defined in item (i) are found, including
all contents contained within the devices.

(b) A device for the vending of cigarettes and all packages of cigarettes, where the
device does not afford at least partial visibility of contents. Where any package exposed
to view does not carry the stamp required by this chapter, it shall be presumed that all
packages contained in the device are unstamped and contraband.

(c) A device for the vending of cigarettes to which the commissioner or authorized
agents have been denied access for the inspection of contents. In lieu of seizure, the
commissioner or an agent may seal the device to prevent its use until inspection of
contents is permitted.

(d) A device for the vending of cigarettes which does not carry the name and address
of the owner, plainly marked and visible from the front of the machine.

(e) A device including, but not limited to, motor vehicles, trailers, snowmobiles,
airplanes, and boats used with the knowledge of the owner or of a person operating with
the consent of the owner for the storage or transportation of more than 5,000 cigarettes
which are contraband under this subdivision. When cigarettes are being transported in
the course of interstate commerce, or are in movement from either a public warehouse to
a distributor upon orders from a manufacturer or distributor, or from one distributor to
another, the cigarettes are not contraband, notwithstanding the provisions of clause (a).

(f) A device including, but not limited to, motor vehicles, trailers, snowmobiles,
airplanes, and boats used with the knowledge of the owner, or of a person operating with
the consent of the owner, for the storage or transportation of untaxed tobacco products
intended for sale in Minnesota other than those in the possession of a licensed distributor
on or before the due date for payment of the tax under section 297F.09, subdivision 2.

(g) Cigarette packages or tobacco products obtained from an unlicensed seller.

(h) Cigarette packages offered for sale or held as inventory in violation of section
297F.20, subdivision 7.

(i) Tobacco products on which the tax has not been paid by a licensed distributor.

(j) Any cigarette packages or tobacco products offered for sale or held as inventory
for which deleted text begin there is not an invoice from a licensed seller deleted text end new text begin the retailer or subjobber does not
produce an itemized invoice from a licensed seller within one hour after being requested
by the commissioner to do so new text end as required under section 297F.13, subdivision 4.

(k) Cigarette packages which have been imported into the United States in violation
of United States Code, title 26, section 5754. All cigarettes held in violation of that section
shall be presumed to have entered the United States after December 31, 1999, in the
absence of proof to the contrary.

(l) Cigarettes subject to forfeiture under section 299F.854, subdivision 5, and
cigarette packaging and markings, including the cigarettes contained therein, which do not
meet the requirements under section 299F.853, paragraph (a).

new text begin (m) All cigarettes and tobacco products, including those for which the tax has been
paid, offered for sale or held as inventory by a retailer operating without a license required
under chapter 461.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end

Sec. 13.

Minnesota Statutes 2014, section 461.12, subdivision 8, is amended to read:

Subd. 8.

Notice to commissioner.

The licensing authority under this section shall,
within 30 days of the issuance new text begin or renewal new text end of a license, deleted text begin inform deleted text end new text begin provide new text end the commissioner of
revenue deleted text begin of deleted text end new text begin , on a form prescribed by the commissioner and completed by the applicant, new text end
the licensee's name, address, trade name, new text begin Minnesota business identification number, the
name of the individual or individuals who will be responsible for purchasing cigarettes or
tobacco products for the licensee, new text end and the effective and expiration dates of the license.
The commissioner of revenue must also be informed of a license deleted text begin renewal, deleted text end transfer,
cancellation, suspension, or revocation during the license period.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for licenses issued, renewed,
transferred, canceled, suspended, or revoked after December 31, 2015.
new text end

Sec. 14. new text begin APPROPRIATIONS.
new text end

new text begin $1,421,000 in fiscal year 2016, $1,036,000 in fiscal year 2017, $1,036,000 in fiscal
year 2018, and $1,036,000 in fiscal year 2019 are appropriated from the general fund to
the commissioner of revenue to carry out the provisions of this act. This is an ongoing
appropriation and shall be added to the base.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 15. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2014, section 297F.185, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2015.
new text end