SF 1774

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/09/2021 09:15am

A bill for an act
relating to taxation; cigarette and tobacco tax; amending the definition of tobacco
products to include electronic delivery devices; increasing the cigarette and tobacco
products excise tax; establishing a tobacco prevention and cessation account in
the special revenue fund; appropriating money; conforming to federal law changes;
amending Minnesota Statutes 2020, sections 297F.01, subdivisions 19, 23, by
adding a subdivision; 297F.031; 297F.05, subdivisions 1, 3, 3a, 4, 4a; 297F.10,
subdivision 1; 297F.24, subdivision 1; 297F.25, subdivision 1; 325F.781,
subdivision 1; 609.685, subdivision 1; repealing Minnesota Statutes 2020, section
297F.01, subdivision 22b.

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

Section 1.

Minnesota Statutes 2020, section 297F.01, is amended by adding a subdivision
to read:

new text begin Subd. 7a. new text end

new text begin Electronic delivery device. new text end

new text begin (a) "Electronic delivery device" means any device
that may be used to deliver aerosolized or vaporized nicotine or any other aerosolized or
vaporized substance to the person inhaling from the device, including but not limited to an
e-cigarette, e-cigar, e-pipe, vape pen, e-hookah, advanced refillable personal vaporizer,
mod, tank system, or any other product name or descriptor.
new text end

new text begin (b) Electronic delivery device includes:
new text end

new text begin (1) any component, part, or accessory of the device, whether or not marketed or sold
separately; and
new text end

new text begin (2) any substance that may be aerosolized or vaporized by the device, whether or not
the substance contains nicotine or is marketed or sold separately.
new text end

new text begin (c) Electronic delivery device does not include a battery or battery charger when sold
separately. Electronic delivery device also does not include any drug, device, or combination
product, as defined by the Federal Food, Drug, and Cosmetic Act, that has been approved
for sale by the United States Food and Drug Administration as a tobacco cessation product,
as a tobacco dependence product, or for other therapeutic purposes, and is being marketed
and sold solely for such an approved purpose.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 2.

Minnesota Statutes 2020, section 297F.01, subdivision 19, is amended to read:

Subd. 19.

Tobacco products.

(a) "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 to, cigars;
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 includes deleted text begin nicotine solution products deleted text end new text begin electronic delivery devices new text end . Tobacco products
excludes any tobacco product new text begin , drug, device, or combination product, as defined by the
Federal Food, Drug, and Cosmetic Act, new text end that has been approved new text begin for sale new text end by the United States
Food and Drug Administration deleted text begin for sale deleted text end as a tobacco cessation product, as a tobacco
dependence product, or for other deleted text begin medical deleted text end new text begin therapeutic new text end purposes, and is being marketed and
sold solely for such an approved purpose.

(b) Except for the imposition of tax under section 297F.05, subdivisions 3 and 4, tobacco
products includes a premium cigar, as defined in subdivision 13a.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 3.

Minnesota Statutes 2020, section 297F.01, subdivision 23, is amended to read:

Subd. 23.

Wholesale sales price.

deleted text begin (a) deleted text end "Wholesale sales price" means the price at which
a distributor purchases a tobacco product.

deleted text begin (b) When a distributor sells a cartridge, bottle, or other package of a solution containing
nicotine that is part of a kit that also includes a product, device, component, part, or accessory
described in subdivision 22b:
deleted text end

deleted text begin (1) the wholesale sales price is the price at which the distributor purchases the kit; except
that
deleted text end

deleted text begin (2) if the distributor also separately sells the same package of solution containing nicotine
that is sold with the kit and can isolate the cost of the package of solution containing nicotine,
then the wholesale sales price includes only the price at which the distributor separately
purchases the package of the solution containing nicotine and any taxes, charges, and costs
listed in paragraph (c).
deleted text end

deleted text begin (c) deleted text end Wholesale sales price includes the applicable federal excise tax, freight charges, or
packaging costs, regardless of whether they were included in the purchase price.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 4.

Minnesota Statutes 2020, section 297F.031, is amended to read:

297F.031 REGISTRATION REQUIREMENT.

Prior to making delivery sales or shipping cigarettes deleted text begin or deleted text end new text begin , new text end tobacco products new text begin , or electronic
delivery devices as defined in section 609.685, subdivision 1, new text end in connection with any sales,
an out-of-state retailer shall file with the Department of Revenue a statement setting forth
the out-of-state retailer's name, trade name, new text begin telephone number, cell phone number, e-mail
address, website address, new text end and the new text begin street new text end address of the out-of-state retailer's principal place
of business and any other place of business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 5.

Minnesota Statutes 2020, 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 rate
of deleted text begin 152 deleted text end new text begin 227 new text end mills, or deleted text begin 15.2 deleted text end new text begin 22.7 new text end cents, on each cigarette.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 6.

Minnesota Statutes 2020, section 297F.05, subdivision 3, is amended to read:

Subd. 3.

Rates; tobacco products.

(a) Except as provided in paragraphs (b) and (c) and
subdivision 3a, 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 deleted text begin 95 deleted text end new text begin 97 new text end 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
retailers.

(b) A tax equal to the greater of the tax imposed under paragraph (a) or a minimum tax
equal to the rate imposed on a pack of 20 cigarettes weighing not more than three pounds
per thousand, as established under subdivision 1, is imposed on each container of moist
snuff weighing not more than 1.2 ounces. When more than one container subject to tax
under this paragraph is packaged together, each container is subject to the minimum tax.

(c) Except as provided in paragraph (b), a tax equal to the greater of the tax imposed
under paragraph (a) or a minimum tax equal to the rate imposed on a pack of 20 cigarettes
weighing not more than three pounds per thousand, as established under subdivision 1,
multiplied by the number of ounces of moist snuff in the container, divided by 1.2, is imposed
on each container of moist snuff weighing more than 1.2 ounces.

(d) For purposes of this subdivision, a "container" means a consumer-size can, package,
or other container that is marketed or packaged for sale to a retail purchaser.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 7.

Minnesota Statutes 2020, section 297F.05, subdivision 3a, is amended to read:

Subd. 3a.

Rates; premium cigars.

(a) A tax is imposed upon all premium cigars in this
state and upon any person engaged in business as a tobacco product distributor, at the lesser
of:

(1) the rate of deleted text begin 95 deleted text end new text begin 97 new text end percent of the wholesale sales price of the premium cigars; or

(2) deleted text begin $0.50 deleted text end new text begin $5.00 new text end per premium cigar.

(b) The tax imposed under paragraph (a) is imposed at the time the tobacco products
distributor:

(1) brings, or causes to be brought, into this state from outside the state premium cigars
for sale;

(2) makes, manufactures, or fabricates premium cigars in this state for sale in this state;
or

(3) ships or transports premium cigars to retailers in this state, to be sold by those retailers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 8.

Minnesota Statutes 2020, section 297F.05, subdivision 4, is amended to read:

Subd. 4.

Use tax; tobacco products.

Except as provided in subdivision 4a, 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 deleted text begin 95 deleted text end new text begin 97 new text end percent of the cost to the consumer of the tobacco
products or the minimum tax under subdivision 3, paragraph (b) or (c), whichever is greater.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 9.

Minnesota Statutes 2020, section 297F.05, subdivision 4a, is amended to read:

Subd. 4a.

Use tax; premium cigars.

A tax is imposed upon the use or storage by
consumers of all premium cigars in this state, and upon such consumers, at the lesser of:

(1) the rate of deleted text begin 95 deleted text end new text begin 97 new text end percent of the cost to the consumer of the premium cigars; or

(2) deleted text begin $0.50 deleted text end new text begin $5.00 new text end per premium cigar.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 10.

Minnesota Statutes 2020, section 297F.10, subdivision 1, is amended to read:

Subdivision 1.

Tax and use tax on cigarettes.

Revenue received from cigarette taxes,
as well as related penalties, interest, license fees, and miscellaneous sources of revenue
shall be deposited by the commissioner in the state treasury and credited as follows:

(1) $22,250,000 each year must be credited to the Academic Health Center special
revenue fund hereby created and is annually appropriated to the Board of Regents at the
University of Minnesota for Academic Health Center funding at the University of Minnesota;
deleted text begin and
deleted text end

(2) $3,937,000 each year must be credited to the medical education and research costs
account hereby created in the special revenue fund and is annually appropriated to the
commissioner of health for distribution under section 62J.692, subdivision 4; deleted text begin and
deleted text end

new text begin (3) $15,000,000 each year must be credited to the tobacco use prevention and cessation
account hereby created in the special revenue fund and is annually appropriated to the
commissioner of health for tobacco use prevention and cessation projects consistent with
the duties specified in section 144.392; a public information program under section 144.393;
the development of health promotion and health education materials about tobacco use
prevention and cessation; tobacco use prevention activities under section 144.396; and
statewide tobacco cessation services under section 144.397. In activities funded under this
clause, the commissioner of health must prioritize preventing youth use of commercial
tobacco and electronic delivery devices, must promote racial and health equity, and must
use strategies that are evidence-based or based on promising practices. For purposes of this
clause, "tobacco" and "electronic delivery device" have the meanings given to those terms
in section 609.685, subdivision 1; and
new text end

deleted text begin (3) deleted text end new text begin (4) new text end the balance of the revenues derived from taxes, penalties, and interest (under this
chapter) and from license fees and miscellaneous sources of revenue shall be credited to
the general fund.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 11.

Minnesota Statutes 2020, 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 deleted text begin 2.5 deleted text end new text begin 3.25 new text end 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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 12.

Minnesota Statutes 2020, 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 the combined tax rate under section 297A.62, multiplied by 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,
deleted text begin 2011 deleted text end new text begin 2021 new text end , through December 31, deleted text begin 2011 deleted text end new text begin 2021 new text end , 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
under section 325D.371; (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.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 13.

Minnesota Statutes 2020, section 325F.781, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given, unless the language or context clearly provides otherwise.

(b) "Consumer" means an individual who purchases, receives, or possesses tobacco
products for personal consumption and not for resale.

(c) "Delivery sale" means:

(1) a sale of tobacco products to a consumer in this state when:

(i) the purchaser submits the order for the sale by means of a telephonic or other method
of voice transmission, the mail or any other delivery service, or the Internet or other online
service new text begin , or the retailer is otherwise not in the physical presence of the purchaser when the
request for purchase or order is made new text end ; or

(ii) the tobacco products are delivered new text begin to the consumer new text end by use of the mail or other delivery
service new text begin , or the retailer is otherwise not in the physical presence of the consumer when the
consumer obtains possession of the tobacco products new text end ; or

(2) a sale of tobacco products that satisfies the criteria in clause (1), item (i), regardless
of whether the seller is located inside or outside of the state.

A sale of tobacco products to an individual in this state must be treated as a sale to a
consumer, unless the individual is licensed as a distributor or retailer of tobacco products.

(d) "Delivery service" means a person, including the United States Postal Service, that
is engaged in the commercial delivery of letters, packages, or other containers new text begin to a consumer new text end .

(e) "Distributor" means a person, whether located inside or outside of this state, other
than a retailer, who sells or distributes tobacco products in the state. Distributor does not
include a tobacco products manufacturer, export warehouse proprietor, or importer with a
valid permit under United States Code, title 26, section 5712 (1997), if the person sells or
distributes tobacco products in this state only to distributors who hold valid and current
licenses under the laws of a state, or to an export warehouse proprietor or another
manufacturer. Distributor does not include a common or contract carrier that is transporting
tobacco products under a proper bill of lading or freight bill that states the quantity, source,
and destination of tobacco products, or a person who ships tobacco products through this
state by common or contract carrier under a bill of lading or freight bill.

(f) "Retailer" means a person, whether located inside or outside this state, who sells or
distributes tobacco products to a consumer in this state.

(g) "Tobacco products" means:

deleted text begin (1) cigarettes, as defined in section 297F.01, subdivision 3;
deleted text end

deleted text begin (2) smokeless tobacco as defined in section 325F.76; and
deleted text end

deleted text begin (3) premium cigars as defined in section 297F.01, subdivision 13a.
deleted text end

new text begin (1) electronic delivery devices as defined in section 609.685, subdivision 1; and
new text end

new text begin (2) tobacco as defined in section 609.685, subdivision 1.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 14.

Minnesota Statutes 2020, section 609.685, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

For the purposes of this section, the following terms shall
have the meanings respectively ascribed to them in this section.

(a) "Tobacco" means cigarettes and 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 to cigars; cheroots; stogies;
perique; granulated, plug cut, crimp cut, ready rubbed, and other smoking tobacco; snuff;
snuff flour; cavendish; plug and twist tobacco; fine cut and other chewing tobaccos; shorts;
refuse scraps, clippings, cuttings and sweepings of tobacco; and other kinds and forms of
tobacco. Tobacco excludes any drugs, devices, or combination products, as those terms are
defined in the Federal Food, Drug, and Cosmetic Act, that are authorized for sale by the
United States Food and Drug Administration.

(b) "Tobacco-related devices" means cigarette papers or pipes for smoking or other
devices intentionally designed or intended to be used in a manner which enables the chewing,
sniffing, smoking, or inhalation of aerosol or vapor of tobacco or tobacco products.
Tobacco-related devices include components of tobacco-related devices which may be
marketed or sold separately.

(c) "Electronic delivery device" means any product containing or delivering nicotine,
lobelia, or any other substance, whether natural or synthetic, intended for human consumption
through inhalation of aerosol or vapor from the product. Electronic delivery device includes
but is not limited to devices manufactured, marketed, or sold as electronic cigarettes,
electronic cigars, electronic deleted text begin pipe deleted text end new text begin pipes, electronic hookahs new text end , vape pens, deleted text begin modes deleted text end new text begin advanced
refillable personal vaporizers, mods new text end , tank systems, or under any other product name or
descriptor. Electronic delivery device includes any component new text begin , liquid, new text end part new text begin , or accessory new text end of
a product, whether or not marketed or sold separately. Electronic delivery device excludes
deleted text begin drugs, devices, or combination products deleted text end new text begin any drug, device, or combination product new text end , as deleted text begin those
terms are deleted text end defined deleted text begin in deleted text end new text begin by new text end the Federal Food, Drug, and Cosmetic Act, that deleted text begin are authorized for
sale by the United States Food and Drug Administration deleted text end new text begin has been approved for sale by the
United States Food and Drug Administration as a tobacco cessation product, as a tobacco
dependence product, or for other therapeutic purposes, and is being marketed and sold solely
for such an approved purpose new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 15. new text begin FLOOR STOCKS TAX.
new text end

new text begin Subdivision 1. new text end

new text begin Cigarettes. new text end

new text begin (a) A floor stocks tax is imposed on every person engaged
in business in this state as a distributor, retailer, subjobber, vendor, manufacturer, or
manufacturer's representative of cigarettes on the stamped cigarettes and unaffixed stamps
in the person's possession or under the person's control at 12:01 a.m. on July 1, 2021.
new text end

new text begin (b) Each distributor, on or before July 11, 2021, shall file a return with the commissioner
of revenue, in the form prescribed by the commissioner, showing the stamped cigarettes
and unaffixed stamps on hand at 12:01 a.m. on July 1, 2021, and the amount of tax due on
the cigarettes and unaffixed stamps.
new text end

new text begin (c) Each retailer, subjobber, vendor, manufacturer, or manufacturer's representative, on
or before July 11, 2021, shall file a return with the commissioner of revenue, in the form
prescribed by the commissioner, showing the cigarettes on hand at 12:01 a.m. on July 1,
2021, and the amount of tax due on the cigarettes.
new text end

new text begin (d) The tax imposed by this section is at the rate of 75 mills on each cigarette plus the
additional cigarette sales tax determined by an adjustment to the weighted average retail
price which reflects the price including the increased tax. The tax is due and payable on or
before August 8, 2021, after which it bears interest at the rate of one percent per month.
new text end

new text begin Subd. 2. new text end

new text begin Audit and enforcement. new text end

new text begin The tax imposed by this section is subject to the audit,
assessment, interest, appeal, refund, penalty, enforcement, administrative, and collection
provisions of Minnesota Statutes, chapters 270C and 297F. The commissioner of revenue
may require a distributor to receive and maintain copies of floor stocks fee returns filed by
all persons requesting a credit for returned cigarettes.
new text end

new text begin Subd. 3. new text end

new text begin Deposit of proceeds. new text end

new text begin The commissioner of revenue shall deposit the revenues
from the tax under this section in the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2021.
new text end

Sec. 16. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2020, section 297F.01, subdivision 22b, 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 July 1, 2021.
new text end

APPENDIX

Repealed Minnesota Statutes: 21-02857

297F.01 DEFINITIONS.

Subd. 22b.

Nicotine solution products.

(a) "Nicotine solution products" means any cartridge, bottle, or other package that contains nicotine made or derived from tobacco, that is in a solution that is consumed, or meant to be consumed, through the use of a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor or aerosol. This paragraph expires December 31, 2019.

(b) Beginning January 1, 2020, "nicotine solution products" means any cartridge, bottle, or other package that contains nicotine, including nicotine made or derived from tobacco or sources other than tobacco, that is in a solution that is consumed, or meant to be consumed, through the use of a heating element, power source, electronic circuit, or other electronic, chemical, or mechanical means that produces vapor or aerosol.

(c) Nicotine solution products includes any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device, and any batteries, heating elements, or other components, parts, or accessories sold with and meant to be used in the consumption of a solution containing nicotine.