Skip to main content Skip to office menu Skip to footer
Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                            CHAPTER 106-S.F.No. 472 
                  An act relating to taxation; recodifying sales taxes 
                  on cigarettes and tobacco products; providing criminal 
                  and civil penalties; appropriating money; amending 
                  Minnesota Statutes 1996, sections 16A.26; 16A.661, 
                  subdivision 3; 16A.6701, subdivision 1; 116P.13, 
                  subdivision 1; 325D.32, subdivision 4; and 325D.415; 
                  proposing coding for new law as Minnesota Statutes, 
                  chapter 297F; repealing Minnesota Statutes 1996, 
                  sections 297.01; 297.02; 297.03; 297.031; 297.032; 
                  297.04; 297.041; 297.05; 297.06; 297.07; 297.075; 
                  297.08; 297.09; 297.10; 297.11; 297.12; 297.13; 
                  297.21; 297.22; 297.23; 297.24; 297.25; 297.26; 
                  297.31; 297.32; 297.321; 297.33; 297.335; 297.34; 
                  297.35; 297.36; 297.37; 297.38; 297.385; 297.39; 
                  297.40; 297.41; 297.42; 297.43; and 297.44. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
                                   ARTICLE 1 
                                 RECODIFICATION 
           Section 1.  [297F.01] [DEFINITIONS.] 
           Subdivision 1.  [APPLICABILITY.] Unless the language or 
        context clearly indicates that a different meaning is intended, 
        the following terms for the purposes of this chapter, have the 
        following meanings. 
           Subd. 2.  [BUSINESS.] "Business" means any trade, 
        occupation, activity, or enterprise engaged in selling or 
        distributing cigarettes or tobacco products in this state. 
           Subd. 3.  [CIGARETTE.] "Cigarette" means any roll for 
        smoking made wholly or in part of tobacco, the wrapper or cover 
        of which is made of paper or another substance or material 
        except tobacco. 
           Subd. 4.  [CIGARETTE DISTRIBUTOR.] "Cigarette distributor" 
        means any of the following: 
           (1) a person engaged in the business of selling cigarettes 
        in this state and who manufactures or who brings, or causes to 
        be brought, into this state from outside the state any packages 
        of cigarettes for sale to subjobbers or retailers; 
           (2) a person engaged in the business outside this state who 
        ships or transports cigarettes to retailers in this state, to be 
        sold by those retailers; 
           (3) a person who is on direct purchase from a cigarette 
        manufacturer and applies cigarette stamps on at least 50 percent 
        of cigarettes sold by that person. 
           Subd. 5.  [CIGARETTE SUBJOBBER.] "Cigarette subjobber" 
        means any person who acquires stamped cigarettes or other 
        state's stamped cigarettes for the primary purpose of resale to 
        retailers, and any licensed distributor who delivers, sells, or 
        distributes stamped cigarettes from a place of business other 
        than that licensed in the distributor's license. 
           "Cigarette subjobber" also means a person who is a vending 
        machine operator.  A vending machine operator is a person whose 
        principal business is operating, or owning and leasing to 
        operators, machines for the vending of merchandise or service.  
           Subd. 6.  [COMMISSIONER.] "Commissioner" means the state 
        commissioner of revenue. 
           Subd. 7.  [CONSUMER.] "Consumer" means any person who has 
        title to or possession of cigarettes or tobacco products in 
        storage, for use or other consumption in this state. 
           Subd. 8.  [INTERNAL REVENUE CODE.] Unless specifically 
        defined otherwise, "Internal Revenue Code" means the Internal 
        Revenue Code of 1986, as amended through December 31, 1996. 
           Subd. 9.  [LICENSING PERIOD.] "Licensing period" means a 
        two-year period during which licenses are issued.  A licensing 
        period begins on January 1 of each even-numbered year and ends 
        on December 31 of the following odd-numbered year. 
           Subd. 10.  [MANUFACTURER.] "Manufacturer" means a person 
        who produces and sells cigarettes or tobacco products. 
           Subd. 11.  [PACKAGE.] "Package" means the individual 
        packet, box, or other container used to contain and convey 
        cigarettes to the consumer. 
           Subd. 12.  [PERSON.] "Person" means an individual or any 
        entity engaged in the sale of cigarettes or tobacco products. 
           Subd. 13.  [PLACE OF BUSINESS.] "Place of business" means a 
        place where cigarettes or tobacco products are sold or where 
        cigarettes or tobacco products are manufactured, stored, or kept 
        for the purpose of sale or consumption, including any vessel, 
        vehicle, airplane, train, or vending machine. 
           Subd. 14.  [RETAILER.] "Retailer" means a person engaged in 
        this state in the business of selling, or offering to sell, 
        cigarettes or tobacco products to consumers. 
           Subd. 15.  [RETAIL OUTLET.] "Retail outlet" means each 
        place of business from which cigarettes or tobacco products are 
        sold to consumers. 
           Subd. 16.  [SALE.] "Sale" means a transfer, exchange, or 
        barter, in any manner or by any means, for consideration, and 
        includes all sales made by any person.  It also includes gifts 
        or samples provided for advertising or promotional purposes, 
        made by a person engaged in the selling of cigarettes or tobacco 
        products. 
           Subd. 17.  [STAMP.] "Stamp" means the adhesive stamp 
        supplied by the commissioner of revenue for use on cigarette 
        packages. 
           Subd. 18.  [STORAGE.] "Storage" means any keeping or 
        retention of cigarettes or tobacco products for use or 
        consumption in this state. 
           Subd. 19.  [TOBACCO PRODUCTS.] "Tobacco products" means 
        cigars; little 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, prepared in such manner as to be suitable for chewing 
        or smoking in a pipe or otherwise, or both for chewing and 
        smoking; but does not include cigarettes as defined in this 
        section. 
           Subd. 20.  [TOBACCO PRODUCTS DISTRIBUTOR.] "Tobacco 
        products distributor" means any of the following: 
           (1) a person engaged in the business of selling tobacco 
        products in this state who brings, or causes to be brought, into 
        this state from outside the state any tobacco products for sale; 
           (2) a person who makes, manufactures, or fabricates tobacco 
        products in this state for sale in this state; 
           (3) a person engaged in the business of selling tobacco 
        products outside this state who ships or transports tobacco 
        products to retailers in this state, to be sold by those 
        retailers. 
           Subd. 21.  [TOBACCO PRODUCTS SUBJOBBER.] "Tobacco products 
        subjobber" means a person, other than a manufacturer or 
        distributor, who buys from a distributor tobacco products upon 
        which the tax imposed by this chapter has been paid and sells 
        them to persons other than the ultimate consumers, and any 
        licensed distributor who delivers, sells, or distributes tobacco 
        products upon which the tax imposed by this chapter has been 
        paid from a place of business other than that licensed in the 
        distributor's license. 
           Subd. 22.  [USE.] "Use" means the exercise of a right or 
        power incidental to the ownership of cigarettes or tobacco 
        products. 
           Subd. 23.  [WHOLESALE PRICE.] "Wholesale price" means the 
        established price for which a manufacturer sells a tobacco 
        product to a distributor, exclusive of any discount or other 
        reduction. 
           Sec. 2.  [297F.02] [ADMINISTRATION.] 
           Subdivision 1.  [DUTIES OF COMMISSIONER.] The commissioner 
        shall enforce the provisions of this chapter and may prescribe 
        rules consistent with the provisions of this chapter for its 
        detailed and efficient administration.  
           In the enforcement of this chapter, the commissioner may 
        call any county attorney or any peace officer for assistance and 
        may appoint such additional employees as may be required to 
        administer this chapter.  The commissioner may bring injunction 
        proceedings to restrain any person from acting as a distributor 
        without complying with the provisions of this chapter. 
           Subd. 2.  [POWERS OF COMMISSIONER.] The commissioner, or 
        duly authorized agents, may conduct investigations, inquiries, 
        and hearings under this chapter and, in connection with such 
        investigations, inquiries, and hearings, the commissioner and 
        the duly authorized agents shall have all the powers conferred 
        upon the commissioner and the commissioner's examiners by 
        section 270.06, and the provisions of that section shall apply 
        to all such investigations, inquiries, and hearings. 
           Subd. 3.  [EXPENSES OF ADMINISTRATION.] Expenses for the 
        administration of this chapter shall be paid out of 
        appropriations to the commissioner for the administration of 
        this chapter and shall include fees and expenses incurred by the 
        attorney general and any county attorney in litigation in 
        connection with the enforcement of this chapter.  Expenses also 
        include all court costs and expenses. 
           Sec. 3.  [297F.03] [LICENSES; CIGARETTE AND TOBACCO 
        PRODUCTS DISTRIBUTOR AND SUBJOBBER.] 
           Subdivision 1.  [SELLING WITHOUT LICENSE ILLEGAL.] No 
        person shall engage in the business of a distributor or 
        subjobber at any place of business without first having received 
        a license from the commissioner to engage in that business at 
        that place of business. 
           Subd. 2.  [FORM OF APPLICATION.] Every application for a 
        cigarette or tobacco products license shall be made on a form 
        prescribed by the commissioner and shall state the name and 
        address of the applicant; if the applicant is a firm, 
        partnership, or association, the name and address of each of its 
        members; if the applicant is a corporation, the name and address 
        of each of its officers; the address of its principal place of 
        business; the place where the business to be licensed is to be 
        conducted; and any other information the commissioner may 
        require for the administration of this chapter. 
           Subd. 3.  [PLACE OF APPLICATION.] A separate application 
        for a distributor's license shall be made for each place of 
        business at which a distributor proposes to engage in business. 
           A separate application for a subjobber's license may be 
        made by a licensed distributor for each place of business, other 
        than that licensed in the distributor's license, to which the 
        distributor sells or distributes stamped cigarettes or tobacco 
        products. 
           Subd. 4.  [NONRESIDENT APPLICATION.] A person outside this 
        state who ships or transports cigarettes or tobacco products to 
        retailers in this state, to be sold by those retailers, shall 
        make an application for a distributor's license, be granted such 
        a license by the commissioner, and thereafter be subject to all 
        the provisions of this chapter. 
           Subd. 5.  [LICENSE FEES; CIGARETTES.] Each application for 
        a cigarette distributor's license must be accompanied by a fee 
        of $300.  Each application for a cigarette subjobber's license 
        must be accompanied by a fee of $24.  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. 
           Subd. 6.  [LICENSE FEES; TOBACCO PRODUCTS.] Each 
        application for a tobacco products distributor's license must be 
        accompanied by a fee of $75.  Each application for a tobacco 
        products subjobber's license must be accompanied by a fee of 
        $20.  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. 
           Subd. 7.  [ISSUANCE OF LICENSE.] The commissioner, upon 
        receipt of the application in proper form, and payment of the 
        license fee required by this chapter, shall, unless otherwise 
        provided by this chapter, issue the applicant a license in the 
        form prescribed by the commissioner.  The license permits the 
        applicant to engage in business as a distributor or subjobber at 
        the place of business shown in the application. 
           Subd. 8.  [LICENSING PERIOD; EXPIRATION.] The licensing 
        period begins January 1 of an even-numbered year and ends on 
        December 31 of the following year.  Each license issued shall 
        expire on December 31 of the second year of the licensing period 
        unless sooner revoked by the commissioner or unless the business 
        with respect to which the license was issued is transferred.  In 
        either case the holder of the license shall immediately 
        surrender it to the commissioner. 
           Subd. 9.  [DISPLAY.] Each license must be prominently 
        displayed on the premises covered by the license. 
           Subd. 10.  [TRANSFER.] Licenses are not transferable to any 
        other person. 
           Sec. 4.  [297F.04] [LICENSE SUSPENSION OR REVOCATION.] 
           Subdivision 1.  [POWERS OF COMMISSIONER.] The commissioner 
        may revoke or suspend the license or licenses of any distributor 
        or subjobber 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.  The commissioner may also revoke, cancel, or suspend 
        the license or licenses of any distributor or subjobber for 
        violation of sections 325D.30 to 325D.42. 
           Subd. 2.  [REFUSAL TO ISSUE OR RENEW; REVOCATION.] The 
        commissioner must not issue or renew a license under this 
        chapter, and may revoke a license under this chapter, if the 
        applicant or licensee: 
           (1) owes $500 or more in delinquent taxes as defined in 
        section 270.72, subdivision 2; 
           (2) after demand, has not filed tax returns required by the 
        commissioner; 
           (3) had a cigarette or tobacco license revoked by the 
        commissioner within the past two years; 
           (4) had a sales and use tax permit revoked by the 
        commissioner within the past two years; or 
           (5) has been convicted of a crime involving cigarettes, 
        including but not limited to:  selling stolen cigarettes or 
        tobacco products, receiving stolen cigarettes or tobacco 
        products, or involvement in the smuggling of cigarettes or 
        tobacco products. 
           Subd. 3.  [NOTICE.] No license may be revoked or suspended 
        under this chapter, and no application for a license may be 
        denied under this chapter, except after 20 days' notice.  In 
        that notice the commissioner shall specify the allegations 
        against the licensee or applicant, and provide the licensee or 
        applicant the right to request in writing within 20 days a 
        contested case hearing as provided in chapter 14. 
           If a written request for a hearing is received by the 
        department of revenue within 20 days of the date of the initial 
        notice, the hearing must be held within 45 days after referral 
        to the office of administrative hearings, and no earlier than 20 
        days after notice to the licensee or applicant of the hearing 
        time and place.  A license is revoked or suspended, and an 
        application is denied, when the commissioner serves notice of 
        revocation, suspension, or denial after 20 days have passed 
        following the initial notice under this paragraph without a 
        request for hearing being made, or if a hearing is held, after 
        the commissioner serves an order of revocation, suspension, or 
        denial under section 14.62, subdivision 1.  All notices under 
        this paragraph may be served personally or by mail. 
           Sec. 5.  [297F.05] [RATES OF TAX; PERSONAL DEBT.] 
           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, subject to the 
        discount provided in this chapter: 
           (1) on cigarettes weighing not more than three pounds per 
        thousand, 24 mills on each such cigarette; and 
           (2) on cigarettes weighing more than three pounds per 
        thousand, 48 mills on each such cigarette. 
           Subd. 2.  [DISTRIBUTION OF FREE SAMPLE PACKAGES.] A person 
        who distributes free packages of cigarettes is liable for the 
        payment of tax under this chapter. 
           Subd. 3.  [RATES; TOBACCO PRODUCTS.] 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 35 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. 
           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 35 percent of the 
        cost to the consumer of the tobacco products. 
           Subd. 5.  [TAX AS PERSONAL DEBT.] The tax imposed by this 
        chapter, and interest and penalties imposed with respect to it, 
        is a personal debt of the person required to file a return from 
        the time the liability for it arises, regardless of when the 
        time for payment of the liability occurs.  In the case of the 
        executor or administrator of the estate of a decedent and in the 
        case of any fiduciary, the debt is that of the person in the 
        person's official or fiduciary capacity only, unless the person 
        has voluntarily distributed the assets held in that capacity 
        without reserving sufficient assets to pay the tax, interest, 
        and penalties.  In that case, the person is personally liable 
        for the deficiency. 
           Subd. 6.  [TAX CONSTRUCTION.] The tax imposed by this 
        section is not a cost of doing business or an overhead expense 
        under section 325D.01, subdivision 7. 
           Subd. 7.  [TAX; SALES BY STATE.] The state of Minnesota or 
        any of its agencies, instrumentalities, or governmental 
        subdivisions is subject to the tax imposed by this chapter on 
        all cigarettes or tobacco products sold, in the same manner as 
        distributors, if such unit is engaged in the purchase and sale 
        of cigarettes or tobacco products. 
           Sec. 6.  [297F.06] [EXEMPTIONS FROM TAX.] 
           Subdivision 1.  [FEDERAL LAWS.] The tax imposed by this 
        section does not apply with respect to any sale of cigarettes or 
        tobacco products which under the constitution and laws of the 
        United States may not be subject to taxation by the state. 
           Subd. 2.  [USE TAX.] The use tax does not apply if the tax 
        imposed on cigarettes or tobacco products has been paid. 
           Subd. 3.  [CIGARETTE USE TAX.] The cigarette use tax does 
        not apply to the use or storage of cigarettes in quantities of 
        200 or fewer in the possession of any one consumer, provided 
        that the cigarettes were carried into this state by that 
        consumer. 
           Subd. 4.  [TOBACCO PRODUCTS USE TAX.] The tobacco products 
        use tax does not apply to the use or storage of tobacco products 
        in quantities of: 
           (1) not more than 50 cigars; 
           (2) not more than ten ounces snuff or snuff powder; 
           (3) not more than one pound smoking or chewing tobacco or 
        any other tobacco product in the possession of any one consumer. 
           Subd. 5.  [OCEAN-GOING VESSELS.] The commissioner may adopt 
        rules for the sale by licensed distributors of tax free 
        cigarettes to the masters of ocean-going vessels for use aboard 
        ship outside the continental limits of the United States, 
        provided the cigarettes are also exempt from the taxes imposed 
        on cigarettes by the United States government. 
           Sec. 7.  [297F.07] [SALES TO INDIAN TRIBES.] 
           Subdivision 1.  [WHOLESALERS.] A wholesaler may set aside 
        the part of the wholesaler's cigarette and tobacco product stock 
        necessary to make sales to the established governing body of an 
        Indian tribe recognized by the United States Department of 
        Interior without paying the tax required by this chapter.  The 
        amount of unstamped or untaxed stock that wholesalers may 
        deliver to an Indian reservation is limited to amounts necessary 
        to meet the personal consumption needs of qualified purchasers.  
        The unstamped stock must be kept separate and apart from stamped 
        stock.  When shipping or delivering unstamped or untaxed stock 
        to an Indian tribal organization, the wholesaler shall make a 
        true duplicate invoice.  The invoice must show the complete 
        details of the sale or delivery.  The wholesaler shall send the 
        duplicate to the commissioner not later than the 18th day of the 
        following calendar month.  If the wholesaler fails to comply 
        with this section, the commissioner shall revoke the permission 
        granted to the wholesaler to keep a stock of unstamped goods. 
           Subd. 2.  [RETAILERS.] Retailers who are Indian tribal 
        organizations may keep unstamped or untaxed stock intended for 
        sale to qualified purchasers. 
           Subd. 3.  [QUALIFIED PURCHASERS.] A qualified purchaser of 
        unstamped or untaxed stock means only an enrolled member of the 
        Indian tribe which is offering the stock for sale. 
           Subd. 4.  [SALES TO NONQUALIFIED BUYERS.] A retailer who 
        sells or otherwise disposes of unstamped or untaxed stock other 
        than to a qualified purchaser shall collect from the buyer or 
        transferee the tax imposed by section 297F.05, and remit the tax 
        to the department of revenue at the same time and manner as 
        required by section 297F.09.  If the retailer fails to collect 
        the tax from the buyer or transferee, or fails to remit the tax, 
        the retailer is personally responsible for the tax and the 
        commissioner may seize any product destined to be delivered to 
        the retailer.  The product so seized shall be considered 
        contraband and be subject to the procedures outlined in section 
        297F.21, subdivision 3.  The proceeds of the sale of the stock 
        may be applied to any tax liability owed by the retailer after 
        deducting all costs and expenses.  
           This section does not relieve the buyer or possessor of 
        unstamped or untaxed stock from personal liability for the tax. 
           Sec. 8.  [297F.08] [CIGARETTE STAMPS.] 
           Subdivision 1.  [STAMP PUT ON BY DISTRIBUTOR.] Except as 
        otherwise provided in this chapter, payment of the tax imposed 
        by this chapter must be evidenced by stamps affixed to each 
        package.  Before delivering, or causing to be delivered, a 
        package to any person in this state, a distributor shall firmly 
        affix to each package of cigarettes appropriate stamps in 
        amounts equal to the tax on those cigarettes as provided in this 
        chapter. 
           Subd. 2.  [TAX DUE; CIGARETTES.] Notwithstanding any other 
        provisions of this chapter, the tax due on the return is based 
        upon actual heat-applied stamps purchased during the reporting 
        period. 
           Subd. 3.  [TIME OF AFFIXING STAMP.] In all cases where 
        cigarettes are shipped into this state by any licensed 
        distributor from outside this state, the appropriate stamps must 
        be affixed to packages at the time the package enters the state. 
           Subd. 4.  [STAMPS; DESIGN, PRINTING.] The commissioner 
        shall adopt the design of two stamps.  One stamp must be 
        designed for application to cigarette packages destined for 
        retail sale on an Indian reservation which is a party to an 
        agreement under section 270.60, subdivision 2, and only to those 
        packages.  A second stamp must be designed for all other 
        cigarette packages subject to the provisions of this chapter.  
        The commissioner shall arrange for the printing of stamps in 
        such amounts and denominations as the commissioner deems 
        necessary. 
           Subd. 5.  [DEPOSIT OF PROCEEDS.] The commissioner shall use 
        the amounts appropriated by law to purchase heat-applied stamps 
        for resale.  The commissioner shall charge the purchasers for 
        the costs of the stamps along with the tax value plus shipping 
        costs.  The costs recovered along with shipping costs must be 
        deposited into the general fund. 
           Subd. 6.  [SECTION 16A.56 SUPERSEDED.] The provisions of 
        this chapter prescribing the powers and duties of the 
        commissioner with relation to stamps supersede all the 
        provisions of section 16A.56 in conflict. 
           Subd. 7.  [PRICE OF STAMPS.] The commissioner shall sell 
        stamps to any person licensed as a distributor at a discount of 
        1.0 percent from the face amount of the stamps for the first 
        $1,500,000 of such stamps purchased in any fiscal year; and at a 
        discount of 0.6 percent on the remainder of such stamps 
        purchased in any fiscal year.  The commissioner shall not sell 
        stamps to any other person.  The commissioner may prescribe the 
        method of shipment of the stamps to the distributor as well as 
        the quantities of stamps purchased. 
           Subd. 8.  [SALE OF STAMPS.] The commissioner may sell 
        heat-applied stamps on a credit basis under conditions 
        prescribed by the commissioner.  The commissioner shall sell the 
        stamps at a price which includes the tax after giving effect to 
        the discount provided in subdivision 7.  The commissioner shall 
        recover the actual costs of the stamps from the distributor.  
        The commissioner shall annually establish the maximum amount of 
        heat-applied stamps that may be purchased each month. 
           Subd. 9.  [TAX STAMPING MACHINES.] The commissioner shall 
        require any person licensed as a distributor to stamp packages 
        with a heat-applied tax stamping machine, approved by the 
        commissioner, which shall be provided by the distributor.  The 
        commissioner shall also supervise and check the operation of the 
        machines and shall provide for the payment of the tax on any 
        package so stamped, subject to the discount provided in 
        subdivision 7.  If the commissioner finds that a stamping 
        machine is not affixing a legible stamp on the package, the 
        commissioner may order the distributor to immediately cease the 
        stamping process until the machine is functioning properly. 
           Subd. 10.  [RESALE OR TRANSFER OF STAMPS PROHIBITED.] No 
        distributor shall resell or transfer any stamps purchased by the 
        distributor from the commissioner.  A distributor may transfer 
        another state's stamped cigarettes to another distributor for 
        the purpose of resale in the other state.  A distributor who has 
        on hand any uncanceled stamps at the time of discontinuing the 
        business of selling cigarettes may return them to the 
        commissioner and receive a refund of the amount paid for the 
        stamps.  Stamps which have become mutilated or unfit for use, or 
        are affixed to cigarettes being returned to the manufacturer, or 
        are affixed to packages which, or the contents of which, have 
        become damaged and unfit for sale, shall be replaced by the 
        commissioner, upon application by the distributor owning the 
        stamps or cigarettes if an investigation discloses that the 
        stamps have not evidenced a taxable transaction, after 
        compliance with rules or orders of the commissioner designed to 
        prevent use of the stamps replaced. 
           Subd. 11.  [RAILROAD OR SLEEPING CAR COMPANY AS A 
        DISTRIBUTOR.] The commissioner may authorize a railroad or 
        sleeping car company licensed as a distributor to sell 
        cigarettes on its cars without affixing stamps to the packages, 
        provided that monthly reports and payments of the tax due 
        subject to the discount in subdivision 7 must be made directly 
        to the commissioner in the manner and under the terms provided 
        for by the commissioner.  Only one distributor's license need be 
        obtained by each railroad or sleeping car company to permit it 
        to sell cigarettes on any or all of its cars within the state. 
           Sec. 9.  [297F.09] [RETURNS; PAYMENT OF TAX.] 
           Subdivision 1.  [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 
        or before the 18th day of each calendar month, a distributor 
        with a place of business in this state shall file a return with 
        the commissioner showing the quantity of cigarettes manufactured 
        or brought in from outside the state or purchased during the 
        preceding calendar month and the quantity of cigarettes sold or 
        otherwise disposed of in this state and outside this state 
        during that month.  A licensed distributor outside this state 
        shall in like manner file a return showing the quantity of 
        cigarettes shipped or transported into this state during the 
        preceding calendar month.  Returns must be made in the form and 
        manner prescribed by the commissioner and must contain any other 
        information required by the commissioner.  The return must be 
        accompanied by a remittance for the full unpaid tax liability 
        shown by it.  The return for the May liability and 75 percent of 
        the estimated June liability is due on the date payment of the 
        tax is due. 
           Subd. 2.  [MONTHLY RETURN; TOBACCO PRODUCTS 
        DISTRIBUTOR.] On or before the 18th day of each calendar month, 
        a distributor with a place of business in this state shall file 
        a return with the commissioner showing the quantity and 
        wholesale sales price of each tobacco product: 
           (1) brought, or caused to be brought, into this state for 
        sale; and 
           (2) made, manufactured, or fabricated in this state for 
        sale in this state, during the preceding calendar month.  
        Every licensed distributor outside this state shall in like 
        manner file a return showing the quantity and wholesale sales 
        price of each tobacco product shipped or transported to 
        retailers in this state to be sold by those retailers, during 
        the preceding calendar month.  Returns must be made in the form 
        and manner prescribed by the commissioner and must contain any 
        other information required by the commissioner.  The return must 
        be accompanied by a remittance for the full tax liability shown, 
        less 1.5 percent of the liability as compensation to reimburse 
        the distributor for expenses incurred in the administration of 
        this chapter.  The return for the May liability and 75 percent 
        of the estimated June liability is due on the date payment of 
        the tax is due. 
           Subd. 3.  [USE TAX RETURN; CIGARETTE OR TOBACCO PRODUCTS 
        CONSUMER.] On or before the 18th day of each calendar month, a 
        consumer who, during the preceding calendar month, has acquired 
        title to or possession of cigarettes or tobacco products for use 
        or storage in this state, upon which cigarettes or tobacco 
        products the tax imposed by this chapter has not been paid, 
        shall file a return with the commissioner showing the quantity 
        of cigarettes or tobacco products so acquired.  The return must 
        be made in the form and manner prescribed by the commissioner, 
        and must contain any other information required by the 
        commissioner.  The return must be accompanied by a remittance 
        for the full unpaid tax liability shown by it. 
           Subd. 4.  [TAX PROVISIONS APPLICABLE TO CONSUMERS.] All of 
        the provisions of this chapter relating to corrections of 
        returns, deficiency assessments, protests, hearings, interest 
        and penalties, and collection of taxes, apply to consumers. 
           Subd. 5.  [EXTENSION OF TIME.] The commissioner may extend 
        the time for filing returns and remittance of tax, deficiencies, 
        and penalties for not more than 60 days.  The commissioner may 
        require that a tentative return be filed at the time for filing 
        the regularly required return and that payment of the tax be 
        made with it on the basis of the tentative return.  When an 
        extension of time for payment has been granted under this 
        section, interest is payable at the rate provided in section 
        270.75 from the date when the payment should have been made, if 
        no extension had been granted, until the tax is paid. 
           Subd. 6.  [ACCELERATED TAX PAYMENT; CIGARETTE OR TOBACCO 
        PRODUCTS DISTRIBUTOR.] A cigarette or tobacco products 
        distributor having a liability of $120,000 or more during a 
        fiscal year ending June 30, shall remit the June liability for 
        the next year in the following manner: 
           (a) Two business days before June 30 of the year, the 
        distributor shall remit the actual May liability and 75 percent 
        of the estimated June liability to the commissioner and file the 
        return in the form and manner prescribed by the commissioner. 
           (b) On or before August 18 of the year, the distributor 
        shall submit a return showing the actual June liability and pay 
        any additional amount of tax not remitted in June.  A penalty is 
        imposed equal to ten percent of the amount of June liability 
        required to be paid in June, less the amount remitted in June.  
        However, the penalty is not imposed if the amount remitted in 
        June equals the lesser of: 
           (1) 70 percent of the actual June liability; or 
           (2) 75 percent of the preceding May's liability. 
           Subd. 7.  [ELECTRONIC FUNDS TRANSFER.] A cigarette or 
        tobacco products distributor having a liability of $120,000 or 
        more during a fiscal year ending June 30 must remit all 
        liabilities in the subsequent calendar year by means of a fund 
        transfer as defined in section 336.4A-104, paragraph (a).  The 
        funds transfer payment date, as defined in section 336.4A-401, 
        must be on or before the date the tax is due.  If the date the 
        tax is due is not a funds transfer business day, as defined in 
        section 336.4A-105, paragraph (a), clause (4), the payment date 
        must be on or before the funds transfer day immediately 
        following the date the tax is due. 
           Subd. 8.  [ORDER PAYMENTS CREDITED.] All payments received 
        may, in the discretion of the commissioner, be credited first to 
        the oldest liability not secured by a judgment or lien, but in 
        all cases must be credited first to penalties, next to interest, 
        and then to the tax due. 
           Subd. 9.  [INTEREST.] The amount of tax not timely paid, 
        together with any penalty imposed in this section, bears 
        interest at the rate specified in section 270.75 from the time 
        such tax should have been paid until paid.  Any interest and 
        penalty is added to the tax and collected as a part of it. 
           Sec. 10.  [297F.10] [DEPOSIT OF PROCEEDS.] 
           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: 
           (a) first to the general obligation special tax bond debt 
        service account in each fiscal year the amount required to 
        increase the balance on hand in the account on each December 1 
        to an amount equal to the full amount of principal and interest 
        to come due on all outstanding bonds whose debt service is 
        payable primarily from the proceeds of the tax to and including 
        the second following July 1; and 
           (b) after the requirements of paragraph (a) have been met: 
           (1) the revenue produced by one mill of the tax on 
        cigarettes weighing not more than three pounds a thousand and 
        two mills of the tax on cigarettes weighing more than three 
        pounds a thousand must be credited to the Minnesota future 
        resources fund; and 
           (2) 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. 
           Subd. 2.  [TAX AND USE TAX ON TOBACCO PRODUCTS.] Revenue 
        received from taxes on tobacco products, as well as related 
        penalties, interest, and license fees shall be deposited by the 
        commissioner in the state treasury and credited to the general 
        fund. 
           Sec. 11.  [297F.11] [INFORMATIONAL REPORTS; CIGARETTES.] 
           Subdivision 1.  [GENERAL RULE.] The following persons shall 
        file with the commissioner a monthly informational report in the 
        form and manner prescribed by the commissioner: 
           (1) a distributor licensed to ship cigarettes into 
        Minnesota; 
           (2) a person who manufactures cigarettes within the state; 
           (3) any other person who imports cigarettes into Minnesota; 
        and 
           (4) a person who possesses, receives, stores, or warehouses 
        cigarettes in Minnesota, upon which the tax imposed by this 
        chapter has not been paid. 
           The requirement of filing an informational report does not 
        apply to a person conveying or possessing cigarettes described 
        in this chapter, nor to any lawful manufacture of cigarettes 
        within the state for personal consumption. 
           Subd. 2.  [FILING DATES; FAILURE TO FILE.] No payment of 
        any tax is required to be remitted with the report required 
        under subdivision 1.  The report must be filed on or before the 
        tenth day following the end of each calendar month, regardless 
        of whether or not the person shipped, manufactured, possessed, 
        received, stored, or warehoused any cigarettes into or within 
        Minnesota during the previous month, unless the commissioner 
        determines that a longer filing period is appropriate for a 
        particular person. 
           Subd. 3.  [COMMON CARRIERS.] Common carriers and contract 
        carriers transporting cigarettes into this state shall file with 
        the commissioner reports of all such shipments other than those 
        which are delivered to public warehouses of first destination in 
        this state, licensed under the provisions of chapter 231.  The 
        reports must be filed monthly on or before the tenth day of each 
        month and must show with respect to deliveries made in the 
        preceding month:  the date, point of origin, point of delivery, 
        name of consignee, the quantity of cigarettes delivered, and any 
        other information the commissioner requires. 
           A common carrier or a contract carrier transporting 
        cigarettes into Minnesota shall permit examination by the 
        commissioner of its records relating to the shipment of 
        cigarettes. 
           Subd. 4.  [CIGARETTE CONSUMERS.] A person who files a 
        cigarette consumer return as required by this chapter may 
        fulfill the requirements of this section by indicating on the 
        cigarette consumer's return which of the items reported on the 
        return were transported into the state by the consumer.  The 
        requirement of filing an informational report does not apply to 
        consumers who import fewer than 200 cigarettes into this state. 
           Sec. 12.  [297F.12] [INFORMATIONAL REPORTS; TOBACCO 
        PRODUCTS.] 
           Subdivision 1.  [GENERAL RULE.] The transportation of 
        tobacco products into this state by means other than common 
        carrier must be reported to the commissioner within 30 days with 
        the following exceptions: 
           (1) transportation of not more than 50 cigars, not more 
        then ten ounces of snuff or snuff powder, or not more than one 
        pound of smoking or chewing tobacco or other tobacco products 
        not specifically mentioned; 
           (2) transportation by a person with a place of business 
        outside the state, who is licensed as a distributor under this 
        chapter, of tobacco products sold by the person to a retailer in 
        this state. 
           The report must be made in the form and manner prescribed 
        by the commissioner. 
           Subd. 2.  [COMMON CARRIERS.] Common carriers transporting 
        tobacco products into this state shall file with the 
        commissioner reports of all such shipments other than those 
        which are delivered to public warehouses of first destination in 
        this state, licensed under the provisions of chapter 231.  The 
        reports must be filed monthly on or before the tenth day of each 
        month and shall show with respect to deliveries made in the 
        preceding month:  the date, point of origin, point of delivery, 
        name of consignee, description and quantity of tobacco products 
        delivered, and any other information required by the 
        commissioner. 
           A common carrier transporting tobacco products into 
        Minnesota shall permit examination by the commissioner of its 
        records relating to the shipment of tobacco products. 
           Subd. 3.  [MANUFACTURERS.] A manufacturer of tobacco 
        products as defined by this chapter shall report in the form and 
        manner prescribed by the commissioner all sales of tobacco 
        products to Minnesota licensed distributors, subjobbers, 
        retailers, or to any locations within the state.  The report is 
        due on the 18th day of the month following the reporting period. 
           Sec. 13.  [297F.13] [REQUIRED RECORDS.] 
           Subdivision 1.  [CIGARETTE DISTRIBUTOR.] (a) A distributor 
        shall keep at each licensed place of business complete and 
        accurate records for that place of business.  The records must 
        include:  itemized invoices of cigarettes held, purchased, 
        manufactured, or brought in or caused to be brought in from 
        outside the state, and all sales of cigarettes made, except 
        sales to the ultimate consumer.  These records must show the 
        names and addresses of purchasers, the inventory of all stamps 
        affixed and unaffixed and all cigarettes on hand at the close of 
        each period for which a return is required, and any other 
        pertinent papers and documents relating to the purchase, sale, 
        or disposition of cigarettes. 
           (b) A distributor or subjobber who sells cigarettes at 
        retail must maintain a separate inventory, substantiated with 
        invoices for cigarettes that were acquired for retail sale. 
           (c) When a licensed distributor sells cigarettes 
        exclusively to the ultimate consumer at the address given in the 
        license, no invoice of those sales is required, but itemized 
        invoices must be made of all cigarettes transferred to other 
        retail outlets owned or controlled by that licensed distributor. 
           (d) All books, records, and other documents required by 
        this chapter shall be preserved for a period of at least 3-1/2 
        years after the date of the documents or the date of the entries 
        appearing in the records, unless the commissioner in writing 
        authorizes their destruction or disposal at an earlier date. 
           (e) To determine whether the distributor is in compliance 
        with the provisions of this chapter, at any time during usual 
        business hours the commissioner, or duly authorized agents or 
        employees, may enter a place of business of a distributor, 
        without a search warrant, and inspect the premises, the records 
        required to be kept under this chapter, and the packages of 
        cigarettes and the vending devices in that place of business.  
        If the commissioner, or an agent or employee of the 
        commissioner, is denied free access or is hindered or interfered 
        with in making the examination, the commissioner may revoke the 
        distributor's license. 
           Subd. 2.  [TOBACCO PRODUCTS DISTRIBUTOR.] (a) A distributor 
        shall keep at each licensed place of business complete and 
        accurate records for that place of business, including itemized 
        invoices of tobacco products held, purchased, manufactured, 
        brought in or caused to be brought in from outside the state, or 
        shipped or transported to retailers in this state, and all sales 
        of tobacco products made, except sales to the ultimate consumer. 
           (b) When a licensed distributor sells tobacco products 
        exclusively to the ultimate consumer at the address given in the 
        license, no invoice of those sales is required, but itemized 
        invoices must be made of all tobacco products transferred to 
        other retail outlets owned or controlled by that licensed 
        distributor. 
           (c) All books, records, and other documents required by 
        this chapter must be preserved for a period of at least 3-1/2 
        years after the date of the documents or the date of the entries 
        appearing in the records, unless the commissioner authorizes in 
        writing their destruction or disposal at an earlier date. 
           (d) To determine whether the distributor is in compliance 
        with the provisions of this chapter, at any time during usual 
        business hours the commissioner, or duly authorized agents or 
        employees, may enter a place of business of a distributor, 
        without a search warrant, and inspect the premises, the records 
        required to be kept under this chapter, and the tobacco products 
        in that place of business.  If the commissioner, or an agent or 
        employee of the commissioner, is denied free access or is 
        hindered or interfered with in making the examination, the 
        commissioner may revoke the distributor's license. 
           Subd. 3.  [DISTRIBUTOR TO PRESERVE COPIES OF INVOICES.] A 
        person who sells cigarettes or tobacco products to persons other 
        than the ultimate consumer shall render with each sale itemized 
        invoices showing the seller's name and address, the purchaser's 
        name and address, the date of sale, and all prices and 
        discounts, and shall preserve legible copies of all such 
        invoices for 3-1/2 years from the date of the sale. 
           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 
        invoices shall show the name and address of the seller and the 
        date of purchase. 
           The retailer and subjobber shall preserve a legible copy of 
        each invoice for one year from the date of purchase.  Copies 
        should be numbered and kept in chronological order. 
           To determine whether the business is in compliance with the 
        provisions of this chapter and sections 325D.30 to 325D.42, 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. 
           Subd. 5.  [CIGARETTES AND TOBACCO PRODUCTS; RECORDS OF 
        DELIVERY AND SHIPMENT.] Records of all deliveries or shipments 
        of cigarettes or tobacco products from any public warehouse of 
        first destination in this state (which is subject to the 
        provisions of and licensed under chapter 231), must be kept by 
        the warehouse and made available to the commissioner for 
        inspection.  The records must show the name and address of the 
        consignee, the date, the quantity of cigarettes or tobacco 
        products delivered, and any other information required by the 
        commissioner.  These records must be preserved for one year from 
        the date of delivery of the cigarettes or tobacco products. 
           Sec. 14.  [297F.14] [REFUNDS.] 
           Subdivision 1.  [GENERAL RIGHT TO REFUND.] If cigarettes or 
        tobacco products, upon which the tax imposed by this chapter has 
        been reported and paid, are shipped or transported by the 
        distributor to consumers to be consumed outside the state, or to 
        retailers or subjobbers outside the state to be sold by those 
        retailers or subjobbers outside the state, or are returned to 
        the manufacturer by the distributor, or destroyed by the 
        distributor, refund of the tax or credit may be made to the 
        distributor. 
           Subd. 2.  [OVERPAYMENT OF TAX.] An overpayment of the tax 
        imposed under this chapter may be refunded to the taxpayer. 
           Subd. 3.  [CREDIT AGAINST TAX.] The commissioner may credit 
        the amount determined under this section against taxes otherwise 
        payable under this chapter by the taxpayer. 
           Subd. 4.  [BAD DEBT.] The commissioner may adopt rules 
        providing a refund of the tax paid under this chapter if the tax 
        paid qualifies as a bad debt under section 166(a) of the 
        Internal Revenue Code. 
           Subd. 5.  [SOURCE OF REFUND; CIGARETTES.] The commissioner 
        of finance shall pay the cigarette tax refund out of the general 
        fund.  The refunds are apportioned to the same accounts and 
        funds in the general fund to which the tax payments were 
        deposited, except no refunds may be apportioned to the general 
        obligation special tax bond debt service account. 
           Subd. 6.  [SOURCE OF REFUND; TOBACCO PRODUCTS.] The 
        commissioner of finance shall pay the tobacco products tax 
        refund out of the general fund. 
           Subd. 7.  [ANNUAL APPROPRIATION.] There is appropriated 
        annually from the general fund to the commissioner of finance 
        the amount necessary to make the refunds provided by this 
        section. 
           Sec. 15.  [297F.15] [EXAMINATIONS AND AUDITS.] 
           Subdivision 1.  [EXAMINATION OF TAXPAYER.] To determine the 
        accuracy of a return or a report, or for the purpose of 
        collection, or in fixing liability or verifying information 
        under any tax under this chapter, the commissioner may make 
        reasonable examinations or investigations of a taxpayer's place 
        of business, tangible personal property, equipment, computer 
        systems and facilities, pertinent books, records, papers, 
        vouchers, computer printouts, accounts, and documents. 
           Subd. 2.  [ACCESS TO RECORDS.] When conducting an 
        investigation or an audit of a taxpayer, or for the purpose of 
        collection, or in fixing liability or verifying information 
        under any tax under this chapter, the commissioner may examine, 
        except where privileged by law, the relevant records and files 
        of any person, business, institution, financial institution, 
        state agency, agency of the United States government, or agency 
        of any other state where permitted by statute, agreement, or 
        reciprocity.  The commissioner may compel production of these 
        records by subpoena.  A subpoena may be served directly by the 
        commissioner. 
           Subd. 3.  [POWER TO COMPEL TESTIMONY.] In the 
        administration of any tax under this chapter, the commissioner 
        may: 
           (1) administer oaths or affirmations and compel by subpoena 
        the attendance of witnesses, testimony, and the production of a 
        person's pertinent books, records, papers, and other data for 
        inspection and copying; 
           (2) examine under oath or affirmation any person regarding 
        the business of any taxpayer concerning any relevant matter 
        incident to the administration of any tax under this chapter.  
        The fees of witnesses required by the commissioner to attend a 
        hearing are equal to those allowed to witnesses appearing before 
        courts of this state.  The fees must be paid in the manner 
        provided for the payment of other expenses incident to the 
        administration of any tax under this chapter; and 
           (3) in addition to other remedies that may be available, 
        bring an action in equity by the state against a taxpayer for an 
        injunction ordering the taxpayer to file a complete and proper 
        return or amended return.  The district courts of this state 
        have jurisdiction over the action and disobedience of an 
        injunction issued under this clause may be punished as a 
        contempt of district court. 
           Subd. 4.  [THIRD-PARTY SUBPOENA WHERE TAXPAYER'S IDENTITY 
        IS KNOWN.] An investigation may extend to a person that the 
        commissioner determines has access to information that may be 
        relevant to the examination or investigation.  When a subpoena 
        requiring the production of records as described in subdivision 
        2 is served on a third-party recordkeeper, written notice of the 
        subpoena must be mailed to the taxpayer and to any other person 
        who is identified on the subpoena.  The notices must be given 
        within three days of the day on which the subpoena is served.  
        Notice to the taxpayer required by this section is sufficient if 
        it is mailed to the last address on record with the 
        commissioner.  The provisions of this subdivision relating to 
        notice to the taxpayer or other parties identified in the 
        subpoena do not apply if there is reasonable cause to believe 
        that the giving of notice may lead to attempts to conceal, 
        destroy, or alter records relevant to the examination, to 
        prevent the communication of information from other persons 
        through intimidation, bribery, or collusion, or to flee to avoid 
        prosecution, testifying, or production of records. 
           Subd. 5.  [THIRD-PARTY SUBPOENA WHERE TAXPAYER'S IDENTITY 
        IS NOT KNOWN.] A subpoena that does not identify the person or 
        persons whose tax liability is investigated may be served only 
        if: 
           (1) the subpoena relates to the investigation of a 
        particular person or an ascertainable group or class of persons; 
           (2) there is reasonable basis for believing that the person 
        or group or class of persons may fail or may have failed to 
        comply with the tax laws administered by the commissioner; 
           (3) the information sought to be obtained from the 
        examination of the records, and the identity of the person or 
        persons with respect to whose liability the subpoena is issued, 
        is not readily available from other sources; 
           (4) the subpoena is clear and specific concerning the 
        information sought to be obtained; and 
           (5) the information sought to be obtained is limited solely 
        to the scope of the investigation. 
           The party served with a subpoena that does not identify the 
        person or persons with respect to whose tax liability the 
        subpoena is issued may, within 20 days after service of the 
        subpoena, petition the district court in the judicial district 
        in which that party is located for a determination whether the 
        commissioner has complied with all the requirements in clauses 
        (1) to (5), and thus, whether the subpoena is enforceable.  If 
        no petition is made by the party served within the time 
        prescribed, the subpoena has the effect of a court order. 
           Subd. 6.  [REQUEST BY TAXPAYER FOR SUBPOENA.] When the 
        commissioner has the power to issue a subpoena for investigative 
        or auditing purposes, the commissioner shall honor a reasonable 
        request by the taxpayer to issue a subpoena on the taxpayer's 
        behalf in connection with the investigation or audit. 
           Subd. 7.  [APPLICATION TO COURT FOR ENFORCEMENT OF 
        SUBPOENA.] Disobedience of subpoenas issued under this section 
        shall be punished by the district court of the district in which 
        the party served with the subpoena is located, in the same 
        manner as contempt of the district court. 
           Subd. 8.  [COST OF PRODUCTION OF RECORDS.] The cost of 
        producing records of a third party required by a subpoena must 
        be paid by the taxpayer, if the taxpayer requests the subpoena 
        to be issued, or if the taxpayer has the records available but 
        has refused to provide them to the commissioner.  In other cases 
        when the taxpayer cannot produce records and the commissioner 
        then initiates a subpoena for third-party records, the 
        commissioner shall pay the reasonable cost of producing the 
        records.  The commissioner may later assess the reasonable costs 
        against the taxpayer if the records contribute to the 
        determination of an assessment of tax against the taxpayer. 
           Subd. 9.  [PHYSICAL INVENTORY.] The commissioner or the 
        commissioner's authorized agents may, as considered necessary, 
        require a cigarette or tobacco products distributor to furnish a 
        physical inventory of all cigarettes or tobacco products in 
        stock.  The inventory must contain the information that the 
        commissioner requests and must be certified by an officer of the 
        corporation. 
           Subd. 10.  [OFFSET.] Upon audit, if a distributor's return 
        reflects an overage resulting from an inventory counting error, 
        the overage shall be offset against a shortage, if any, in the 
        month immediately preceding the month of the overage.  If any 
        overage remains after that offset, the remainder may only be 
        offset against a shortage, if any, in the month immediately 
        following the month of the overage.  If the commissioner 
        determines that the overage is attributable to a mistake by the 
        distributor other than an inventory counting error, the 
        commissioner may permit the overage to be offset against a 
        shortage in any month or months during the 12-month period 
        immediately following the month when the overage was discovered 
        upon audit. 
           Sec. 16.  [297F.16] [ASSESSMENTS.] 
           Subdivision 1.  [GENERAL RULE.] The commissioner shall make 
        determinations, corrections, and assessments with respect to any 
        tax under this chapter, including interest, additions to taxes, 
        and assessable penalties. 
           Subd. 2.  [COMMISSIONER FILED RETURNS.] If a taxpayer fails 
        to file a required return, the commissioner, from information in 
        the commissioner's possession or obtainable by the commissioner, 
        may make a return for the taxpayer.  The return is prima facie 
        correct and valid.  The commissioner may use statistical or 
        other sampling techniques consistent with generally accepted 
        auditing standards in examining returns or records and making 
        assessments. 
           Subd. 3.  [ORDER OF ASSESSMENT; NOTICE AND DEMAND TO 
        TAXPAYER.] (a) When a return has been filed and the commissioner 
        determines that the tax disclosed by the return is different 
        than the tax determined by the examination, the commissioner 
        shall send an order of assessment to the taxpayer.  When no 
        return has been filed, the commissioner may make a return for 
        the taxpayer under subdivision 2 or may send an order of 
        assessment under this subdivision.  The order must explain the 
        basis for the assessment and must explain the taxpayer's appeal 
        rights.  An order of assessment is final when made but may be 
        reconsidered by the commissioner under this chapter. 
           (b) Penalties under this chapter are not imposed and no 
        collection action can be taken, including the filing of liens 
        under section 270.69, if the amount shown on the order is paid 
        to the commissioner: 
           (1) within 60 days after notice of the amount and demand 
        for its payment have been mailed to the taxpayer by the 
        commissioner; or 
           (2) if an administrative appeal is filed under this 
        chapter, or a tax court appeal is filed under chapter 271, 
        within 60 days following final determination of the appeal if 
        the appeal is based upon a constitutional challenge to the tax, 
        and if not, when the decision of the tax court is made. 
           Subd. 4.  [ERRONEOUS REFUNDS OR CREDITS.] An erroneous 
        refund or credit is considered an underpayment of tax on the 
        date made.  An assessment of a deficiency arising out of an 
        erroneous refund or credit must be made within 3-1/2 years from 
        the date prescribed for filing the return, plus any extension of 
        time granted for filing the return, but only if filed within the 
        extended time, or two years from the time the tax is paid in 
        full, whichever period expires later. 
           Subd. 5.  [ASSESSMENT PRESUMED VALID.] A return or 
        assessment of tax made by the commissioner is prima facie 
        correct and valid.  The taxpayer has the burden of establishing 
        its incorrectness or invalidity in any related action or 
        proceeding. 
           Subd. 6.  [AGGREGATE REFUND OR ASSESSMENT.] The 
        commissioner, on examining returns of a taxpayer for more than 
        one year or period, may issue one order covering the period 
        under examination that reflects the aggregate refund or 
        additional tax due. 
           Subd. 7.  [SUFFICIENCY OF NOTICE.] An order of assessment, 
        sent postage prepaid by United States mail to the taxpayer at 
        the taxpayer's last known address, is sufficient even if the 
        taxpayer is deceased or is under a legal disability, or, in the 
        case of a corporation, has terminated its existence, unless the 
        department has been provided with a new address by a party 
        authorized to receive notices of assessment. 
           Sec. 17.  [297F.17] [LIMITATIONS ON TIME FOR ASSESSMENT OF 
        TAX.] 
           Subdivision 1.  [GENERAL RULE.] Except as otherwise 
        provided in this chapter, the amount of any tax due must be 
        assessed within 3-1/2 years after a return is filed.  The taxes 
        are considered assessed within the meaning of this section when 
        the commissioner has prepared a notice of tax assessment and 
        mailed it to the person required to file a return to the post 
        office address given in the return.  The notice of tax 
        assessment must be sent by mail to the post office address given 
        in the return and the record of the mailing is presumptive 
        evidence of the giving of such notice, and such records must be 
        preserved by the commissioner. 
           Subd. 2.  [DATE OF FILING.] For purposes of this chapter, a 
        return filed before the last day prescribed by law for its 
        filing is considered filed on the last day. 
           Subd. 3.  [FALSE OR FRAUDULENT RETURN OR CLAIM FOR REFUND; 
        NO RETURN.] When a person required to file a return under this 
        chapter files a false or fraudulent return or claim for refund, 
        or fails to file a return, the tax may be assessed, and a 
        proceeding in court for the collection of such tax may be begun 
        at any time. 
           Subd. 4.  [OMISSION OVER 25 PERCENT.] If the person 
        required to file the return omits from the return a dollar 
        amount properly includable in it that is in excess of 25 percent 
        of the dollar amount reported in the return, the tax may be 
        assessed, or a proceeding in court for the collection of such 
        tax may be begun, at any time within 6-1/2 years after the 
        return was filed. 
           Subd. 5.  [TIME LIMIT FOR REFUNDS.] Unless otherwise 
        provided in this chapter, a claim for a refund of an overpayment 
        of tax must be filed within 3-1/2 years from the date prescribed 
        for filing the return, plus any extension of time granted for 
        filing the return, but only if filed within the extended time, 
        or one year after the date of assessment, whichever period 
        expires later. 
           Subd. 6.  [TIME LIMIT FOR BAD DEBT DEDUCTION.] Claims for 
        refund must be filed with the commissioner within one year of 
        the filing date of the taxpayer's federal income tax return 
        containing the bad debt deduction that is being claimed.  
        Claimants under this subdivision are subject to the notice 
        requirements of section 289A.38, subdivision 7. 
           Subd. 7.  [CONSENT TO EXTEND TIME.] If before the 
        expiration of the time prescribed in this section for the 
        assessment of the tax, the commissioner and the person filing 
        the return consent in writing to an extension of time for the 
        assessment of the tax, the tax may be assessed at any time prior 
        to the expiration of the period agreed upon.  The period so 
        agreed upon may be extended by subsequent agreements in writing 
        made before the expiration of the period previously agreed upon. 
           Subd. 8.  [SUSPENSION OF TIME; BANKRUPTCY PROCEEDINGS.] The 
        time during which a tax must be assessed or collection 
        proceedings commenced under this chapter is suspended during the 
        period from the date of a filing of a petition in bankruptcy 
        until 30 days after notice to the commissioner that the 
        bankruptcy proceedings have been closed or dismissed, or that 
        the automatic stay has been terminated or has expired. 
           The suspension of the statute of limitations under this 
        subdivision applies to the person against whom the petition in 
        bankruptcy is filed, and to all other persons who may be wholly 
        or partially liable for the tax under this chapter. 
           Sec. 18.  [297F.18] [INTEREST.] 
           Subdivision 1.  [INTEREST RATE.] When interest is required 
        under this section, interest is computed at the rate specified 
        in section 270.75. 
           Subd. 2.  [LATE PAYMENT.] If a tax under this chapter is 
        not paid within the time named by law for payment, the unpaid 
        tax bears interest from the date the tax should have been paid 
        until the date the tax is paid. 
           Subd. 3.  [EXTENSIONS.] When an extension of time for 
        payment has been granted, interest must be paid from the date 
        the payment should have been made, if no extension had been 
        granted, until the date the tax is paid. 
           Subd. 4.  [ADDITIONAL ASSESSMENTS.] When a taxpayer is 
        liable for additional taxes because of a redetermination by the 
        commissioner, or for any other reason, the additional taxes bear 
        interest from the time the tax should have been paid, without 
        regard to an extension allowed, until the date the tax is paid. 
           Subd. 5.  [ERRONEOUS REFUNDS.] In the case of an erroneous 
        refund, interest begins to accrue from the date the refund was 
        paid unless the erroneous refund results from a mistake of the 
        department, in which case no interest or penalty is imposed, 
        unless the deficiency assessment is not satisfied within 60 days 
        of the order. 
           Subd. 6.  [INTEREST ON JUDGMENTS.] Notwithstanding section 
        549.09, if judgment is entered in favor of the commissioner with 
        regard to any tax under this chapter, the judgment bears 
        interest at the rate given in section 270.75 from the date the 
        judgment is entered until the date of payment. 
           Subd. 7.  [INTEREST ON PENALTIES.] (a) A penalty imposed 
        under section 297F.19, subdivisions 2 to 7, bears interest from 
        the date the return or payment was required to be filed or paid, 
        including any extensions, to the date of payment of the penalty. 
           (b) A penalty not included in paragraph (a) bears interest 
        only if it is not paid within ten days from the date of the 
        notice.  In that case interest is imposed from the date of 
        notice to the date of payment. 
           Sec. 19.  [297F.19] [CIVIL PENALTIES.] 
           Subdivision 1.  [CIVIL ACTION; GENERAL RULE.] The 
        commissioner may recover the amount of any tax due and unpaid 
        under this chapter, as well as interest, and any penalty in a 
        civil action.  The collection of the tax, interest, or penalty 
        is not a bar to any prosecution under this chapter. 
           Subd. 2.  [PENALTY FOR FAILURE TO PAY TAX.] If a tax 
        imposed by this chapter is not paid within the time specified 
        for payment, a penalty is added to the amount required to be 
        shown as tax.  The penalty is five percent of the tax not paid 
        on or before the date specified for payment of the tax if the 
        failure is for not more than 30 days, with an additional penalty 
        of five percent of the amount of tax remaining unpaid during 
        each additional 30 days or fraction of 30 days during which the 
        failure continues, not exceeding 15 percent in the aggregate. 
           Subd. 3.  [PENALTY FOR FAILURE TO MAKE AND FILE RETURN.] If 
        a taxpayer fails to make and file a return within the time 
        prescribed, including an extension, a penalty of five percent of 
        the amount of tax not timely paid is added to the tax. 
           Subd. 4.  [COMBINED PENALTIES.] When penalties are imposed 
        under subdivisions 2 and 3, the penalties imposed under both 
        subdivisions combined must not exceed 38 percent in the 
        aggregate. 
           Subd. 5.  [PENALTY FOR INTENTIONAL DISREGARD OF LAW OR 
        RULES.] If part of an additional assessment is due to negligence 
        or intentional disregard of the provisions of the applicable tax 
        laws or rules of the commissioner, but without intent to 
        defraud, there must be added to the tax an amount equal to ten 
        percent of the additional assessment. 
           Subd. 6.  [PENALTY FOR REPEATED FAILURES TO FILE RETURNS OR 
        PAY TAXES.] If there is a pattern by a person of repeated 
        failures to timely file returns or timely pay taxes, and written 
        notice is given that a penalty will be imposed if such failures 
        continue, a penalty of 25 percent of the amount of the tax not 
        timely paid as a result of each such subsequent failure is added 
        to the tax.  The penalty can be abated under the abatement 
        authority in section 270.07, subdivisions 1, paragraph (e), and 
        6. 
           Subd. 7.  [PENALTY FOR FALSE OR FRAUDULENT RETURN; 
        EVASION.] If a person files a false or fraudulent return, or 
        attempts in any manner to evade or defeat a tax or payment of 
        tax, there is imposed on the person a penalty equal to 50 
        percent of the tax due for the period to which the return 
        related, less amounts paid by the person on the basis of the 
        false or fraudulent return. 
           Subd. 8.  [PAYMENT OF PENALTIES.] The penalties imposed by 
        this section are collected and paid in the same manner as taxes. 
           Subd. 9.  [PENALTIES ARE ADDITIONAL.] The civil penalties 
        imposed by this section are in addition to the criminal 
        penalties imposed by this chapter. 
           Sec. 20.  [297F.20] [CRIMINAL PENALTIES.] 
           Subdivision 1.  [PENALTIES FOR FAILURE TO FILE OR PAY.] (a) 
        A person required to file a return, report, or other document 
        with the commissioner who fails to do so is guilty of a 
        misdemeanor. 
           (b) A person required to pay or to collect and remit a tax 
        under this chapter, who fails to do so when required, is guilty 
        of a misdemeanor. 
           Subd. 2.  [PENALTIES FOR KNOWING FAILURE TO FILE OR 
        PAY.] (a) A person required to file a return, report, or other 
        document with the commissioner, who knowingly, rather than 
        accidentally, inadvertently, or negligently, fails to file it 
        when required, is guilty of a gross misdemeanor.  
           (b) A person required to pay or to collect and remit a tax 
        under this chapter, who knowingly, rather than accidentally, 
        inadvertently, or negligently, fails to file it when required, 
        is guilty of a gross misdemeanor. 
           Subd. 3.  [FALSE OR FRAUDULENT RETURNS; PENALTIES.] (a) A 
        person who files with the commissioner a return, report, or 
        other document, known by the person to be fraudulent or false 
        concerning a material matter, is guilty of a felony. 
           (b) A person who knowingly aids or assists in, or advises 
        in the preparation or presentation of a return, report, or other 
        document that is fraudulent or false concerning a material 
        matter, whether or not the falsity or fraud is committed with 
        the knowledge or consent of the person authorized or required to 
        present the return, report, or other document, is guilty of a 
        felony. 
           Subd. 4.  [COUNTERFEITING.] Any person who makes, alters, 
        forges, or counterfeits a stamp, or who possesses an altered, 
        forged, or counterfeit stamp is guilty of a felony. 
           Subd. 5.  [UNSTAMPED CIGARETTES; PRESUMPTION.] (a) Except 
        as provided in paragraph (b), whenever a package of cigarettes 
        is found in the place of business or in the possession of any 
        person without a proper stamp affixed as required by this 
        chapter, it is presumed that those cigarettes are kept there or 
        held by that person illegally. 
           (b) This presumption does not apply to: 
           (1) cigarettes in the place of business or in the 
        possession of a licensed distributor; 
           (2) cigarettes in the possession of a common carrier or 
        sleeping car company engaged in interstate commerce; 
           (3) cigarettes held in a public warehouse of first 
        destination in this state, in the unbroken, original shipping 
        containers, subject to delivery or shipping instructions from 
        the manufacturer or a distributor; 
           (4) cigarettes in the possession of a person other than a 
        distributor in quantities of 200 cigarettes or less, when those 
        cigarettes have had the individual packages or seals broken, and 
        when they are intended for personal use and not to be sold or 
        offered for sale; 
           (5) cigarettes sold under circumstances in which the tax 
        cannot legally be imposed because of the laws or constitution of 
        the United States. 
           Subd. 6.  [UNSTAMPED CIGARETTES; UNTAXED TOBACCO 
        PRODUCTS.] (a) A person who possesses, receives, or transports 
        more than 200 but fewer than 5,000 unstamped cigarettes, or up 
        to $100 worth of untaxed tobacco products is guilty of a 
        misdemeanor. 
           (b) A person who possesses, receives, or transports 5,000 
        or more, but fewer than 20,001 unstamped cigarettes, or up to 
        $500 worth of untaxed tobacco products is guilty of a gross 
        misdemeanor. 
           (c) A person who possesses, receives, or transports more 
        than 20,000 unstamped cigarettes, or $500 or more worth of 
        untaxed tobacco products is guilty of a felony. 
           Subd. 7.  [SALE OF CIGARETTE PACKAGES WITH INDIAN 
        STAMP.] (a) A retailer doing business off of an Indian 
        reservation who sells or offers to sell more than 200 but fewer 
        than 5,000 cigarettes with Indian stamps is guilty of a 
        misdemeanor. 
           (b) A retailer doing business off of an Indian reservation 
        who sells or offers to sell 5,000 or more, but fewer than 20,001 
        cigarettes with Indian stamps is guilty of a gross misdemeanor. 
           (c) A retailer doing business off of an Indian reservation 
        who sells or offers to sell more than 20,000 cigarettes with 
        Indian stamps is guilty of a felony. 
           Subd. 8.  [SALES AFTER LICENSE REVOCATION.] A person 
        selling cigarettes or tobacco products after the person's 
        license has been revoked is guilty of a felony. 
           Subd. 9.  [PURCHASES FROM UNLICENSED SELLERS.] (a) A 
        retailer, subjobber, or consumer who purchases from an 
        unlicensed seller more than 200 but fewer than 5,000 cigarettes 
        or up to $100 worth of tobacco products is guilty of a 
        misdemeanor. 
           (b) A retailer, subjobber, or consumer who purchases from 
        an unlicensed seller 5,000 or more, but fewer than 20,001 
        cigarettes or up to $500 worth of untaxed tobacco products is 
        guilty of a gross misdemeanor. 
           (c) A retailer, subjobber, or consumer who purchases from 
        an unlicensed seller more than 20,000 cigarettes or $500 or more 
        worth of tobacco products is guilty of a felony. 
           Subd. 10.  [PENALTIES ARE ADDITIONAL.] Criminal penalties 
        imposed by this section are in addition to any civil penalties 
        imposed by this chapter. 
           Subd. 11.  [STATUTE OF LIMITATIONS.] Notwithstanding 
        section 628.26, or any other provision of the criminal laws of 
        this state, an indictment may be found and filed, or a complaint 
        filed, upon a criminal offense named in this section, in the 
        proper court within six years after the offense is committed. 
           Subd. 12.  [OTHER PENALTIES.] A violation of this chapter 
        unless otherwise specified is a misdemeanor. 
           Sec. 21.  [297F.21] [CONTRABAND.] 
           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) Cigarette packages or tobacco products obtained from an 
        unlicensed seller. 
           (g) Cigarette packages offered for sale or held as 
        inventory in violation of section 297F.20, subdivision 7. 
           (h) Tobacco products on which the tax has not been paid by 
        a licensed distributor. 
           Subd. 2.  [SEIZURE.] Cigarettes, tobacco products, or other 
        property made contraband by subdivision 1 may be seized by the 
        commissioner or authorized agents or by any sheriff or other 
        police officer, with or without process, and are subject to 
        forfeiture as provided in subdivisions 3 and 4. 
           Subd. 3.  [INVENTORY; JUDICIAL DETERMINATION; APPEAL; 
        DISPOSITION OF SEIZED PROPERTY.] (a) Within ten days after the 
        seizure of any alleged contraband, the person making the seizure 
        shall make available an inventory of the property seized to the 
        person from whom the seizure was made, if known, and file a copy 
        with the commissioner.  Within ten days after the date of 
        service of the inventory, the person from whom the property was 
        seized or any person claiming an interest in the property may 
        file with the commissioner a demand for a judicial determination 
        of the question as to whether the property was lawfully subject 
        to seizure and forfeiture.  The commissioner, within 60 days, 
        shall institute an action in the district court of the county 
        where the seizure was made to determine the issue of forfeiture. 
           (b) The action must be brought in the name of the state and 
        must be prosecuted by the county attorney or by the attorney 
        general.  The court shall hear the action without a jury and 
        shall try and determine the issues of fact and law involved. 
           (c) When a judgment of forfeiture is entered, the 
        commissioner may, unless the judgment is stayed pending an 
        appeal, either: 
           (1) deliver the forfeited property to the commissioner of 
        human services for use by patients in state institutions; 
           (2) cause it to be destroyed; or 
           (3) cause it to be sold at public auction as provided by 
        law. 
           (d) If a demand for judicial determination is made and no 
        action commenced as provided in this subdivision, the property 
        must be released by the commissioner and returned to the person 
        entitled to it.  If no demand is made, the property seized is 
        considered forfeited to the state by operation of law and may be 
        disposed of by the commissioner as provided in the case of a 
        judgment of forfeiture.  When the commissioner is satisfied that 
        a person from whom property is seized was acting in good faith 
        and without intent to evade the tax imposed by this chapter, the 
        commissioner shall release the property seized without further 
        legal proceedings. 
           Subd. 4.  [DISPOSAL OF OTHER PROPERTY.] (a) The property 
        described in subdivision 1, clause (e), must be confiscated 
        after conviction of the person from whom it was seized, upon 
        compliance with the following procedure:  the commissioner or 
        agents shall file with the court a separate complaint against 
        the property, describing it and charging its use in the 
        specified violation, and specifying substantially the time and 
        place of the unlawful use.  A copy of the complaint must be 
        served upon the defendant or person in charge of the property at 
        the time of seizure, if any. 
           (b) If the person arrested is acquitted, the court shall 
        dismiss the complaint against the property and order it returned 
        to the persons legally entitled to it.  Upon conviction of the 
        person arrested, the court shall issue an order directed to any 
        person known or believed to have any right or title or interest 
        in, or lien upon, any of the property, and to persons unknown 
        claiming any right, title, interest, or lien in it, describing 
        the property; and 
           (1) stating that it was seized and that a complaint against 
        it, charging the specified violation, has been filed with the 
        court, 
           (2) requiring the persons to file with the court 
        administrator their answer to the complaint, setting forth any 
        claim they may have to any right or title to, interest in, or 
        lien upon the property, within 30 days after the service of the 
        order, and 
           (3) notifying them in substance that if they fail to file 
        their answer within the prescribed time, the property will be 
        ordered sold by the commissioner or the commissioner's agents. 
           (c) The court shall cause the order to be served on any 
        person known or believed to have any right, title, interest, or 
        lien as in the case of a summons in a civil action, and on 
        unknown persons by publication, as provided for service of 
        summons in a civil action.  If an answer is filed within the 
        time provided, the court shall fix a time for hearing, which 
        shall be not less than ten nor more than 30 days after the time 
        for filing answer expires.  If no answer is filed within the 
        time prescribed, the court shall, upon affidavit by the court 
        administrator, setting forth the fact, order the property sold 
        by the commissioner or agents.  Seventy-five percent of the 
        proceeds of the sale of forfeited property, after payment of 
        seizure, storage, forfeiture, and sale expenses, must be 
        forwarded to the commissioner for deposit as a supplement to its 
        operating fund or similar fund for official use, and 25 percent 
        must be forwarded to the county attorney or other prosecuting 
        agency that handled the forfeiture for deposit as a supplement 
        to its operating fund or similar fund for prosecutorial purposes.
           (d) At the time fixed for hearing, unless continued for 
        cause, the matter must be heard and determined by the court 
        without a jury as in other civil actions.  If the court finds 
        that the property, or any part of it, was used in the violation 
        specified in the complaint, it shall order the property 
        unlawfully used, and sold as provided by law, unless the owner 
        shows to the satisfaction of the court that the owner had no 
        notice or knowledge or reason to believe that the property was 
        used or intended to be used in the violation.  The officer 
        making a sale, after deducting the expense of keeping the 
        property, the fee for seizure, and the costs of the sale, shall 
        pay all liens according to their priority, which are established 
        at the hearing as being bona fide, and as existing without the 
        lienor having any notice or knowledge that the property was 
        being used or was intended to be used for or in connection with 
        the violation specified in the order of the court, and shall pay 
        the balance of the proceeds to the commissioner for official use 
        and sharing in the manner provided in paragraph (c).  A sale 
        under the provisions of this section operates to free the 
        property sold from any and all liens on it.  An appeal from the 
        order of the district court lies as in other civil cases. 
           (e) At any time after seizure of the articles specified in 
        this subdivision, and before the hearing provided for, the 
        property must be returned to the owner or person having a legal 
        right to its possession, upon execution of a good and valid bond 
        to the state, with corporate surety, in the sum of not less than 
        $100 and not more than double the value of the property seized, 
        to be approved by the court in which the case is triable, or a 
        judge of it, conditioned to abide any order and the judgment of 
        the court, and to pay the full value of the property at the time 
        of seizure.  The commissioner may dismiss the proceedings 
        outlined in this subdivision when the commissioner considers it 
        in the best interests of the state to do so. 
           Sec. 22.  [297F.22] [ADMINISTRATIVE REVIEW.] 
           Subdivision 1.  [TAXPAYER RIGHT TO RECONSIDERATION.] A 
        taxpayer may obtain reconsideration by the commissioner of an 
        order assessing any tax imposed by this chapter, a denial of a 
        request for abatement of penalty, or a denial of a claim for 
        refund by filing an administrative appeal under subdivision 3.  
        A taxpayer cannot obtain reconsideration under this section if 
        the action taken by the commissioner is the outcome of an 
        administrative appeal. 
           Subd. 2.  [NOTICE DATE.] For purposes of this section, the 
        term "notice date" means the date of the order adjusting the tax 
        or order denying a request for abatement, or, in the case of a 
        denied refund, the date of the notice of denial. 
           Subd. 3.  [TIME AND CONTENT FOR ADMINISTRATIVE 
        APPEAL.] Within 60 days after the notice date, the taxpayer must 
        file a written appeal with the commissioner.  The appeal need 
        not be in any particular form but must contain the following 
        information: 
           (1) the name and address of the taxpayer; 
           (2) if a corporation, the state of incorporation of the 
        taxpayer, and the principal place of business of the 
        corporation; 
           (3) the Minnesota identification number or social security 
        number of the taxpayer; 
           (4) the type of tax involved; 
           (5) the date; 
           (6) the tax years or period involved and the amount of tax 
        involved for each year or period; 
           (7) the findings in the notice that the taxpayer disputes; 
           (8) a summary statement that the taxpayer relies on for 
        each exception; and 
           (9) the taxpayer's signature or signature of the taxpayer's 
        duly authorized agent. 
           Subd. 4.  [EXTENSIONS.] When requested in writing and 
        within the time allowed for filing an administrative appeal, the 
        commissioner may extend the time for filing an appeal for a 
        period of not more than 30 days from the expiration of the 60 
        days from the notice date. 
           Subd. 5.  [DETERMINATION OF APPEAL.] On the basis of 
        applicable law and available information, the commissioner shall 
        determine the validity, if any, in whole or part of the appeal 
        and notify the taxpayer of the decision.  This notice must be in 
        writing and contain the basis for the determination. 
           Subd. 6.  [AGREEMENT DETERMINING TAX LIABILITY.] When it 
        appears to be in the best interests of the state, the 
        commissioner may settle any taxes, penalties, or interest that 
        the commissioner has under consideration by virtue of an appeal 
        filed under this section.  An agreement must be in writing and 
        signed by the commissioner and the taxpayer, or the taxpayer's 
        representative authorized by the taxpayer to enter into an 
        agreement.  The agreement must be filed in the office of the 
        commissioner. 
           Subd. 7.  [APPEAL OF AN ADMINISTRATIVE 
        DETERMINATION.] Following the determination or settlement of an 
        appeal and notwithstanding any period of limitations for making 
        assessments or other determinations to the contrary, the 
        commissioner must issue an order reflecting that disposition.  
        If the statute of limitations for making assessments or other 
        determinations would have expired before the issuance of this 
        order, except for this section, the order is limited to issues 
        or matters contained in the appealed determination.  Except in 
        the case of an agreement determining tax under this section, the 
        order is appealable to the Minnesota tax court under section 
        271.06. 
           Subd. 8.  [APPEAL WHERE NO DETERMINATION.] If the 
        commissioner does not make a determination within six months of 
        the filing of an administrative appeal, the taxpayer may appeal 
        to tax court. 
           Subd. 9.  [INAPPLICABILITY OF ADMINISTRATIVE PROCEDURE 
        ACT.] An appeal under this section is not a contested case 
        governed by chapter 14. 
           Sec. 23.  [297F.23] [JUDICIAL REVIEW.] 
           In lieu of an administrative appeal under this chapter, a 
        person aggrieved by an order of the commissioner fixing a tax, 
        penalty, or interest under this chapter may, within 60 days from 
        the date of the notice of the order, appeal to the tax court in 
        the manner provided under section 271.06. 
           Sec. 24.  [PURPOSE.] 
           It is the intent of the legislature to simplify Minnesota's 
        cigarette and tobacco products tax laws by consolidating and 
        recodifying tax administration and compliance provisions now 
        contained throughout Minnesota Statutes, chapter 297.  Due to 
        the complexity of the recodification, prior provisions are 
        repealed on the effective date of the new provisions.  The 
        repealed provisions, however, continue to remain in effect until 
        superseded by the analogous provision in the new law. 
           Sec. 25.  [REPEALER.] 
           Minnesota Statutes 1996, sections 297.01; 297.02; 297.03; 
        297.031; 297.032; 297.04; 297.041; 297.05; 297.06; 297.07; 
        297.075; 297.08; 297.09; 297.10; 297.11; 297.12; 297.13; 297.21; 
        297.22; 297.23; 297.24; 297.25; 297.26; 297.31; 297.32; 297.321; 
        297.33; 297.335; 297.34; 297.35; 297.36; 297.37; 297.38; 
        297.385; 297.39; 297.40; 297.41; 297.42; 297.43; and 297.44, are 
        repealed. 
           Sec. 26.  [EFFECTIVE DATE.] 
           Sections 1, 7, and 24 are effective the day following final 
        enactment. 
           Sections 2 to 6 and 8 to 12, 14, 19, 22, and 23 are 
        effective for returns, reports, taxes, or other payments first 
        becoming due on or after August 1, 1997. 
           Sections 13, 21, and 25 are effective August 1, 1997. 
           Sections 15 and 16 are effective for audits or 
        investigations initiated on or after August 1, 1997. 
           Section 17 is effective for returns becoming due on or 
        after August 1, 1997. 
           Section 18 is effective for interest on amounts first 
        becoming due to the commissioner on or after August 1, 1997. 
           Section 20 is effective for crimes committed on or after 
        August 1, 1997. 
                                   ARTICLE 2
                          CROSS-REFERENCE CORRECTIONS 
           Section 1.  Minnesota Statutes 1996, section 16A.26, is 
        amended to read: 
           16A.26 [ONE DEPOSITORY ACCOUNT FOR EACH TAX.] 
           Notwithstanding sections 297.13 297F.10, 298.17, 298.282, 
        298.39, 298.396, 297C.02 to 297C.08 and similar laws to the 
        contrary relating to the depositing, disposition, or 
        apportionment of tax receipts, the commissioner may use one 
        depository account for each tax.  To do so, there must be enough 
        information to identify and dispose of or apportion the tax 
        under law.  The commissioner shall ask the appropriate officials 
        for the transfers and necessary certifications.  The 
        commissioner may issue directives to carry out this section. 
           Sec. 2.  Minnesota Statutes 1996, section 16A.661, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ESTABLISHMENT OF DEBT SERVICE FUND; 
        APPROPRIATION OF DEBT SERVICE FUND MONEY.] (a) There is 
        established within the state bond fund a separate and special 
        account designated as a general obligation special tax bond debt 
        service account.  There must be credited to this debt service 
        account in each fiscal year from the tobacco tax revenue fund 
        established in section 297.13 297F.10 an amount sufficient to 
        increase the balance on hand in the debt service account on each 
        December 1 to an amount equal to the full amount of principal 
        and interest to come due on all outstanding bonds whose debt 
        service is payable primarily from proceeds of the tax to and 
        including the second following July 1.  The money on hand in the 
        debt service account must be used solely for the payment of the 
        principal of, and interest on, the bonds, and is appropriated 
        for this purpose.  This appropriation does not cancel as long as 
        any of the bonds remain outstanding. 
           (b) There is established within the state bond fund a 
        separate and special account designated as a general obligation 
        special tax bond debt service account.  There must be credited 
        to this debt service account in each fiscal year from the sports 
        and health club sales tax revenue fund established in section 
        297A.44 an amount sufficient to increase the balance on hand in 
        the debt service account on each December 1 to an amount equal 
        to the full amount of principal and interest to come due on all 
        outstanding bonds whose debt service is payable primarily from 
        proceeds of the tax to and including the second following July 
        1.  The money on hand in the debt service account must be used 
        solely for the payment of the principal of, and interest on, the 
        bonds, and is appropriated for this purpose.  This appropriation 
        does not cancel as long as any of the bonds remain outstanding. 
           Sec. 3.  Minnesota Statutes 1996, section 16A.6701, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [STATE LICENSE AND SERVICE FEES.] For 
        purposes of section 16A.67, subdivision 3, and this section, the 
        term "state license and service fees" means, and refers to, all 
        license fees, service fees, and charges imposed by law and 
        collected by any state officer, agency, or employee, which are 
        listed below or which are defined as departmental earnings under 
        section 16A.1285, subdivision 1, and the use of which is not 
        otherwise restricted by law, and which are not required to be 
        credited or transferred to a fund other than the general fund:  
           Minnesota Statutes 1994, sections 3.9221; 5.12; 5.14; 5.16; 
        5A.04; 6.58; 13.03, subdivision 10; 16A.155; 16A.48; 16A.54; 
        16A.72; 16B.59; 16B.70; 17A.04; 18.51, subdivision 2; 18.53; 
        18.54; 18C.551; 19.58; 19.64; 27.041, subdivision 2, clauses (d) 
        and (e); 27.07, subdivision 5; 28A.08; 32.071; 32.075; 32.392; 
        35.71; 35.824; 35.95; 41C.12; 45.027, subdivisions 3 and 6; 
        46.041, subdivision 1; 46.131, subdivisions 2, 7, 8, 9, and 10; 
        47.101, subdivision 2; 47.54, subdivisions 1 and 4; 47.62, 
        subdivision 4; 47.65; 48.475, subdivision 1; 48.61, subdivision 
        7; 48.93; 49.36, subdivision 1; 52.01; 52.203; 53.03, 
        subdivisions 1, 5, and 6; 53.09, subdivision 1; 53A.03; 53A.05, 
        subdivision 1; 53A.081, subdivision 3; 54.294, subdivision 1; 
        55.04, subdivision 2; 55.095; 56.02; 56.04; 56.10; 59A.03, 
        subdivision 2; 59A.06, subdivision 3; 60A.14, subdivisions 1 and 
        2; 60A.23, subdivision 8; 60K.19, subdivision 5; 65B.48, 
        subdivision 3; 70A.14, subdivision 4; 72B.04, subdivision 10; 
        79.251, subdivision 5; 80A.28, subdivisions 1, 2, 3, 4, 5, 6, 7, 
        7a, 8, and 9; 80C.04, subdivision 1; 80C.07; 80C.08, subdivision 
        1; 80C.16, subdivisions 2 and 3; 80C.18, subdivision 2; 82.20, 
        subdivision 8 and 9; 82A.04, subdivision 1; 82A.08, subdivision 
        2; 82A.16, subdivisions 2 and 6; 82B.09, subdivision 1; 83.23, 
        subdivisions 2, 3, and 4; 83.25, subdivisions 1 and 2; 83.26, 
        subdivision 2; 83.30, subdivision 2; 83.31, subdivision 2; 
        83.38, subdivision 2; 85.052; 85.053; 85.055; 88.79, subdivision 
        2; 89.035; 89.21; 115.073; 115.77, subdivisions 1 and 2; 116.41, 
        subdivision 2; 116C.69; 116C.712; 116J.9673; 125.08; 136C.04, 
        subdivision 9; 155A.045; 155A.16; 168.27, subdivision 11; 
        168.33, subdivisions 3 and 7; 168.54; 168.67; 168.705; 168A.152; 
        168A.29; 169.345; 171.06, subdivision 2a; 171.29, subdivision 2; 
        176.102; 176.1351; 176.181, subdivision 2a; 177.30; 181A.12; 
        183.545; 183.57; 184.28; 184.29; 184A.09; 201.091, subdivision 
        5; 204B.11; 207A.02; 214.06; 216C.261; 221.0355; 239.101; 
        240.06; 240.07; 240.08; 240.09; 240.10; 246.51; 270.69, 
        subdivision 2; 270A.07; 272.484; 296.06; 296.12; 296.17; 
        297.04 297F.03; 297.33; 299C.46; 299C.62; 299K.09; 299K.095; 
        299L.07; 299M.04; 300.49; 318.02; 323.44, subdivision 3; 
        325D.415; 326.22; 326.3331; 326.47; 326.50; 326.92, subdivisions 
        1 and 3; 327.33; 331A.02; 332.15, subdivisions 2 and 3; 332.17; 
        332.22, subdivision 1; 332.33, subdivisions 3 and 4; 332.54, 
        subdivision 7; 333.055; 333.20; 333.23; 336.9-413; 336A.04; 
        336A.05; 336A.09; 345.35; 345.43, subdivision 2a; 345.44; 
        345.55, subdivision 3; 347.33; 349.151; 349.161; 349.162; 
        349.163; 349.164; 349.165; 349.166; 349.167; 357.08; 359.01, 
        subdivision 3; 360.018; 360.63; 386.68; and 414.01, subdivision 
        11; Minnesota Statutes 1994, chapters 154; 216B; 237; 302A; 303; 
        308A; 317A; 322A; and 322B; Laws 1990, chapter 593; Laws 1993, 
        chapter 254, section 7; and Laws 1994, chapter 573, section 4; 
        Minnesota Rules, parts 1800.0500; 1950.1070; 2100.9300; 
        7515.0210; and 9545.2000 to 9545.2040. 
           Sec. 4.  Minnesota Statutes 1996, section 116P.13, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [REVENUE SOURCES.] The money in the 
        Minnesota future resources fund consists of revenue credited 
        under section 297.13 297F.10, subdivision 1, paragraph (b), 
        clause (1). 
           Sec. 5.  Minnesota Statutes 1996, section 325D.32, 
        subdivision 4, is amended to read: 
           Subd. 4.  "Wholesaler" means and includes any person who 
        acquires cigarettes for the purpose of sale to retailers or to 
        other persons for resale, and who maintains an established place 
        of business when any part of the business is the sale of 
        cigarettes at wholesale to persons licensed to sell cigarettes 
        by the state or any municipality, and where at all times a stock 
        of cigarettes is available to retailers for resale, or any 
        cigarette manufacturer or manufacturer's representative who 
        sells to retailers or to other persons for resale, and any 
        person defined as a "distributor" under section 297.01 297F.01, 
        subdivision 7 6.  The term "wholesaler" shall also include a 
        "subjobber" as defined by section 297.01 297F.01, subdivision 14 
        19.  This subdivision does not prohibit any person from engaging 
        in business as a retailer as defined in subdivision 5. 
           Sec. 6.  Minnesota Statutes 1996, section 325D.415, is 
        amended to read: 
           325D.415 [CIGARETTE DISTRIBUTOR FEES.] 
           A cigarette distributor as defined in section 297.01 
        297F.01, subdivision 7 6, shall pay to the commissioner an 
        annual fee as follows:  
           (1) a fee of $2,500 is due from those distributors whose 
        annual cigarette tax collections exceed $2,000,000; and 
           (2) a fee of $1,200 is due from those distributors whose 
        annual cigarette tax collections are $2,000,000 or less. 
           The annual fee must be paid by December 31 of each year.  
        If the fee is not paid when due, the commissioner shall revoke 
        or refuse to issue or renew the license under chapter 297.  The 
        annual fee must be deposited into the general fund. 
           Sec. 7.  [EFFECTIVE DATE.] 
           Sections 1 to 6 are effective August 1, 1997. 
           Presented to the governor May 5, 1997 
           Signed by the governor May 6, 1997, 2:47 p.m.