H. B. 3046
(By Mr. Speaker, Mr. Kiss)
[Introduced February 18, 2003; Referred to
the Committee on Finance.]
A BILL to amend chapter sixteen of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designate nine-d, all relating
generally to facilitating and enforcing compliance with
tobacco master settlement agreement and with laws implementing
that agreement; imposing civil and criminal penalties for
failure to comply; and specifying internal effective dates.
Be it enacted by the Legislature of West Virginia:
That chapter sixteen of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by adding
thereto a new article, designated article nine-d, all
to reads as
follows:
ARTICLE 9D. ENFORCEMENT OF STATUTES IMPLEMENTING TOBACCO MASTER
SETTLEMENT AGREEMENT.
§16-9D-1. Findings & Purpose.
The Legislature finds that violations of article nine-b of
this chapter threaten the integrity of the tobacco master
settlement agreement, the fiscal soundness of the state, and the
public health. The legislature finds that enacting procedural
enhancements will help prevent violations and aid enforcement of
article nine-b of this chapter and thereby safeguard the master
settlement agreement, the fiscal soundness of the state, and the
public health.
§16-9D-2. Definitions.
(a) "Brand Family" means all styles of cigarettes sold under
the same trade mark and differentiated from one another by means of
additional modifiers or descriptors, including, but not limited to,
"menthol," "lights," "kings," and "100s" and includes any brand
name (alone or in conjunction with any other word), trademark,
logo, symbol, motto, selling message, recognizable pattern of
colors, or any other indicia of product identification identical or
similar to, or identifiable with, a previously known brand of
cigarettes.
(b) "Cigarette" has the same meaning as in section two,
article nine-b of this chapter.
(c) "Commissioner" means the duly appointed head of the agency
responsible for collection of the excise tax on cigarettes.
(d) "Distributor" means a person, wherever resident or
located, who purchases non-tax-paid cigarettes and stores, sells, or otherwise disposes of the cigarettes.
(e) "Master tobacco settlement agreement" has the same meaning
as that term is defined in section two, article nine-b of this
chapter.
(f) "Non-participating manufacturer" means any tobacco product
manufacturer that is not a participating manufacturer.
(g) "Participating manufacturer" has the meaning given that
term in section II(jj) of the master settlement agreement and all
amendments thereto.
(h) "Qualified escrow fund" has the same meaning as that term
is defined in section two, article nine-b of this chapter.
(i) "Stamping agent" includes any distributor or other person
that is authorized to affix tax stamps to packages or other
containers of cigarettes under article seventeen, chapter eleven of
this code, or any person that is required to pay the excise tax
imposed on cigarettes pursuant to article seventeen of said chapter
eleven.
(j) "Tobacco product manufacturer" has the same meaning as
that term is defined in section two, article nine-b of this
chapter.
(k)
"Units sold" has the same meaning as that term is defined
in section two, article nine-b of this chapter.
§16-9D-3. Certifications; directory; tax stamps.
(a)
Certification. - Every tobacco product manufacturer whose cigarettes are sold in this state, whether directly or through a
distributor, retailer or similar intermediary or intermediaries,
shall execute and deliver in the manner prescribed by the
commissioner a certification to the commissioner and the attorney
general, no later than the thirtieth day of April each year,
certifying under penalty of perjury that, as of the date of the
certification, the tobacco product manufacturer either is a
participating manufacturer or is in full compliance with article
nine-b of this chapter, including payment of all quarterly
installment payments required by section six of this article.
(1) A participating manufacturer shall include in its
certification a list of its brand families. The participating
manufacturer shall update the list thirty calendar days prior to
any addition to or modification of its brand families by executing
and delivering a supplemental certification to the commissioner and
the attorney general.
(2) A non-participating manufacturer shall include in its
certification:
(A) A list of all of its brand families and the number of
units sold for each brand family that were sold in this state
during the preceding calendar year,
(B) A list of all of its brand families that have been sold in
this state at any time during the current calendar year,
indicating, by an asterisk, any brand family sold in this state during the preceding calendar year that is no longer being sold in
this state as of the date of the certification, and
(D) Identification, by name and address, of any other
manufacturer of the brand families in the preceding calendar year.
The non-participating manufacturer shall update the list thirty
calendar days prior to any addition to or modification of its brand
families by executing and delivering a supplemental certification
to the commissioner and the attorney general.
(3) In the case of a non-participating manufacturer, the
certification shall further certify:
(A) That the non-participating manufacturer is registered to
do business in this state or has appointed a resident agent for
service of process and provided notice thereof as required by
section four of this article;
(B) That the non-participating manufacturer has (i)
established and continues to maintain a qualified escrow fund, and
(ii) has executed a qualified escrow agreement that has been
reviewed and approved by the attorney general and that governs the
qualified escrow fund;
(C) That the non-participating manufacturer is in full
compliance with article nine-b of this chapter and this article,
and any rules promulgated pursuant to either article; and
(D) The name, address and telephone number of the financial
institution where the non-participating manufacturer has established the qualified escrow fund required by article nine-b of
this chapter and all rules promulgated thereto, and:
(i) The account number of the qualified escrow fund and sub-
account number for the state of West Virginia;
(ii) The amount the non-participating manufacturer placed in
escrow fund for cigarettes sold in this state during the preceding
calendar year, the date and amount of each such deposit, and any
evidence or verification as may be deemed necessary by the attorney
general to confirm the foregoing; and
(iii) The amount and date of any withdrawal or transfer of
funds the non-participating manufacturer made at any time from the
qualified escrow fund or from any other qualified escrow fund into
which it ever made escrow payments pursuant to article nine-b of
this chapter and all rules promulgated thereto.
(4) A tobacco product manufacturer may not include a brand
family in its certification unless:
(A) In the case of a participating manufacturer, the
participating manufacturer affirms that the brand family is to be
deemed to be its cigarettes for purposes of calculating its
payments under the master settlement agreement for the relevant
year, in the volume and shares determined pursuant to the master
settlement agreement; and
(B) In the case of a non-participating manufacturer, the non-
participating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of article nine-b of this
chapter. Nothing in this section shall be construed as limiting or
otherwise affecting this state's right to maintain that a brand
family constitutes cigarettes of a different tobacco product
manufacturer for purposes of calculating payments under the master
settlement agreement or for purposes of article nine-b of this
chapter.
(5) Tobacco product manufacturers shall maintain all invoices
and documentation of sales and other such information relied upon
for the certification for a period of five years, unless otherwise
required by law to maintain them for a greater period of time.
(b)
Directory of cigarettes approved for stamping and sale. -
The commissioner shall develop and publish on the tax division's
website a directory listing all tobacco product manufacturers that
have provided current and accurate certifications conforming to the
requirements of subsection (a) of this section and all brand
families that are listed in the certifications, except as provided
in subdivisions (1) and (2) of this subsection (b).
(1) The commissioner shall not include or retain in the
directory the name or brand families of any non-participating
manufacturer that has failed to provide the required certification
or whose certification the commissioner or the attorney general
determines is not in compliance with subdivisions (2) and (3),
subsection (a) of this section, unless the commissioner has determined that the violation has been cured to the satisfaction of
the commissioner and the attorney general.
(2) Neither a tobacco product manufacturer nor brand family
shall be included or retained in the directory if the attorney
general concludes in the case of a non-participating manufacturer,
that:
(A) Any escrow payment required pursuant to article nine-b of
this chapter for any period for any brand family, whether or not
listed by the non-participating manufacturer, has not been
fully paid into a qualified escrow fund governed by a qualified
escrow agreement that has been approved by the attorney general of
this state, or
(B) Any outstanding final judgment, including interest
thereon, for violations of article nine-b of this chapter has not
been fully satisfied for the brand family and the non-participating
manufacturer.
(3) The tax commissioner shall update the directory as
necessary in order to correct mistakes and to add or remove a
tobacco product manufacturer or brand family.
(A) The commissioner may not remove any manufacturer or brand
family from the directory unless the manufacturer and all
distributors and other stamping agents registered under article
twelve, chapter eleven of this code, have been given at least seven
days' prior notice of the intended removal by electronic mail or first class mail, which notices have been e-mailed or posted to the
addresses provided by the manufacturers, distributors or other
stamping agents for this purpose.
(B) The commissioner shall transmit by email or other
practicable means to each distributor or other stamping agent
registered under article twelve, chapter eleven of this code, to
affix West Virginia tax stamps to cigarettes notice of any addition
to or removal from the directory of any tobacco product
manufacturer or brand family.
(C) Failure of a manufacturer, distributor or other stamping
agent to receive notice under paragraph (A) or (B),subdivision (3),
subsection (b) of this section, or failure of the state to provide
notice of any addition to or removal from the directory shall not
relieve the distributor or other stamping agent of its obligations
under this article.
(4) Every tobacco product manufacturer selling cigarettes in
this state and every distributor or other stamping agent affixing
West Virginia tax stamps to packages of cigarettes for sale in this
state shall provide and update as necessary an electronic mail
address to the commissioner for the purpose of receiving any
notifications as may be required by this article.
(c)
Prohibition against stamping or sale of cigarettes not on
the directory. - It shall be unlawful for any person:
(1) To affix a stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not
included in the directory; or
(2) To sell, offer, or possess for sale in this state,
cigarettes of a tobacco product manufacturer or brand family not
included in the directory, except as follows:
(A) This subsection (c) shall not prohibit a distributor or
other stamping agent from possessing unstamped containers of
cigarettes held in inventory for delivery to, or for sale in,
another state; and
(B) A person purchasing cigarettes for resale shall not be in
violation of this subsection (c) if, at the time the cigarettes
were purchased, the manufacturer and brand families of the
cigarettes are included in the directory maintained by the tax
commissioner and the cigarettes are otherwise lawfully stamped and
sold within thirty days after the date of the notice provided under
paragraph (A), subdivision (3), subsection (b) of this section.
§16-9D-4. Certification of tobacco product manufacturer wanting to
sell product in this state for the first time.
(a) A tobacco product manufacturer whose cigarettes have not
previously been sold in this state, whether directly or through a
distributor, retailer or similar intermediary or intermediaries,
shall, at least thirty calendar days before beginning to sell its
cigarettes in this state, make the certification required by
section three of this article. In addition to the information required by section three, the manufacturer shall include the
following information in its certification:
(1) If the tobacco product manufacturer is a partnership,
limited liability company, corporation, association or other
business entity, the following where applicable:
(A) The names and addresses of every partner, member, officer,
resident agent, director or person performing a function similar to
a director,
(B) The names and addresses of any person owning of record a
ten percent or greater equity interest in the tobacco product
manufacturer; and
(C) A list of all names under which the tobacco manufacturer,
or any partner, member, officer, resident agent, director, or
person owning a ten percent or greater equity interest in the
tobacco manufacturer, previously did business as a tobacco product
manufacturer in the United States within the five-year period
preceding the date of submission of the certification;
(2) A statement of whether the tobacco product manufacturer,
or any partner, member, officer, resident agent, director, or
person owning a ten percent or greater equity interest in the
tobacco manufacturer, or in any subsidiary, affiliate or persons
controlled by or under common control with the tobacco
manufacturer, has ever been an officer, partner, director or person
owning a ten percent or greater equity interest in a tobacco product manufacturer that ever defaulted in fully funding the
escrow account required by article nine-b of this chapter in the
five-year period prior to the date of submission of the
certification under this section and, if so, a brief explanation of
the facts involved.
§16-9D-5.Agent for service of process.
(a)
Requirement for agent for service of process.
(1) Any non-resident or foreign non-participating manufacturer
that has not registered to do business in this state as a foreign
corporation or business entity shall, as a condition precedent to
having its brand families included or retained in the directory,
appoint and continually engage without interruption the services of
an agent in this state, or in the United States, to act as agent
for the service of process on whom all process, and any action or
proceeding against it concerning or arising out of the enforcement
of this article and article nine-b of this chapter, may be served
in any manner authorized by law. Such service shall constitute
legal and valid service of process on the non-participating
manufacturer. The non-participating manufacturer shall provide the
name, address, phone number and proof of the appointment and
availability of the agent to and to the satisfaction of the
commissioner and the attorney general.
(2) Any non-resident stamping agent authorized to affix stamps
to packages of cigarettes evidencing payment of the tax levied by article seventeen, chapter eleven of this code, on cigarettes to be
sold in this state that has not registered to do business in this
state as a foreign corporation or business entity shall, as a
condition precedent to being authorized to affix West Virginia tax
stamps, appoint and continually engage without interruption the
services of an agent in this state, or in the United States, to act
as agent for the service of process on whom all process, and any
action or proceeding against it concerning or arising out of the
enforcement of this article and article nine-b of this chapter, may
be served in any manner authorized by law. Such service shall
constitute legal and valid service of process on the non-resident
stamping agent. The non-resident stamping agent shall provide the
name, address, phone number and proof of the appointment and
availability of the agent to and to the satisfaction of the
commissioner and the attorney general.
(b) The non-participating manufacturer or the non-resident
stamping agent shall provide written notice to the commissioner and
the attorney general thirty calendar days prior to termination of
the authority of an agent and shall further provide proof to the
satisfaction of the attorney general of the appointment of a new
agent no less than five calendar days prior to the termination of
an existing agent appointment. In the event an agent terminates an
agency appointment, the non-participating manufacturer, or non-
resident stamping agent, as the case may be, shall notify the commissioner and attorney general in writing of the termination
within five calendar days and shall include proof to the
satisfaction of the attorney general of the appointment of a new
agent.
(c) Any non-participating manufacturer and any non-resident
stamping agent whose cigarettes are sold in this state, who has not
appointed and engaged an agent as required by this section, shall
be deemed to have appointed the secretary of state of West Virginia
as the agent and may be proceeded against in the courts of this
state by service of process upon the secretary of state:
Provided,
That the appointment of the secretary of state as the agent of the
manufacturer or the nonresident stamping agent shall not satisfy
the condition precedent for having the brand families of the non-
participating manufacturer included or retained in the directory.
§16-9D-6. Reporting of information; escrow installments.
(a)
Reporting by distributors and other stamping agents.
(1) Not later than twenty calendar days after the end of each
calendar quarter, and more frequently if so directed by the
commissioner, each distributor or stamping agent shall submit such
information as the commissioner requires to facilitate compliance
with this article, including, but not limited to, a list by brand
family of the total number of cigarettes, or in the case of roll
your own, the equivalent stick count, for which the distributor or
other stamping agent affixed West Virginia stamps and sold in West Virginia during the previous calendar quarter or otherwise paid
the tax due for the cigarettes.
(2) The distributor or stamping agent shall maintain, and make
available to the commissioner, all invoices and documentation of
sales of all cigarettes sold in West Virginia and any other
information relied upon in reporting to the commissioner for a
period of five years.
(b)
Disclosure of information. - The commissioner is
authorized to disclose to the attorney general of this state any
information received under this article and requested by the
attorney general for purposes of determining compliance with and
enforcing the provisions of this article. The commissioner and the
attorney general shall share with each other the information
received under this article, and may share the information with
other federal, state or local agencies only for purposes of
enforcement of this article, article nine-b of this chapter, or
corresponding laws of other states.
(c)
Verification of qualified escrow fund. - The attorney
general may require at any time from the non-participating
manufacturer proof, from the financial institution in which the
manufacturer has established a qualified escrow fund for the
purpose of compliance with article nine-b of this chapter, of the
amount of money in the fund, exclusive of interest, the amount and
date of each deposit to the qualified escrow fund, and the amount and date of each withdrawal from the fund.
(d)
Requests for additional information. - In addition to the
information required to be submitted pursuant to this section, the
attorney general may require a stamping agent, distributor or
tobacco product manufacturer to submit any additional information
including, but not limited to, samples of the packaging or labeling
of each brand family, as is necessary to enable the attorney
general to determine whether a tobacco product manufacturer is in
compliance with this article.
(e)
Quarterly escrow installments. - To promote compliance
with the provisions of this article, a tobacco product manufacturer
subject to the requirements of subdivision (2), subsection (a),
section three of this article, who, in the opinion of the attorney
general, materially defaults in fully funding its escrow account
timely and then cures the default shall make escrow deposits for
the calendar year during which the default was cured and ensuing
calendar years in quarterly installments during the year in which
the sales covered by such deposits are made. The attorney general
may require production of information sufficient to enable the
attorney general to determine the adequacy of the amount of the
installment deposit.
§16-9D-7. Penalties and other remedies.
(a)
Revocation of business registration certificate and civil
money penalty. - In addition to or in lieu of any other civil or criminal remedy provided by law, upon a determination that a
distributor, stamping agent or any other person has violated
subsection (c), section three of this article, or any rule adopted
pursuant thereto, the commissioner may revoke or suspend the
business registration certificate of the distributor, stamping
agent or other person in the manner provided by article twelve,
chapter eleven of this code. Each stamp affixed and each sale or
offer to sell cigarettes in violation of subsection (c), section
three of this article shall constitute a separate violation. The
commissioner may also impose a civil penalty in an amount not to
exceed the greater of five hundred percent of the retail value of
the cigarettes or five thousand dollars upon a determination of
violation of subsection (c), section three of this article or any
rules adopted pursuant thereto. The penalty shall be imposed and
collected in the manner that tax is assessed and collected under
article ten, chapter eleven of this code. The amount of penalty
collected shall be deposited in the tobacco control special fund
created in section seven of this article.
(b)
Contraband and seizure. - Any cigarettes that have been
sold, offered for sale, or possessed for sale, in this state, in
violation of subsection (c), section three of this article, shall
be deemed contraband under article seventeen, chapter eleven of
this code and the cigarettes shall be subject to seizure and
forfeiture as provided in article seventeen, and all cigarettes so seized and forfeited shall be destroyed and not resold:
Provided,
That this subsection shall not prohibit a stamping agent or
distributor from possessing unstamped containers of cigarettes held
in inventory for delivery to, or for sale in, another state.
(c)
Injunction. - The attorney general, on behalf of the
commissioner, may seek an injunction to restrain a threatened or
actual violation of subsection (c), section three of this article,
subsection (a), section five of this article, or subsection (d) of
said section five, by a distributor, stamping agent or other person
and to compel the distributor, stamping agent or other person to
comply with these subsections:
Provided, That this subsection shall
not prohibit a stamping agent or distributor from possessing
unstamped containers of cigarettes held in inventory for delivery
to, or for sale in, another state. In any action brought pursuant
to this section, the state shall be entitled to recover the costs
of investigation, costs of the action and reasonable attorney fees.
(d)
Unlawful sale and distribution. - It shall be unlawful for
a person to:
(1) sell or distribute cigarettes, or
(2) acquire, hold, own, possess, transport, import, or cause
to be imported cigarettes that the person knows or should know are
intended for distribution or sale in this state in violation of
subsection (c), section three of this article. A violation of this
subsection shall be a misdemeanor punishable as provided in section nineteen-a, article seventeen, chapter eleven of this code.
(e)
Unfair trade practice. - A person who violates subsection
(c), section three of this article, engages in an unfair and
deceptive trade practice in violation of article six, chapter
forty-six-a of this code.
§16-9D-8. Miscellaneous provisions.
(a)
Notice and review of determination. - A determination of
the commissioner or the attorney general to not include or to
remove from the directory a brand family or tobacco product
manufacturer shall be subject to review in the manner prescribed by
article ten-a, chapter eleven of this code, by filing a petition
for review with the office of tax appeals within thirty days of
receipt of the commissioner's written determination to not include
or to remove the brand family or tobacco product manufacturer from
the directory. A determination not to list in, or to remove from,
the directory any brand family or tobacco product manufacturer
shall not be stayed during the pendency of appeal procedure.
(b)
Applicants for business registration certificate. - No
person shall be issued a business registration certificate under
article twelve, chapter eleven of this code or granted a renewal of
its business registration certificate to act as a distributor or
stamping agent unless the person has certified in writing, under
penalty of perjury, that the person will comply fully with this
article.
(c)
Promulgation of rules. - The commissioner and the attorney
general may separately promulgate such procedural, interpretive and
legislative rules in the manner provided in article three, chapter
twenty-nine-a of this code, each deems to be necessary to effect
the purposes of this article.
(d)
Recovery of costs and fees by attorney general. - In any
action brought by the state to enforce this article, the state
shall be entitled to recover the costs of investigation, expert
witness fees, costs of the action and reasonable attorney fees.
(e)
Disgorgement of profits for violations of this article. -
If a court determines that a person has violated this article, the
court shall order any profits, gain, gross receipts or other
benefit from the violation to be disgorged and paid to the state
treasurer for deposit in the "tobacco control special fund", which
is hereby created in the state treasury. Unless otherwise expressly
provided, the remedies or penalties provided by this article are
cumulative to each other and to the remedies or penalties available
under all other laws of this state.
(f)
Construction and severability.
(A) If a court of competent jurisdiction finds that the
provisions of this article and of article nine-b of this chapter
conflict and cannot be harmonized, then the provisions of article
nine-b shall control.
(B) If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this article causes article nine-b of
this chapter to no longer constitute a qualifying or model statute,
as those terms are defined in the master settlement agreement, then
that portion of this article shall not be valid.
(C) If any section, subsection, subdivision, paragraph,
sentence, clause or phrase of this article is for any reason held
to be invalid, unlawful or unconstitutional, that decision shall
not affect the validity of the remaining portions of this article
or any part thereof.
§16-9D-9. Effective date; implementation.
Should this act of the Legislature take effect ninety days
from passage, the first certification by a tobacco product
manufacturer described in subsection (a), section three of this
article, shall be due the first day of July, two thousand three,
covering the two thousand two calendar year, and the additional
information required by section three for the current calendar year
up to the date of the certification; and the directory described in
subsection (b), section three of this article, shall be published
in the state register by the fifteenth day of August, two thousand
three, and made available on the tax commissioner's web page by the
fifteenth day of October, two thousand three.
(b) Should this act of the Legislature be in effect from
passage, the first certification by a tobacco product manufacturer
described in subsection (a), section three of this article, shall be due the first day of May, two thousand three, covering the two
thousand two calendar year, and the additional information required
by section three for the current calendar year up to the date of
the certification; and the directory described in subsection (b),
section three of this article, shall be published in the state
register by the fifteenth day of June, two thousand three, and made
available on the tax commissioner's web page by the fifteenth day
of August, two thousand three.
(c) Should this act of the Legislature take effect the first
day of July, two thousand three, the first certification by a
tobacco product manufacturer described in subsection (a), section
three of this article, shall be due the first day of July, two
thousand three, covering the two thousand two calendar year, and
the additional information required by section three for the
current calendar year up to the date of the certification; and the
directory described in subsection (b), section three of this
article, shall be published in the state register by the fifteenth
day of August, two thousand three, and made available on the tax
commissioner's web page by the fifteenth day of October, two
thousand three.
NOTE: The purpose of this bill is to facilitate compliance
with and enforcement of provisions of the Tobacco Master Settlement
Agreement and W. Va. Code §16-9B-1
et seq., which implements the
Tobacco Master Settlement Agreement. This legislation is
recommended for adoption by the Tobacco Project of the National
Association of Attorneys General.
Article 9D is new; therefore, strike-throughs and underscoring
have been omitted.
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