REPORT TITLE: 
Cigarette Stamp Tax


DESCRIPTION:
Provides that the excise tax on cigarettes shall be imposed and
collected through the use of stamps purchased by licensees, and
affixed to cigarette packages.  Includes provisions for civil
and criminal penalties, and for forfeitures of cigarettes, to be
enforced by the police departments, liquor commissions, the
attorney general, and prosecuting attorneys.  Requires the
Director of Taxation to submit findings and recommendations to
the legislature for the 2005 Session on effectiveness of Act.
(CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        788
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                H.D. 2
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  Chapter 245, Hawaii Revised Statutes, is amended
 
 2 by adding a new part to be appropriately designated and to read
 
 3 as follows:
 
 4                 "PART   .  STAMPING OF CIGARETTES
 
 5      §245-A  Payment of tax through use of stamps.(a)  The tax
 
 6 imposed under section 245-3 upon the sale or use of cigarettes
 
 7 shall be paid by licensees through the use of stamps.
 
 8      (b)  The department shall furnish stamps for sale.
 
 9      §245-B  Sales through financial institutions; rules.  The
 
10 department may enter into agreements to permit the sale of stamps
 
11 by designated financial institutions located within the State.  A
 
12 list of financial institutions designated to sell stamps shall be
 
13 made available at the department.  The department may adopt rules
 
14 as necessary for this purpose pursuant to chapter 91.
 
15      §245-C  Designs, specifications, and denominations of
 
16 stamps; affixation; cancellation.  Stamps shall be of such
 
17 designs, specifications, and denominations as may be prescribed
 
18 by the department.  The department shall adopt rules pursuant to
 
19 chapter 91, on the method and manner in which stamps are to be
 

 
Page 2                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 affixed to packages of cigarettes, and may provide for the
 
 2 cancellation of stamps.
 
 3      §245-D  Affixation prior to distribution.(a)  Beginning
 
 4 December 15, 1999, a licensee, or designee of a licensee, may
 
 5 apply to the department for stamps as provided in this section.
 
 6      (b)  Beginning January 1, 2000, a licensee or the authorized
 
 7 agent or designee of a licensee, shall affix a stamp to the
 
 8 bottom of each individual package of cigarettes, prior to
 
 9 distribution.
 
10      (c)  Beginning April 1, 2000, an individual package of
 
11 cigarettes, not affixed with the stamp required under this
 
12 section, shall not be sold or offered for sale to the general
 
13 public.
 
14      (d)  Beginning April 1, 2000, a cigarette package, not
 
15 affixed with the stamp required under this section, shall not be
 
16 placed or stored in a vending machine. 
 
17      §245-E  Approval of department required for transfer of
 
18 stamps.  Unaffixed stamps shall not be sold, exchanged, or in any
 
19 manner transferred by a licensee to another person without prior
 
20 written approval of the department.  Any person who violates this
 
21 section shall be fined not less than $500 and not more than
 
22 $1,000 for each violation.
 
23      §245-F  Authority to order purchases for wholesaler or
 

 


 

Page 3                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 dealer; duration; revocation.  A licensee shall, in writing,
 
 2 authorize those persons who may order purchases of stamps for the
 
 3 licensee at a location where stamps are sold.  The authorization
 
 4 shall continue in effect until written notice of revocation of
 
 5 the authority is delivered at the sales location in the manner
 
 6 prescribed by rules adopted by the department pursuant to chapter
 
 7 91.
 
 8      §245-G  Payment of tax without use of stamps in certain
 
 9 transactions; rules.  The department may provide by rule pursuant
 
10 to chapter 91 that the tax imposed by this chapter with respect
 
11 to cigarettes may be paid without the use of stamps in connection
 
12 with a particular type of transaction.
 
13      §245-H  Price; payment; deferred payment purchases.(a)
 
14 Stamps shall be sold to licensees at their denominated values,
 
15 plus a state stamp fee of .2 per cent of the denominated value of
 
16 the stamp to pay for the cost to the State of providing the
 
17 stamps; provided that the department may adopt rules, pursuant to
 
18 chapter 91, to modify the state stamp fee to reflect the actual
 
19 costs incurred by the State in providing the stamps.
 
20      (b)  Payment for stamps shall be made at the time of
 
21 purchase; provided that the department may adopt rules pursuant
 
22 to chapter 91 to permit a licensee to defer payments therefor as
 
23 provided for in section 245-I.
 

 
Page 4                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      §245-I  Application to fix maximum amount and time of
 
 2 deferred-payment purchases; bonding; designation of sales
 
 3 locations.(a)  A licensee may apply to the department to set
 
 4 the maximum amount of deferred-payment purchases of stamps that
 
 5 may remain unpaid by the licensee during the time specified under
 
 6 section 245-J.  Upon receipt of the application and any bond
 
 7 required pursuant to subsection (b), the department shall set the
 
 8 amount for deferred-payment purchases.
 
 9      (b)  The department may require that a licensee who submits
 
10 an application for deferred-payment purchases of stamps post a
 
11 bond in an amount of up to one hundred per cent of the maximum
 
12 amount of allowed deferred-payment purchases as a condition of
 
13 approval of the application by the department.
 
14      §245-J  Time for payment of deferred-payment purchases;
 
15 manner of payment.  Amounts owing for stamps purchased on the
 
16 deferred-payment basis in any calendar month shall be due and
 
17 payable on or before the last day of the following calendar
 
18 month.  Payment shall be made by a remittance payable to the
 
19 department.
 
20      §245-K  Suspension of privilege to purchase on deferred-
 
21 payment basis or reduction of amount of permissible purchases.
 
22 The department may suspend, without prior notice, a licensee's
 
23 privilege to purchase stamps on the deferred-payment basis, or
 

 
Page 5                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 may reduce the amount of deferred-payment purchases allowed the
 
 2 licensee, if:
 
 3      (1)  The licensee fails to promptly pay for stamps when
 
 4           payment is due;
 
 5      (2)  The bond or bonds required of the licensee are
 
 6           canceled, become void, impaired, or unenforceable for
 
 7           any reason; or
 
 8      (3)  In the opinion of the department, collection of any
 
 9           amounts unpaid or due from the licensee under this
 
10           chapter is jeopardized.
 
11      §245-L  Penalty for failure to make timely payment.  A
 
12 licensee who fails to pay any amount owing for the purchase of
 
13 stamps within the time required shall pay a penalty of ten per
 
14 cent of the amount due in addition to the amount due plus
 
15 interest at the rate specified in section 231-39, from the date
 
16 on which the amount became due and payable until the date of
 
17 payment.
 
18      §245-M  Unused stamps.  The department shall adopt rules
 
19 pursuant to chapter 91 for a refund or credit to a licensee in
 
20 the amount of the denominated values of any unused stamps.
 
21      §245-N  Cigarettes and tobacco products shipped outside the
 
22 State for sale or use outside the State; refund or credit of
 
23 taxes.(a)  The department shall adopt rules pursuant to chapter
 

 
Page 6                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 91 to provide a tobacco tax refund or credit to a licensee who
 
 2 has paid a tobacco tax on the distribution of cigarettes or
 
 3 tobacco products that are shipped to a point outside the State
 
 4 for subsequent sale or use outside the State.
 
 5      (b)  This part shall not apply to cigarettes or tobacco
 
 6 products that are distributed in this State to consumers and that
 
 7 are subsequently taken outside the State.
 
 8      §245-O  Monthly report on distributions of cigarettes and
 
 9 tobacco products, and purchases of stamps.(a)  On or before the
 
10 last day of each month, every licensee shall file, on forms
 
11 prescribed by the department, a report of the licensee's
 
12 distributions of cigarettes and purchases of stamps during the
 
13 preceding month, and any other information that the department
 
14 may require to carry out this section.
 
15      (b)  On or before the last day of each month, every licensee
 
16 shall file, on forms prescribed by the department, a report of
 
17 the licensee's distributions of tobacco products and the
 
18 wholesale costs of tobacco products during the preceding month,
 
19 and any other information that the department may require to
 
20 carry out this part.
 
21      §245-P  Counterfeiting stamps.  Any person who:
 
22      (1)  Falsely or fraudulently makes, forges, alters, reuses,
 
23           or counterfeits any stamp provided for or authorized
 

 
Page 7                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1           under this part;
 
 2      (2)  Causes any stamp to be falsely or fraudulently made,
 
 3           forged, altered, reused, or counterfeited; or
 
 4      (3)  Knowingly and wilfully utters, publishes, passes, or
 
 5           tenders as genuine, any false, forged, altered, reused,
 
 6           or counterfeited stamp,
 
 7 is guilty of a class B felony and shall be imprisoned for not
 
 8 less than one year and not more than ten years, and may be fined
 
 9 not more than $50,000, or both.
 
10      §245-Q  Sale or purchase of packages of cigarettes without
 
11 stamps; fines and penalties.(a)  Beginning April 1, 2000, a
 
12 person who knowingly possesses, keeps, stores, acquires,
 
13 transports, or retains for the purpose of sale, or sells or
 
14 offers to sell, three thousand or more cigarettes with an
 
15 aggregate wholesale price of $250 or more, to which there are not
 
16 affixed the stamps required under this part, regardless of the
 
17 source of, or method of obtaining the cigarettes, is guilty of a
 
18 class C felony, and upon conviction thereof, shall be fined not
 
19 more than $10,000, and may be imprisoned not less than one year
 
20 and not more than five years, or both; provided that a
 
21 corporation shall be fined not more than $50,000.
 
22      (b)  Beginning April 1, 2000, a person who knowingly
 
23 possesses, keeps, stores, acquires, transports, or retains for
 

 
Page 8                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 the purpose of sale, or sells or offers to sell, one thousand two
 
 2 hundred or more, but not more than two thousand nine hundred
 
 3 ninety-nine, cigarettes with an aggregate wholesale value of $100
 
 4 or more, but less than $250, to which there are not affixed the
 
 5 stamps required under this part, regardless of the source of, or
 
 6 method of obtaining the cigarettes, is guilty of a misdemeanor,
 
 7 and upon conviction thereof, shall be fined not more than $5,000,
 
 8 and may be imprisoned not more than one year, or both; provided
 
 9 that a corporation shall be fined not more than $25,000.
 
10      (c)  Beginning April 1, 2000, a person who knowingly
 
11 violates a provision of this part for which a criminal punishment
 
12 is not otherwise provided is guilty of a misdemeanor, and may be
 
13 fined not more than $2,000 or imprisoned not more than one year,
 
14 or both.
 
15      §245-R  Vending unstamped cigarettes; offense; punishment.
 
16 Beginning April 1, 2000, a person in possession or control of, or
 
17 having access to, a cigarette vending machine, who knowingly or
 
18 wilfully places for sale in the vending machine any cigarettes
 
19 not contained in packages to which are affixed Hawaii tax stamps,
 
20 shall be guilty of a class C felony, and upon conviction thereof:
 
21      (1)  Shall be fined not more than $10,000;
 
22      (2)  May be imprisoned not less than one year and not more
 
23           than ten years; or 
 

 
Page 9                                                     788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      (3)  Both;
 
 2 provided that a corporation shall be fined not more than $50,000.
 
 3      §245-S  Treatment of unstamped cigarettes.  Beginning April
 
 4 1, 2000, all persons in possession or control of unstamped
 
 5 cigarettes shall destroy the unstamped cigarettes or return the
 
 6 unstamped cigarettes to the manufacturers.  Failure to comply may
 
 7 subject persons in possession or control of unstamped cigarettes
 
 8 to the criminal penalties and administrative fines provided for
 
 9 in sections 245-Q, 245-R, 245-U, 245-V, 245-W, and 245-X.
 
10      §245-T  Enforcement; injunction; disposition of fines.(a)
 
11 Enforcement of this part shall be under the concurrent
 
12 jurisdiction of the attorney general, liquor commission,
 
13 prosecuting attorney, and police department.
 
14      (b)  Notwithstanding the existence of other remedies at law,
 
15 the attorney general or prosecuting attorney may apply for, and
 
16 the court may grant, a temporary or permanent injunction
 
17 restraining any person from violating or continuing to violate
 
18 this part.  The injunction shall be issued without bond.
 
19      (c)  Where a police department, working with either the
 
20 attorney general or prosecuting attorney, initiates and conducts
 
21 an investigation resulting in the imposition and collection of a
 
22 criminal fine pursuant to this part, one hundred per cent of the
 
23 fine shall be equally distributed between the police department
 

 
Page 10                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 whose officers or employees initiated and conducted the
 
 2 investigation, and either the office of the attorney general or
 
 3 of the prosecuting attorney, whichever obtained the underlying
 
 4 conviction.
 
 5      §245-U  Liquor commission hearing, counterfeiting stamps,
 
 6 or selling, purchasing, or vending unstamped cigarettes.(a)
 
 7 The liquor commission or liquor control adjudication board may
 
 8 assess and collect a fine against, or reprimand any person who
 
 9 counterfeits Hawaii tax stamps, or sells, purchases, or vends
 
10 unstamped cigarettes in violation of this part or of any rule or
 
11 regulation applicable thereto.  Any reprimand or fine imposed by
 
12 the commission or board pursuant to this section shall be in
 
13 addition to any other fine that may be imposed by law.  The fine
 
14 assessed and collected pursuant to this section shall not exceed
 
15 the sum of $2,000 for each violation.
 
16      (b)  In every case where proceedings under this section in
 
17 which a fine may be imposed are conducted, the person subject to
 
18 those proceedings shall be entitled to notice and hearing in
 
19 conformity with chapter 91.  The person shall be entitled to be
 
20 heard in person or through counsel, and shall be given a full and
 
21 fair opportunity to present facts showing that the alleged cause
 
22 or causes for the proposed action do not exist, or to show any
 
23 other reason why no fine should be imposed.  Testimony taken at
 

 
Page 11                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 the hearing shall be under oath and recorded stenographically, or
 
 2 by machine.  The parties shall not be bound by strict rules of
 
 3 evidence.  At the request of the person subject to the
 
 4 proceedings, certified copies of any transcript and of any other
 
 5 record made of, or at the hearing, shall be provided upon payment
 
 6 by the requester of the costs of providing the certified copies.
 
 7      (c)  The notice required by this section shall be served in
 
 8 the following manner:
 
 9      (1)  Written notice of the violation shall be given to the
 
10           person charged with the violation within a reasonable
 
11           period of time after the alleged violation is
 
12           discovered, and the person charged shall be requested
 
13           to acknowledge receipt of the notice;
 
14      (2)  If the person charged cannot be found after diligent
 
15           search, notice may be served by leaving a certified
 
16           copy of the written notice at the person's dwelling
 
17           house or usual place of abode with any person of
 
18           suitable age and discretion residing therein;
 
19      (3)  If the person charged cannot be found after diligent
 
20           search, and service cannot be made, then service may be
 
21           made by mailing a certified copy of the written notice
 
22           by way of the United States post office certified mail,
 
23           postage prepaid, and addressed to the person at the
 

 
Page 12                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1           person's last known residence address; and
 
 2      (4)  Where a partnership, corporation, unincorporated
 
 3           association, or limited liability company is charged,
 
 4           service may be made upon any partner, officer, or
 
 5           member thereof.
 
 6      §245-V  Seizure and confiscation of unstamped cigarettes.
 
 7 The attorney general, liquor commission, prosecuting attorney,
 
 8 and the police department may seize and confiscate any cigarette,
 
 9 package of cigarettes, or carton of cigarettes that is possessed,
 
10 kept, stored, acquired, transported, or retained for the purpose
 
11 of sale, or sold or offered for sale in violation of this part,
 
12 subject to the requirements of chapter 281.
 
13      §245-W  Arrest; abetters.  The owner, keeper, and any person
 
14 having custody of any cigarette, package of cigarettes, or carton
 
15 of cigarettes seized as provided in section 245-V, may be
 
16 arrested without necessity of warrant and brought before the
 
17 district court of the circuit in which the seizure occurred.  If
 
18 the owner or keeper of the cigarette, package of cigarettes, or
 
19 carton of cigarettes seized is unknown to the police officer
 
20 making the seizure, or if no person is found in apparent
 
21 possession or custody of them, the police officer may arrest and
 
22 bring before the court the owner or occupant of the building,
 
23 place, or premises, or the driver, operator, owner, or other
 

 
Page 13                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 person in charge of the conveyance in which the cigarette,
 
 2 package of cigarettes, or carton of cigarettes is found, if such
 
 3 person is known or can be ascertained.  Any person who has
 
 4 knowingly engaged in, aided, assisted, or abetted the obtaining,
 
 5 keeping, or sale of any cigarette, package of cigarettes, or
 
 6 carton of cigarettes seized as provided in section 245-V, or has
 
 7 been privy thereto, or has knowingly permitted the use of any
 
 8 place, building, premises, or conveyance for such unlawful
 
 9 purpose, shall be guilty of a misdemeanor and be punished as
 
10 provided in section 245-Q(c).
 
11      §245-X  Forfeitures; disposition.(a)  Any cigarette,
 
12 package of cigarettes, or carton of cigarettes unlawfully
 
13 possessed, kept, stored, acquired, transported, or retained for
 
14 the purpose of sale, or sold or offered for sale, in violation of
 
15 this part, may be ordered forfeited pursuant to chapter 281 by an
 
16 appropriate administrative or judicial proceeding. 
 
17      (b)  Any cigarette, package of cigarettes, or carton of
 
18 cigarettes forfeited pursuant to this section shall be sold to a
 
19 licensed wholesaler or dealer.
 
20      (c)  All proceeds from the sale of any cigarette, package of
 
21 cigarettes, or carton of cigarettes forfeited as provided in this
 
22 section shall, after payment of expenses of administration and
 
23 sale, be distributed equally between:
 

 
Page 14                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      (1)  Either the county police department or county liquor
 
 2           commission whose officers, investigators, or employees
 
 3           initiated and conducted an investigation resulting in
 
 4           the forfeiture and sale of cigarettes pursuant to this
 
 5           section; and
 
 6      (2)  The attorney general or prosecuting attorney who
 
 7           instituted the action producing the forfeiture.
 
 8      (d)  Money distributed to the attorney general, liquor
 
 9 commission, police department, or prosecuting attorney shall be
 
10 used for law enforcement purposes, and shall complement but not
 
11 supplant the funds regularly appropriated for such purposes.
 
12      §245-Y  Appeals.  A claimant of a cigarette, package of
 
13 cigarettes, or carton of cigarettes forfeited pursuant to section
 
14 245-X, may appeal the forfeiture in the same manner as appeals
 
15 are allowed in other cases governed by chapter 281.  If the
 
16 claimant fails to appear, or to diligently prosecute the appeal,
 
17 or fails to secure a reversal of the judgment in the appellate
 
18 court, the judgment appealed from shall be carried out.
 
19      §245-Z  Claims.  If the owner or possessor of any cigarette,
 
20 package of cigarettes, or carton of cigarettes seized under this
 
21 part appears and makes claim to the item, the owner or possessor
 
22 shall file with the court before whom the proceedings are
 
23 pending, a claim in writing, setting forth the claimant's
 

 
Page 15                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 interest therein, and the reason why the items claimed should not
 
 2 be forfeited.  The claimant shall also give bond in favor of the
 
 3 State, sufficient in amount and sureties, as required by the
 
 4 court, and conditioned so that if the claim is diligently
 
 5 prosecuted and decided against the claimant, the claimant shall
 
 6 pay the costs of the proceedings conducted to resolve the claim.
 
 7 If the judgment is against the claimant, the cigarette, package
 
 8 of cigarettes, carton of cigarettes, and all containers thereof
 
 9 shall be forfeited and shall be disposed of as provided in
 
10 section 245-X.
 
11      §245-AA  Prosecutions not to exclude other remedies
 
12 affecting goods.  The criminal penalties and administrative fines
 
13 authorized under this part shall be in addition to any
 
14 forfeitures imposed pursuant to section 245-X."
 
15      SECTION 2.  Section 245-1, Hawaii Revised Statutes, is
 
16 amended by adding nine new definitions to be appropriately
 
17 inserted and to read as follows:
 
18      ""Attorney general" means the attorney general or deputy
 
19 attorneys general of the State of Hawaii.
 
20      "Department" means the department of taxation.
 
21      "License" means any license granted under this chapter.
 
22      "Licensee" means a holder of a license granted under this
 
23 chapter.
 

 
Page 16                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      "Liquor commission" means the liquor commission of the
 
 2 various counties.
 
 3      "Liquor control adjudication board" or "board" means a board
 
 4 established by county charter, within a county, that shall have
 
 5 the jurisdiction to hear and determine complaints or violations
 
 6 of chapter 281 and to impose penalties as may be provided in
 
 7 chapter 281.
 
 8      "Police department" means the police department of the
 
 9 various counties.
 
10      "Prosecuting attorney" means the prosecuting attorney or
 
11 deputy prosecuting attorneys of the various counties.
 
12      "Stamp" means a stamp printed, manufactured, or made by
 
13 authority of the department, as provided in this chapter, which
 
14 is issued, sold, or circulated by the department, and by the use
 
15 of which the tax levied under this chapter is paid."
 
16      SECTION 3.  Section 245-3, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "§245-3  Taxes[; limitations].(a)  Every licensee,
 
19 wholesaler, or dealer, in addition to any other taxes provided by
 
20 law, shall pay for the privilege of conducting business and other
 
21 activities in the State an:
 
22      (1)  Excise tax equal to[:
 
23           (A)  4.00 cents for each cigarette sold, used, or
 

 
Page 17                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1                possessed by the wholesaler or dealer, after
 
 2                August 31, 1997; and
 
 3           (B)] 5.00 cents for each cigarette sold, used, or
 
 4                possessed by a licensee, wholesaler, or dealer
 
 5                after June 30, 1998, whether or not sold at
 
 6                wholesale, or if not sold then at the same rate
 
 7                upon the use by the licensee, wholesaler, or
 
 8                dealer; and
 
 9      (2)  Excise tax equal to forty per cent of the wholesale
 
10           price of each article or item of tobacco products sold
 
11           by the licensee, wholesaler, or dealer, whether or not
 
12           sold at wholesale, or if not sold then at the same rate
 
13           upon the use by the licensee, wholesaler, or dealer.
 
14      Where the tax imposed has been paid on cigarettes or tobacco
 
15 products which thereafter become the subject of a casualty loss
 
16 deduction allowable under chapter 235, the tax paid shall be
 
17 refunded or credited to the account of the licensee, wholesaler,
 
18 or dealer.  [In applying the tax, the tax shall be applied
 
19 against the latest of the activities of selling, using, or
 
20 possessing.  The tax shall be imposed at the time of the last of
 
21 the following activities to occur:  the sale; the use; or the
 
22 possession of cigarettes or tobacco products.] The tax shall be
 
23 applied to cigarettes through the use of stamps.
 

 
Page 18                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      (b)  The taxes, however, are subject to the following
 
 2 limitations:
 
 3      (1)  The measure of the taxes shall not include any
 
 4           cigarettes or tobacco products exempted, and so long as
 
 5           the same are exempted, from the imposition of taxes by
 
 6           the Constitution or laws of the United States; [and]
 
 7      (2)  The measure of taxes shall exempt and exclude all sales
 
 8           of cigarettes and tobacco products to the United States
 
 9           (including any agency or instrumentality thereof that
 
10           is wholly owned or otherwise so constituted as to be
 
11           immune from the levy of a tax under this chapter), sold
 
12           by any person licensed under this chapter; and
 
13     [(2)] (3)  The taxes shall be paid only once in respect of
 
14           the same cigarettes or tobacco product.  This
 
15           limitation shall not prohibit the imposition of the
 
16           excise tax on receipts from sales of tobacco products
 
17           under subsection (a)(2); provided that the amount
 
18           subject to the tax on each sale shall not include
 
19           amounts previously taxed under this chapter."
 
20      SECTION 4.  Section 245-5, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "§245-5  Returns.  Every licensee, wholesaler, or dealer, on
 
23 or before the last day of each month, shall file with the
 

 
Page 19                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 department [of taxation] a return showing the cigarettes and
 
 2 tobacco products sold, possessed, or used by the licensee,
 
 3 wholesaler, or dealer during the preceding calendar month and of
 
 4 the taxes chargeable against the taxpayer in accordance with this
 
 5 chapter.  The form of the return shall be prescribed by the
 
 6 department and shall [contain such information including] include
 
 7 [a]:
 
 8      (1)  A separate statement of the number and wholesale price
 
 9           of cigarettes[,];
 
10      (2)  The amount of stamps purchased and used; [and the]
 
11      (3)  The wholesale price of tobacco products, sold,
 
12           possessed, or used[, as it]; and
 
13      (4)  Any other information that the department may deem
 
14           necessary,
 
15 for the proper administration of this chapter."
 
16      SECTION 5.  Section 245-6, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "§245-6  Payment of taxes; penalties.  At the time of the
 
19 filing of the return required under section 245-5 and within the
 
20 time prescribed therefor, each licensee, wholesaler, or dealer
 
21 shall pay to the department [of taxation] the taxes imposed by
 
22 this chapter, required to be shown by the return[.], including
 
23 the unpaid amount of taxes imposed by this chapter.
 

 
Page 20                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      Penalties and interest shall be added to and become a part
 
 2 of the taxes, when and as provided by section 231-39."
 
 3      SECTION 6.  Section 245-8, Hawaii Revised Statutes, is
 
 4 amended by amending subsection (a) to read as follows:
 
 5      "(a)  Every licensee, wholesaler, and dealer shall keep a
 
 6 record of [every]:
 
 7      (1)  Every sale or use of cigarettes and tobacco products by
 
 8           the licensee, wholesaler, or dealer, the;
 
 9      (2)  The number and wholesale price of cigarettes[, and
 
10           the];
 
11      (3)  The wholesale price of tobacco products, sold,
 
12           possessed, or used[, and of the];
 
13      (4)  The taxes payable [thereon,] on tobacco products sold,
 
14           possessed, or used, if any[,]; and
 
15      (5)  The amounts of stamps purchased and used,
 
16 in such form as the department [of taxation] may prescribe.  The
 
17 records shall be offered for inspection and examination at any
 
18 time upon demand by the department and shall be preserved for a
 
19 period of five years, except that the department, in writing, may
 
20 consent to their destruction within the five-year period or may
 
21 require that they be kept longer.  The department, by rule, may
 
22 require the licensee, wholesaler, or dealer to keep such other
 
23 records as it may deem necessary for the proper enforcement of
 

 
Page 21                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 this chapter."
 
 2      SECTION 7.  Section 245-15, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "§245-15  Disposition of revenues.  All moneys collected
 
 5 pursuant to this chapter shall be paid into the state treasury as
 
 6 state realizations to be kept and accounted for as provided by
 
 7 law[.], except for the amounts designated by sections 245-T,
 
 8 245-U, and 245-X, for distribution to the liquor commission, the
 
 9 police department, or the prosecuting attorney."
 
10      SECTION 8.  Section 281-17, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "§281-17  Jurisdiction and powers.  The liquor commission,
 
13 within its own county, shall have the sole jurisdiction, power,
 
14 authority, and discretion, subject only to this chapter[:] and
 
15 chapter 245:
 
16      (1)  To grant, refuse, suspend, and revoke any licenses for
 
17           the manufacture, importation, and sale of liquors;
 
18      (2)  To take appropriate action against a person who,
 
19           directly or indirectly, manufactures or sells any
 
20           liquor without being authorized pursuant to this
 
21           chapter; provided that in counties which have
 
22           established by charter a liquor control adjudication
 
23           board, the board shall have the jurisdiction, power,
 

 
Page 22                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1           authority, and discretion to hear and determine
 
 2           administrative complaints of the director regarding
 
 3           violations of the liquor laws of the State or of the
 
 4           rules of the liquor commission, and impose penalties
 
 5           [[]for[]] violations thereof as may be provided by law;
 
 6      (3)  To take appropriate action against a person who
 
 7           counterfeits stamps, or sells, purchases, or vends
 
 8           unstamped cigarette packages in violation of chapter
 
 9           245 or any rule thereof;
 
10     [(3)] (4)  To control, supervise, and regulate the
 
11           manufacture, importation, and sale of liquors by
 
12           investigation, enforcement, and education; provided
 
13           that any educational program shall be limited to
 
14           licensees and their employees and shall be financed
 
15           through the money collected from the assessment of
 
16           fines against licensees;
 
17     [(4)] (5)  From time to time to make, amend, and repeal such
 
18           rules, not inconsistent with this chapter, as in the
 
19           judgment of the commission seem appropriate for
 
20           carrying out this chapter and for the efficient
 
21           administration thereof, and the proper conduct of the
 
22           business of all licensees, including every matter or
 
23           thing required to be done or which may be done with the
 

 
Page 23                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1           approval or consent or by order or under the direction
 
 2           or supervision of or as prescribed by the commission;
 
 3           which rules, when adopted as provided in chapter 91
 
 4           shall have the force and effect of law;
 
 5     [(5)] (6)  Subject to chapters 76 and 77, to appoint and
 
 6           remove an administrator, who may also be appointed an
 
 7           investigator and who shall be responsible for the
 
 8           operations and activities of the staff.  The
 
 9           administrator may hire and remove hearing officers,
 
10           investigators, and clerical or other assistants as its
 
11           business may from time to time require, to prescribe
 
12           their duties, and fix their compensation; to engage the
 
13           services of experts and persons engaged in the practice
 
14           of a profession, if deemed expedient.  Every
 
15           investigator, within the scope of the investigator's
 
16           duties, shall have the powers of a police officer.  No
 
17           employee of any commission, aside from exercising the
 
18           right to vote, shall support, advocate, or aid in the
 
19           election or defeat of any candidate for public office,
 
20           and upon satisfactory proof of such prohibited activity
 
21           the offender shall be summarily dismissed;
 
22     [(6)] (7)  To limit the number of licenses of any class or
 
23           kind within the county, or the number of licenses of
 

 
Page 24                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1           any class or kind to do business in any given locality,
 
 2           when in the judgment of the commission such limitations
 
 3           are in the public interest;
 
 4     [(7)] (8)  To prescribe the nature of the proof to be
 
 5           furnished, the notices to be given, and the conditions
 
 6           to be met or observed in case of the issuance of a
 
 7           duplicate license in place of one alleged to have been
 
 8           lost or destroyed, including a requirement of any
 
 9           indemnity deemed appropriate to the case;
 
10     [(8)] (9)  To fix the hours between which licensed premises
 
11           of any class or classes may regularly be open for the
 
12           transaction of business, which shall be uniform
 
13           throughout the county as to each class respectively;
 
14     [(9)] (10)  To prescribe all forms to be used for the
 
15           purposes of this chapter not otherwise provided for in
 
16           this chapter, or in chapter 245, and the character and
 
17           manner of keeping of books, records, and accounts to be
 
18           kept by licensees of this chapter and chapter 245 in
 
19           any matter pertaining to their business;
 
20    [(10)] (11)  To investigate violations of this chapter,
 
21           chapter 244D, and chapter 245 and, notwithstanding any
 
22           law to the contrary, violations of the applicable
 
23           department of health's allowable noise levels, through
 

 
Page 25                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1           its investigators or otherwise, to include covert
 
 2           operations, and to report violations to the prosecuting
 
 3           officer for prosecution and, where appropriate, the
 
 4           director of taxation to hear and determine complaints
 
 5           against any licensee;
 
 6    [(11)] (12)  To prescribe, by rule, the terms, conditions, and
 
 7           circumstances under which persons or any class of
 
 8           persons may be employed by holders of licenses;
 
 9    [(12)] (13)  To prescribe, by rule, the term of any license or
 
10           solicitor's and representative's permit authorized by
 
11           this chapter, the annual or prorated amount, the manner
 
12           of payment of fees for the licenses and permits, and
 
13           the amount of filing fees; and
 
14    [(13)] (14)  To prescribe, by rule, the circumstances and
 
15           penalty for the unauthorized manufacturing or selling
 
16           of any liquor.
 
17      Subject only to this chapter, the commission or board and
 
18 each member thereof shall have the same powers respecting the
 
19 administering of oaths, compelling the attendance of witnesses
 
20 and the production of documentary evidence, and examining the
 
21 witnesses as are possessed by a circuit court, except that the
 
22 commission or board and each member thereof shall not be bound by
 
23 the strict legal rules of evidence.  In addition, the commission
 

 
Page 26                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 or board shall have the power to require the production of, and
 
 2 to examine any books, papers, and records of any [licensee]
 
 3 person licensed under this chapter or chapter 245, which may
 
 4 pertain to the licensee's business under the license or which may
 
 5 pertain to a matter at a hearing before the commission or board
 
 6 or to an investigation by the commission or board.
 
 7      The exercise by the commission or board of the power,
 
 8 authority, and discretion vested in it pursuant to this chapter
 
 9 shall be final and shall not be reviewable by or appealable to
 
10 any court or tribunal, except as otherwise provided in this
 
11 chapter or chapter 91."
 
12      SECTION 9.  Chapter 245, Hawaii Revised Statutes, is amended
 
13 by designating sections 245-1 to 245-15 as part I and inserting a
 
14 title before section 245-1 to read as follows:
 
15                   "PART I.  GENERAL PROVISIONS"
 
16      SECTION 10.  There is appropriated out of the general
 
17 revenues of the general revenues of the State of Hawaii the sum
 
18 of $35,000, or so much thereof as may be necessary, for fiscal
 
19 year 1999-2000, for start-up costs for implementing the cigarette
 
20 stamp tax system, including a one year supply of stamps and stamp
 
21 cylinders.
 
22      The sum appropriated shall be expended by the department of
 
23 taxation for purposes of this Act.
 

 
Page 27                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1      SECTION 11.  There is appropriated out of the general
 
 2 revenues of the State of Hawaii the sum of $405,500, or so much
 
 3 thereof as may be necessary, for fiscal year 1999-2000, to be
 
 4 apportioned to the following county liquor commissions:
 
 5      Honolulu                             $220,500
 
 6      Hawaii                                 49,500
 
 7      Maui                                  110,000
 
 8      Kauai                                  24,500
 
 9      There is appropriated out of the general revenues of the
 
10 State of Hawaii the sum of $591,500, or so much thereof as may be
 
11 necessary, for fiscal year 2000-2001, to be apportioned to the
 
12 following county liquor commissions:
 
13      Honolulu                             $350,500
 
14      Hawaii                                 58,500
 
15      Maui                                  133,500
 
16      Kauai                                  49,000
 
17      The sums appropriated shall be expended by the respective
 
18 liquor commissions of each county for the purposes of this Act.
 
19      SECTION 12.  This Act does not affect the rights and duties
 
20 that matured, penalties that were incurred, and proceedings that
 
21 were begun, before its effective date.
 
22      SECTION 13.  In codifying the new part added to chapter 245,
 
23 Hawaii Revised Statutes, by section 1 of this Act, the revisor of
 

 
Page 28                                                    788
                                     S.B. NO.           S.D. 2
                                                        H.D. 2
                                                        C.D. 1

 
 1 statutes shall substitute appropriate section numbers for the
 
 2 letters used in designating the new sections in this Act.
 
 3      SECTION 14.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 15.  The director of taxation shall submit findings
 
 6 and recommendations to the legislature twenty days prior to the
 
 7 regular session of 2005 as to the effectiveness of this Act in
 
 8 reducing the loss of cigarette tax revenue to the State from
 
 9 illegal sales of untaxed cigarettes.  The director of taxation
 
10 may submit an interim report to the legislature on any findings
 
11 relating to the effectiveness of this Act before 2005.
 
12      SECTION 16.  The county liquor commission for each of the
 
13 counties of Honolulu, Hawaii, Maui, and Kauai shall report to the
 
14 legislature no later than twenty days before the convening of
 
15 each of the regular sessions of 2001 and 2002 on their respective
 
16 activities relating to this Act, including expenses, fines, and
 
17 penalties collected, and forfeitures.
 
18      SECTION 17.  This Act shall take effect upon its approval;
 
19 provided that sections 10 and 11 shall take effect on July 1,
 
20 1999; and provided further that on June 30, 2005, this Act shall
 
21 be repealed and sections 245-1, 245-3, 245-5, 245-6, 245-8,
 
22 245-15, and 281-17, Hawaii Revised Statutes, shall be reenacted
 
23 in the form in which they read on the day before the approval of
 
24 this Act.