Report Title:

Cigarette Tax; Corrections

Description:

Amends the cigarette tax law to ensure the intended distribution and use of the funds collected.

HOUSE OF REPRESENTATIVES	H.B. NO.	1079
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO THE CIGARETTE TAX.

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

     SECTION 1.  Section 245-3, Hawaii Revised Statutes, is amended to read as follows:

     "§245-3  Taxes.  (a)  Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay for the privilege of conducting business and other activities in the State[:], an excise tax in the following amounts for each cigarette sold, used, or possessed by a wholesaler or dealer at any time during the periods indicated; provided that no wholesaler or dealer shall be taxed more than once per cigarette:

     (1)  [An excise tax equal to] 5.00 cents [for each cigarette sold, used, or, possessed by a wholesaler or dealer] after June 30, 1998, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to October 1, 2002;

     (2)  [An excise tax equal to] 6.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer] after September 30, 2002, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to July 1, 2003;

     (3)  [An excise tax equal to] 6.50 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer] after June 30, 2003, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to July 1, 2004;

     (4)  [An excise tax equal to] 7.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer] after June 30, 2004, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to September 30, 2006;

     (5)  [An excise tax equal to] 8.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer on and] after September [30,] 29, 2006, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to October 1, 2007;

     (6)  [An excise tax equal to] 9.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer on and] after September 30, 2007, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to October 1, 2008;

     (7)  [An excise tax equal to] 10.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer on and] after September 30, 2008, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to October 1, 2009;

     (8)  [An excise tax equal to] 11.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer on and] after September 30, 2009, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;]but prior to October 1, 2010;

     (9)  [An excise tax equal to] 12.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer on and] after September 30, 2010, [whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer;] but prior to October 1, 2011; and

    (10)  [An excise tax equal to] 13.00 cents [for each cigarette sold, used, or possessed by a wholesaler or dealer on and] after September 30, 2011[, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer; and].

  [(11) An] (b)  Every wholesaler or dealer, in addition to any other taxes provided by law, shall pay for the privilege of conducting business and other activities in the state an excise tax equal to forty per cent of the wholesale price of each article or item of tobacco products sold by the wholesaler or dealer, whether or not sold at wholesale, or if not sold then at the same rate upon the use by the wholesaler or dealer.

(c)  Where the tax imposed by this section has been paid on [cigarettes or tobacco] products that thereafter become the subject of a casualty loss deduction allowable under chapter 235, the tax paid shall be refunded or credited to the account of the wholesaler or dealer. 

(d)  The tax shall be applied to cigarettes through the use of stamps.

     [(b)] (e)  The taxes, however, are subject to the following limitations:

     (1)  The measure of the taxes shall not include any cigarettes or tobacco products exempted, and so long as the same are exempted, from the imposition of taxes by the Constitution or laws of the United States;

     (2)  The measure of taxes shall exempt and exclude all sales of cigarettes and tobacco products to the United States (including any agency or instrumentality thereof that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under this chapter), sold by any person licensed under this chapter; and

     (3)  The taxes shall be paid only once with respect to the same cigarettes or tobacco product.  This limitation shall not prohibit the imposition of the excise tax on receipts from sales of tobacco products under subsection [(a)(5);](b); provided that the amount subject to the tax on each sale shall not include amounts previously taxed under this chapter."

     SECTION 2.  Section 245-15, Hawaii Revised Statutes, is amended to read as follows:

     "§245‑15  Disposition of revenues.  All moneys collected pursuant to this chapter shall be paid into the state treasury as state realizations to be kept and accounted for as provided by law; provided that, of the moneys collected under the tax imposed pursuant to [section 245‑3(a) that represents the difference between the 7.0 cents for each cigarette sold, used, or possessed by a wholesaler or dealer under section 245-3(a)(1) and the amount of tax imposed and collected on each cigarette sold, used, or possessed by a wholesaler or dealer under] section 245‑3(a)(5), (6), (7), (8), (9), and (10)[:], the following amount for each cigarette sold, used, or possessed by a wholesaler or dealer during the period indicated shall be deposited as follows:

     (1)  [From September 30, 2006 to] After September 29, 2006, but prior to October 1, 2007, 1.0 cent shall be deposited to the credit of the Hawaii cancer research special fund[,] established pursuant to section [[]304A-2168[], for research and operating expenses];

     (2)  [From] After September 30, 2007 [to September 29], but prior to October 1, 2008:

         (A)  1.5 cents shall be deposited to the credit of the Hawaii cancer research special fund[,] established pursuant to section [[]304A-2168[], for research and operating expenses; and];

         (B)  0.25 cents [of the moneys] shall be deposited to the credit of the trauma system special fund established pursuant to section 321‑22.5; and

         (C)  0.25 cents [of the moneys] shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

     (3)  [From] September 30, 2008 [to September 29], but prior to October 1, 2009:

         (A)  2.0 cents shall be deposited to the credit of the Hawaii cancer research special fund[,] established pursuant to section [[]304A-2168[], for research and operating expenses; and];

         (B)  0.5 cents [of the moneys] shall be deposited to the credit of the trauma system special fund established pursuant to section 321‑22.5;

         (C)  0.25 cents [of the moneys] shall be deposited to the credit of the community health centers special fund[;] established pursuant to section 321-1.65; and

         (D)  0.25 cents [of the moneys] shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

     (4)  [From] After September 30, 2009 [to September 29], but prior to October 1, 2010:

         (A)  2.0 cents shall be deposited to the credit of the Hawaii cancer research special fund[,] established pursuant to section [[]304A-2168[], for research and operating expenses; and];

         (B)  0.75 cents [of the moneys] shall be deposited to the credit of the trauma system special fund established pursuant to section 321‑22.5;

         (C)  0.75 cents [of the moneys] shall be deposited to the credit of the community health centers special fund[;] established pursuant to section 321-1.65; and

         (D)  0.5 cents [of the moneys] shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321-234;

     (5)  [From] After September 30, 2010 [to September 29], but prior to October 1, 2011:

         (A)  2.0 cents shall be deposited to the credit of the Hawaii cancer research special fund[,] established pursuant to section [[]304A-2168[], for research and operating expenses; and];

         (B)  1.0 cent [of the moneys] shall be deposited to the credit of the trauma system special fund established pursuant to section 321‑22.5;

         (C)  1.0 cent [of the moneys] shall be deposited to the credit of the community health centers special fund[;] established pursuant to section 321-1.65; and

         (D)  1.0 cent [of the moneys] shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321‑234;

and

     (6)  [From] After September 30, 2011, and thereafter:

         (A)  2.0 cents shall be deposited to the credit of the Hawaii cancer research special fund[,] established pursuant to section [[]304A-2168[], for research and operating expenses; and];

         (B)  1.5 cents [of the moneys] shall be deposited to the credit of the trauma system special fund established pursuant to section 321‑22.5;

         (C)  1.25 cents [of the moneys] shall be deposited to the credit of the community health centers special fund[;] established pursuant to section 321-1.65; and

         (D)  1.25 cents [of the moneys] shall be deposited to the credit of the emergency medical services special fund established pursuant to section 321-234.

The department shall provide an annual accounting of these dispositions to the legislature."

     SECTION 3.  Section 245-16, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  This section shall not apply to the shipment of cigarettes if any of the following conditions are met:

     (1)  The cigarettes are exempt from taxes as provided by section [245-3(b)] 245-3(e) or are otherwise exempt from the applicability of this chapter as provided by section 245-62;

     (2)  All applicable Hawaii taxes on the cigarettes are paid in accordance with the requirements of this chapter; or

     (3)  The person or entity engaged in the business of selling, advertising, or offering cigarettes for sale and transfer or shipment:

         (A)  Has fully complied with all of the requirements of chapter 10A (commencing with section 375) of Title 15 of the United States Code, otherwise known as the Jenkins Act; and

         (B)  Includes on the outside of the shipping container an externally visible and easily legible notice located on the same side of the shipping container as the address to which the shipping container is delivered stating as follows:

              "CIGARETTES:  HAWAII LAW PROHIBITS THE SALE OF CIGARETTES TO INDIVIDUALS UNDER EIGHTEEN YEARS OF AGE AND REQUIRES THE PAYMENT OF ALL APPLICABLE TAXES.  YOU ARE LEGALLY RESPONSIBLE FOR ALL APPLICABLE UNPAID TAXES ON THESE CIGARETTES.""

     SECTION 4.  Section 245-22.5, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

     "(d)  This section shall not apply to cigarettes that are exempt from taxes as provided by section [245-3(b).] 245-3(e).

     SECTION 5.  Section 245-39, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a) Sections 245-37 and 245-38 shall not apply to cigarettes that are exempt from taxes as provided by section [245-3(b).] 245-3(e)."

     SECTION 6.  Section 304A-2168, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  [Moneys] Cigarette tax revenues collected pursuant to section 245-15 and designated for the Hawaii cancer research special fund shall be deposited into the special fund."

     SECTION 7.  Section 321-1.65, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Moneys collected pursuant to section 245-15 and designated for the community health centers special fund shall be deposited into the special fund."

     SECTION 8.  Section 321-22.5, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  [Interest] Cigarette tax revenues collected pursuant to section 245-15 and designated for the trauma system special fund, interest and investment earnings attributable to the moneys in the trauma system special fund, federal funding, legislative appropriations, and grants, donations, and contributions from private or public sources for the purposes of the trauma system special fund shall be deposited into the trauma system special fund."

     SECTION 9.  Section 321-234, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Fees remitted pursuant to section 249-31, cigarette tax revenues [designated] collected under section 245-15 and designated for the emergency medical services special fund, interest and investment earnings attributable to the moneys in the special fund, legislative appropriations, and grants, donations, and contributions from private or public sources for the purposes of the fund, shall be deposited into the special fund."

     SECTION 10.  In 2006, the legislature passed Act 316 to, among other things, allocate "a significant percentage of tobacco tax revenues to programs that strive to maintain Hawaii's health such as the cancer research center of Hawaii..."  However, due to a drafting oversight, the Act allocated only a penny to the cancer research center of Hawaii.  This Act corrects the provisions of Act 316 to provide the cancer research center of Hawaii with the amount of funding that it would have received had the provisions of Act 316 been correct.  It is the intent of the legislature by the amendment in this Act to section 245-15, Hawaii Revised Statutes, to ensure that the proportionate amount of funding collected under section 245-3, Hawaii Revised Statutes, that should have been deposited to the credit of the Hawaii cancer research special fund pursuant to paragraph (1) of section 245-15, Hawaii Revised Statutes, be so deposited.

     SECTION 11.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 12.  This Act shall take effect on July 1, 2007.

INTRODUCED BY:

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