Be It Enacted by the General Assembly of the State of South Carolina s4

1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND ARTICLE 5, CHAPTER 21, TITLE 12, CODE OF 12 LAWS OF SOUTH CAROLINA, 1976, RELATING TO 13 TOBACCO, AMMUNITION, AND PLAYING CARDS, SO AS 14 TO LEVY, ASSESS, AND COLLECT FIVE CENTS ON 15 CERTAIN PRODUCTS CONTAINING NICOTINE THAT ARE 16 COMMONLY USED IN ELECTRONIC CIGARETTES, TO 17 LIMIT THE RATE TO NO MORE THAN TEN PERCENT OF 18 THE EXCISE TAX AND SURCHARGE ON A PACK OF 19 CIGARETTES, TO REQUIRE THAT AN INVOICE FOR SUCH 20 PRODUCTS CLEARLY STATES THE AMOUNT OF 21 PRODUCT INCLUDED, AND TO MAKE CONFORMING 22 CHANGES. 23 24 Be it enacted by the General Assembly of the State of South 25 Carolina: 26 27 SECTION 1. Article 5, Chapter 21, Title 12 of the 1976 Code is 28 amended to read: 29 30 “Article 5 31 32 Tobacco, Ammunition and Playing Cards 33 34 Section 1221610. Every person doing business within the 35 State and engaging in the business of selling such articles or 36 commodities as are named in this article shall, for the privilege of 37 carrying on such business, and every person, firm, corporation, 38 club or association within the State importing, receiving or 39 acquiring from without the State or from any other source any such 40 articles for use or consumption within the State shall for the 41 privilege of so doing be subject to the payment of a license tax

[4074] 1 1 which shall be measured by and graduated in accordance with the 2 volume of sales or acquisitions of such person within the State. 3 4 Section 1221615. (A) Any invoice for vapor products or 5 tobaccoderived products must include the actual fluid ounces, or 6 its metric equivalent, of the consumable material contained in 7 vapor products and the actual pounds or ounces of tobaccoderived 8 products, as applicable. 9 (B) A copy of all invoices for the purchase or sale of any 10 tobacco products, vapor products, or tobaccoderived products must 11 be retained by any party that issues or receives the invoice for a 12 period of three years, subject to the examination by the 13 Department of Revenue. 14 15 Section 1221620. (A) There shall be levied, assessed, 16 collected, and paid in respect to the articles containing tobacco 17 enumerated in this section the following amounts: 18 (1) upon all cigarettes made of tobacco or any substitute for 19 tobacco, three and onehalf mills on each cigarette; 20 (2) upon all tobacco products, as defined in Section 21 1221800, five percent of the manufacturer’s price; 22 (3) upon all vapor products five cents per milliliter of 23 consumable material in the vapor product. A proportionate tax at 24 the same rate shall be levied, assessed, and collected on all 25 fractional parts of a milliliter. However, the rate per milliliter may 26 never exceed ten percent of the tax imposed on a pack of 27 cigarettes, containing twenty cigarettes, imposed pursuant to item 28 (1) and Section 1221625; 29 (4) upon all tobaccoderived products, five cents per ounce. 30 A proportionate tax at the same rate shall be levied, assessed, and 31 collected on all fractional parts of an ounce. However, the rate per 32 ounce may never exceed ten percent of the tax imposed on a pack 33 of cigarettes, containing twenty cigarettes, imposed pursuant to 34 item (1) and Section 1221625. 35 Manufacturer’s price as used in this section is the established 36 price at which a manufacturer sells to a wholesaler. 37 (B) As used in this section, ‘cigarette’ means: 38 (1) any roll for smoking containing tobacco or any substitute 39 for tobacco wrapped in paper or in any substance other than a 40 tobacco leaf; or 41 (2) any roll for smoking containing tobacco or any substitute 42 for tobacco, wrapped in any substance, weighing three pounds per 43 thousand or less, however labeled or named, which because of its

[4074] 2 1 appearance, size, type of tobacco used in the filler, or its 2 packaging, pricing, marketing, or labeling, is likely to be offered 3 to, or purchased by, consumers as a cigarette described in item (1) 4 of this subsection. 5 6 Section 1221625. (A) Effective July 1, 2010, there is imposed 7 a surtax on cigarettes subject to the tax imposed pursuant to 8 Section 1221620(1) in an amount equal to two and onehalf cents 9 on each cigarette. 10 (B) Notwithstanding another provision of law providing for the 11 crediting of the revenues of license or other taxes, the revenue of 12 the surtax imposed pursuant to this section must be credited as 13 follows: 14 (1) five million dollars annually to the Medical University of 15 South Carolina Hollings Cancer Center to be used for 16 tobaccorelated cancer research; 17 (2) five million dollars annually to the Smoking Prevention 18 and Cessation Trust Fund created pursuant to Section 1111230(A); 19 (3) the remaining annual revenue shall be deposited in the 20 South Carolina Medicaid Reserve Fund created pursuant to Section 21 1111230(B). 22 (C) For all purposes of reporting, payment, collection, and 23 enforcement, the surtax imposed by this section is deemed to be 24 imposed pursuant to Section 1221620. 25 (D) For purposes of this section, ‘cigarette’ means: 26 (1) any roll for smoking containing tobacco or any substitute 27 for tobacco wrapped in paper or in any substance other than a 28 tobacco leaf; or 29 (2) any roll for smoking containing tobacco or any substitute 30 for tobacco, wrapped in any substance, weighing three pounds per 31 thousand or less, however labeled or named, which because of its 32 appearance, size, type of tobacco used in the filler, or its 33 packaging, pricing, marketing, or labeling, is likely to be offered 34 to, or purchased by, consumers as a cigarette described in item (1). 35 36 Section 1221650. Whenever in this article: 37 (1) Reference is made to manufactured tobacco products, 38 vapor products, or tobaccoderived products manufactured or 39 imported to sell at a certain price, as the basis for computing the 40 tax, it is intended to mean the ordinary, customary or usual price 41 paid by the consumer for each individual cigar, package of 42 cigarettes, package of smoking tobacco, vapor products, 43 tobaccoderived products, or other tobacco product;

[4074] 3 1 (2) The retail or selling price is referred to as the basis for 2 computing the amount of stamps required on any article, it is 3 intended to mean the ordinary, customary or usual price paid by 4 the consumer for each article less the amount of tax added thereto; 5 and 6 (3) When any articles or commodities subject to tax under this 7 article are given as prizes on punchboards, shooting galleries and 8 under similar circumstances the tax shall be based on the ordinary 9 selling price of such articles. 10 11 Section 1221660. Every person engaged in the business of 12 purchasing, selling or distributing cigars, cheroots, stogies, 13 cigarettes, snuff, or smoking or chewing tobacco, vapor products, 14 or tobaccoderived products at wholesale or through vending 15 machines within the State and all cigarette, cigar, vapor products, 16 tobaccoderived products and tobacco product manufacturers’ sales 17 representatives who conduct business in this State shall file with 18 the Department of Revenue an application for a license permitting 19 him to engage in such business. When such business is conducted 20 at two or more separate places, a separate license for each place of 21 business shall be required. A person whose business is conducted 22 through vending machines needs to obtain only one license but 23 shall maintain an uptodate list of the location of each vending 24 machine operated under this license and each manufacturer’s sales 25 representative needs to obtain only one license. The provisions of 26 this section shall not apply to persons who own and stock vending 27 machines for use on their own premises. 28 Nothing in this section shall be construed as requiring a license 29 for the privilege of buying, selling or distributing leaf tobacco nor 30 shall this section apply to churches, schools or charitable 31 organizations operating booths at state, county, or community fairs 32 or to school or church entertainments. 33 34 Section 1221670. The application must be filed on a blank to 35 be furnished by the department for that purpose and shall contain a 36 statement including the name of the individual, partnership, (and in 37 the case of each individual partner) or corporation, the postoffice 38 address and the nature of the business. Upon receipt of an 39 application for a license to engage in any business as set forth in 40 Section 1221660, the department shall issue to the applicant a 41 permanent license permitting the purchase, sale, and distribution of 42 the articles designated therein. The license must be displayed at all 43 times in some conspicuous place at or in the place of business

[4074] 4 1 where it may be easily seen by the public. The license provided 2 for in this section must be obtained before engaging in the business 3 in this State and is only valid for the person in whose name it is 4 issued and only for the transaction of business at the place 5 designated in the license. 6 7 Section 1221680. The department may reclassify a person as a 8 wholesaler or retailer as may be just and proper according to the 9 business done. 10 11 Section 1221690. No license issued permitting the sale and 12 distribution of tobacco products shall be transferable and any 13 license issued to any person who shall afterwards retire from 14 business shall be null and void. But anyone may be allowed to 15 operate for ten days after purchase of stock in bulk, pending 16 granting of a license upon application made promptly upon such 17 purchase. 18 19 Section 1221735. Each person or distributor of cigarettes, 20 vapor products, or tobaccoderived products taxable under this 21 article, first receiving untaxed cigarettes, vapor products, or 22 tobaccoderived products for sale or distribution in this State, is 23 subject to the tax imposed in Section 1221620. Each distributor 24 required to pay the tax shall make a report to the department, in the 25 form the department prescribes, of all cigarettes, vapor products, or 26 tobaccoderived products sold or disposed of in this State, and pay 27 taxes due thereon not later than the twentieth day of the month 28 next succeeding the month of the sale or disposition. However, 29 any person or distributor making shipments of cigarettes, vapor 30 products, or tobaccoderived products to retail locations in and out 31 of this State shall apply to the department for a license which 32 enables them to purchase cigarettes, vapor products, or 33 tobaccoderived products free of tax, and report and pay tax as 34 provided in this section on sales of cigarettes, vapor products, or 35 tobaccoderived products sold to locations in this State. 36 The department shall require bonds or statements of financial 37 stability satisfactory to the department to cover possible losses 38 resulting from failure to remit taxes due. When the return required 39 by this section is timely filed and the taxes shown to be due are 40 paid by the date specified in this section, the person or distributor 41 may deduct three and onehalf percent of the tax due. 42

[4074] 5 1 Section 1221750. All retail dealers in manufactured tobacco 2 products, vapor products, tobaccoderived products, shells, 3 cartridges or playing cards purchasing or receiving such 4 commodities from without the State, whether they shall have been 5 ordered through a wholesaler or jobber in this State, by drop 6 shipment or otherwise, shall, within five days after receipt of them, 7 mail a duplicate invoice of all such purchases or receipts to the 8 department. Failure to furnish duplicate invoices as required shall 9 be a misdemeanor and, upon conviction, be punishable by a fine of 10 not more than one hundred dollars for each offense or 11 imprisonment for a period not exceeding thirty days. 12 13 Section 1221760. It is the intent of this article to require all 14 manufacturers within this State, wholesale dealers, jobbers, 15 distributors and retail dealers to affix the stamps provided for in 16 this article to taxable commodities, but when the stamps have been 17 affixed as required in this article no further or other stamp shall be 18 required under the provisions of this chapter regardless of how 19 often such articles may be sold or resold within this State. 20 21 Section 1221770. Every person, firm, corporation, club or 22 association who sells, stores or receives for the purpose of 23 distribution to any person, firm, corporation, club or association 24 any shotgun or other shells, cartridges, manufactured tobacco 25 products, vapor products, tobaccoderived products, or playing 26 cards otherwise taxable under the provisions of this chapter shall 27 pay the tax at the rates provided in this article for the sale of such 28 articles. 29 30 Section 1221780. Every distributor, on or before the twentieth 31 day of each month, shall file with the South Carolina Department 32 of Revenue a return on forms to be prescribed and furnished by the 33 department showing the quantity and wholesale price of all 34 tobacco products, vapor products, and tobaccoderived products 35 transported or caused to be transported into the State by him or 36 manufactured or fabricated in the State for sale in this State. Every 37 distributor authorized by the department to make returns and pay 38 the tax on tobacco products, vapor products, or tobaccoderived 39 products sold, shipped, or delivered by him to any person in the 40 State shall file a return showing the quantity and wholesale price 41 of all products so sold, shipped, or delivered during the preceding 42 calendar month. These returns must contain such further 43 information as the department may require. Every distributor shall

[4074] 6 1 pay to the department with the filing of the return the tax on 2 tobacco products, vapor products, and tobaccoderived products for 3 the month imposed under this article. When the distributor or 4 dealer files the return and pays the tax within the time specified in 5 this section, he may deduct therefrom three and onehalf percent of 6 the tax due. 7 8 Section 1221785. Notwithstanding the provisions of Sections 9 1221735 and 1221780, the department may require returns and 10 payments of this tax for other than monthly periods. 11 12 Section 1221800. As used in Sections 1221620 and 1221780, 13 ‘tobacco products’ means cigars, cheroots, stogies, periques, 14 granulated, plug cut, crimp cut, ready rubbed, and other smoking 15 tobacco, snuff, snuff flour, cavendish, plug and twist tobacco, 16 finecut, and other chewing tobacco, shorts, refuse scraps, 17 clippings, cuttings and sweepings of tobacco, and other kinds and 18 forms of tobacco, prepared in a manner to be suitable for chewing 19 or smoking in a pipe or otherwise, or both for chewing or smoking, 20 but does not include cigarettes, vapor products, or tobaccoderived 21 products. 22 23 Section 1221810. As used in Section 1221780, ‘distributor’ 24 means: 25 (A) Any person engaged in the business of selling tobacco 26 products, vapor products, or tobaccoderived products in this State 27 who brings or causes to be brought into this State from without the 28 State any tobacco products, vapor products, or tobaccoderived 29 products for sale; 30 (B) Any person who makes, manufacturers, or fabricates 31 tobacco products, vapor products, or tobaccoderived products in 32 this State for sale in this State; 33 (C) Any person engaged in the business of selling tobacco 34 products, vapor products, or tobaccoderived products without this 35 State who ships or transports tobacco products, vapor products, or 36 tobaccoderived products to retailers in this State to be sold by 37 those retailers. 38 39 Section 1221820. As used in this article: 40 (1) ‘Consumable material’ means any liquid nicotine solution 41 or other material containing nicotine that is depleted as a vapor 42 product is used.

[4074] 7 1 (2) ‘Tobaccoderived product’ means any noncombustible 2 product derived from tobacco that contains nicotine and is 3 intended for human consumption, whether chewed, absorbed, 4 dissolved or ingested by any other means, but does not include a 5 vapor product or any product regulated by the United States Food 6 and Drug Administration under Chapter V of the Food, Drug and 7 Cosmetic Act. 8 (3) ‘Vapor product’ means a noncombustible tobaccoderived 9 product containing nicotine, such as an electronic cigarette, that 10 employs a mechanical heating element, battery or electronic 11 circuit, regardless of shape or size, that can be used to heat a liquid 12 nicotine solution contained in a vapor cartridge. ‘Vapor product’ 13 includes any vapor cartridge that can be used with or in a vapor 14 product and containing liquid nicotine solution, but does not 15 include any product regulated by the United States Food and Drug 16 Administration under Chapter V of the Food, Drug and Cosmetic 17 Act.” 18 19 SECTION 2. This act takes effect July 1, 2013. 20 XX 21

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