SB406 (2006) Detail

Establishing a manufacturer's tax on cigarettes sold in New Hampshire.


SB 406-FN-A – AS INTRODUCED

2006 SESSION

06-3060

09/10

SENATE BILL 406-FN-A

AN ACT establishing a manufacturer’s tax on cigarettes sold in New Hampshire.

SPONSORS: Sen. Clegg, Dist 14; Sen. Gatsas, Dist 16

COMMITTEE: Finance

ANALYSIS

This bill establishes a manufacturer’s tax on cigarettes sold in New Hampshire.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

06-3060

09/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Six

AN ACT establishing a manufacturer’s tax on cigarettes sold in New Hampshire.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Tobacco Tax; Nature of Tax. Amend RSA 78:7-a to read as follows:

78:7-a Nature of Tax. All taxes upon tobacco products under this chapter, except for the manufacturer’s tax imposed under RSA 78:36, are declared to be a direct tax upon the consumer at retail and shall conclusively be presumed to be pre-collected for the purpose of convenience and facility only.

2 Chapter Heading. Amend the chapter heading of RSA 78 to read as follows:

CHAPTER 78

TOBACCO TAX; MANUFACTURER’S TAX

3 New Subdivision; Manufacturer’s Tax. Amend RSA 78 by inserting after section 34 the following new subdivision:

78:35 Definitions. In this subdivision:

Manufacturer’s Tax

I. “Consumer price index” means the Consumer Price Index All Urban Consumers as published by the Bureau of Labor Statistics of the U. S. Department of Labor.

II. “Department” means the department of revenue administration.

III. “Pack” means a package of 20 cigarettes.

78:36 Imposition of Manufacturer’s Tax.

I. Any manufacturer whose cigarettes are sold in the state shall pay a tax based on the number of packs sold.

II.(a) The manufacturer’s tax shall be $0.415 per pack.

(b) Beginning January 1, 2008, and on January 1 of each succeeding year, the tax shall be increased by the greater of 3 percent or by the consumer price index inflation factor for the immediately preceding year.

III. Distributions of packages with other than 20 cigarettes shall be assessed a tax calculated by multiplying the number of cigarettes in the package by 1/20 of the per pack tax.

IV. The manufacturer’s tax shall be deposited in the general fund.

78:37 Refund of Manufacturer’s Tax.

I. Upon application to the commissioner, on such form as the commissioner shall prescribe, each manufacturer shall receive a refund of the manufacturer’s tax equivalent to any amounts received by the state treasurer by or on behalf of such manufacturer under any statute, other than this chapter, or under any agreement, including without limitation, any sum paid to the state during the previous calendar year pursuant to the Consent Decree and Final Judgment of Merrimack County Superior Court in State of New Hampshire v. R.J. Reynolds Tobacco Company, et. al., docket number 97-E-0165.

II.(a) Upon application to the commissioner, on such form as the commissioner shall prescribe, any manufacturer that makes payments to a qualified escrow account under RSA 541-C:3 may grant to the state an irrevocable assignment of such payments, and if granted, shall receive a refund equivalent to any amount so assigned. Such assignment may be made at any time before the to-be-assigned payment into the qualified escrow account is due. This paragraph shall not be construed to authorize the release or assignment of escrow funds accumulated prior to January 1, 2007.

(b) An assignment of rights executed under this paragraph shall be in writing and shall become effective upon delivery of the assignment to the department and the financial institution that maintains the qualified escrow account.

(c) The manufacturer, the attorney general, and the financial institution that maintains the qualified escrow account shall make such amendments to the qualified escrow account agreement, title to the account, and the account itself to effectuate the assignment of rights under this paragraph.

III. No refund under this section shall be granted to any manufacturer that is found to have passed the manufacturer’s tax, imposed under RSA 78:36, to a wholesaler, retailer, or consumer as determined by the commissioner.

78:38 Quarterly Return and Payment.

I. Each manufacturer shall submit a return and full payment of the manufacturer’s tax on a calendar quarterly basis on such form or forms prescribed by the commissioner. Such return shall be due on the last day of the month next following the quarter. All returns shall be signed by the manufacturer or by its authorized representative, subject to the pains and penalties of perjury and the penalties provided in RSA 21-J:39.

II. The commissioner, or designee, is authorized to audit any manufacturer, wholesaler, retailer, or sub-jobber to ascertain accuracy and compliance with this subdivision.

78:39 Interest and Penalties.

I. Each quarterly payment of the manufacturer’s tax not made by the due date shall accrue interest under RSA 21-J:28.

II. Each quarterly payment of the manufacturer’s tax not made within 30 days of the due date shall accrue penalties under RSA 21-J:31.

78:40 Tobacco Products Manufacturers’ Failure to Comply; Certifications. Every manufacturer whose cigarettes are stamped for sale in this state, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, shall execute and deliver on a form prescribed by the attorney general a certification to the attorney general no later than April 30 of each year, certifying under penalty of perjury that, as of the date of such certification, such manufacturer is in full compliance with this subdivision.

78:41 Rulemaking. The commissioner and the attorney general shall adopt rules, pursuant to RSA 541-A, as necessary to enforce the provisions of this subdivision.

78:42 Agent for Service of Process.

I. Any non-resident or foreign manufacturer that has not registered to do business in the state as a foreign corporation or business entity shall, as a condition precedent to having its brand families listed or retained in the directory, appoint and continually engage without interruption the services of an agent in this state 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 subdivision, may be served in any manner authorized by law. Such service shall constitute legal and valid service of process on the manufacturer. The manufacturer shall provide the name, address, phone number, and proof of the appointment and availability of such agent to and to the satisfaction of the attorney general.

II. The manufacturer shall provide notice to the attorney general 30 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 5 calendar days prior to the termination of an existing agent appointment. In the event an agent terminates an agency appointment, the manufacturer shall notify the attorney general of said termination within 5 calendar days and shall include proof to the satisfaction of the attorney general of the appointment of a new agent.

III. Any manufacturer whose products are sold in this state, without appointing or designating an agent as herein required shall be deemed to have appointed the secretary of state as such agent and may be proceeded against in courts of this state by service of process upon the secretary of state; however, the appointment of the secretary of state as such agent shall not satisfy the condition precedent to having its brand families listed or retained in the directory.

4 Effective Date. This act shall take effect January 1, 2007.

LBAO

06-3060

Revised 4/5/06

SB 406 FISCAL NOTE

AN ACT establishing a manufacturer’s tax on cigarettes sold in New Hampshire.

FISCAL IMPACT:

The Department of Revenue Administration indicates this bill will increase state unrestricted general fund revenue by $15,668,000 in FY 2007, $32,452,000 in FY 2008 and by an indeterminable amount each year thereafter. There is no fiscal impact on state, county and local expenditures or local and county revenue.

METHODOLOGY:

The Department of Revenue Administration (DRA) states that this bill establishes a $0.415 per pack manufacturer’s tax on cigarettes sold in New Hampshire, effective January 1, 2007. DRA estimates FY 2007 cigarette sales at $143.3 million, which translates to 179,125,000 packs. Given a January 1, 2007 effective date, the revenue increase in FY 2007 will be for half the fiscal year and total $15,668,000. For FY 2008, DRA estimates flat cigarette sales at $143.3 million or 179,125,000 packs. Since the tax rate adjusts each year to be the greater of the consumer price index inflation factor or 3 percent, for the first half of FY 2008, the tax rate will be $0.415 and the second half of the year the rate is estimated at $0.42745 (3% increase). Using these tax rates and estimated sales, DRA projects the FY 2008 revenue from this tax to be $32,452,000. DRA’s calculations assume the maximum amount of refund/credit available from the amounts the State receives from manufacturers under the tobacco settlement agreement, which for FY 2007 and FY 2008 is estimated at $43 million per year. The DRA did not project the revenue from this tax beyond FY 2008, however, the total is expected to be consistent with prior year revenue totals. The DRA further states that this tax can be administered within their existing budget.

The Department of Justice states that since the administrative burden of this tax will falls primarily on DRA, any costs to the Department of Justice as a result of this bill can be absorbed within the Department’s existing budget.