Provide for taxation of vapor products

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1 HOUSE BILL NO. 910
2 INTRODUCED BY M. CAFERRO
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT PROVIDING FOR THE TAXATION OF VAPOR PRODUCTS;
5 REVISING THE DEFINITION OF "TOBACCO PRODUCTS"; PROVIDING A DEFINITION; AMENDING
6 SECTION SECTIONS 16-11-102, AND 16-11-111, MCA; AND PROVIDING AN APPLICABILITY DATE.”
7
8 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
9
10Section 1. Section 16-11-102, MCA, is amended to read:
11 "16-11-102. Definitions. (1) As used in this chapter, the following definitions apply, unless the context
12 requires otherwise:
13 (a) "Contraband" means:
14 (i) any tobacco product possessed, sold, offered for sale, distributed, held, owned, acquired,
15 transported, imported, or caused to be imported in violation of this part;
16 (ii) any cigarette or roll-your-own tobacco that is possessed, sold, offered for sale, distributed,
17 held, owned, acquired, transported, imported, or caused to be imported in violation of part 4 or 5;
18 (iii) any cigarettes that bear trademarks that are counterfeit under state or federal trademark laws;
19 (iv) any cigarettes bearing false or counterfeit insignia or tax stamps from any state; or
20 (v) any cigarettes or tobacco products that violate 16-10-306.
21 (b) "Department" means the department of revenue provided for in 2-15-1301.
22 (c) "Person" means an individual, firm, partnership, corporation, association, company, committee,
23 other group of persons, or other business entity, however formed.
24 (2) As used in this part, the following definitions apply, unless the context requires otherwise:
25 (a) "Cigarette" means any product that contains nicotine, is intended to be burned or heated under
26 ordinary conditions of use, and consists of or contains:
27 (i) any roll of tobacco wrapped in paper or in any substance not containing tobacco;
28 (ii) tobacco, in any form, that is functional in the product and that, because of its appearance, the
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1 type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to or purchased by
2 consumers as a cigarette; or
3 (iii) any roll of tobacco wrapped in any substance containing tobacco that, because of its
4 appearance or the type of tobacco used in the filler and regardless of its packaging and labeling, is likely to be
5 offered to or purchased by consumers as a cigarette described in subsection (2)(a)(i).
6 (b) "Controlling person" means a person who owns an equity interest of 10% or more of a business
7 or the equivalent.
8 (c) "Directory" means the tobacco product directory as provided in 16-11-504.
9 (d) "Full face value of insignia" means the total amount of the tax levied under this part.
10 (e) "Insignia" or "indicia" means the impression, mark, or stamp approved by the department under
11 the provisions of this part.
12 (f) "Licensed retailer" means any person, other than a wholesaler, subjobber, or tobacco product
13 vendor, who is licensed under the provisions of this part.
14 (g) "Licensed subjobber" means a subjobber licensed under the provisions of this part. The person
15 must be treated as a wholesaler.
16 (h) "Licensed wholesaler" means a wholesaler licensed under the provisions of this part.
17 (i) "Manufacturer" means any person who fabricates tobacco products from raw materials for the
18 purpose of resale.
19 (j) "Manufacturer's original container" means the original master shipping case or original shipping
20 case used by the tobacco product manufacturer to ship multipack units, such as boxes, cartons, and sleeves, to
21 warehouse distribution points.
22 (k) "Moist snuff" means any finely cut, ground, or powdered tobacco, other than dry snuff, that is
23 intended to be placed in the oral cavity.
24 (l) (i) "Premium cigar" means any roll of tobacco that is hand wrapped in 100% whole tobacco
25 leaf, is not wrapped by a machine, and does not contain a filter, tip, or any characterizing nontobacco flavor.
26 (ii) The term does not include a cigarette.
27 (m) "Record" means an original document, a legible facsimile, or an electronically preserved copy.
28 (n) "Retailer" means a person, other than a wholesaler, who is engaged in the business of selling
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1 tobacco products to the ultimate consumer. The term includes a person who operates fewer than 10 tobacco
2 product vending machines.
3 (o) "Roll-your-own tobacco" means any tobacco that, because of its appearance, type, packaging,
4 or labeling, is suitable for use and likely to be offered to or purchased by consumers as tobacco for making
5 cigarettes.
6 (p) "Sale" or "sell" means any transfer of tobacco products for consideration, exchange, barter, gift,
7 offer for sale, or distribution in any manner or by any means.
8 (q) "Sole distributor" means a person who either causes a unique brand of tobacco products to be
9 manufactured according to distinctive specifications and acts as the exclusive distributor of the tobacco
10 products or is the exclusive distributor of a brand of tobacco products within the continental United States.
11 (r) "Subjobber" means a person who purchases from a licensed wholesaler cigarettes with the
12 Montana cigarette tax insignia affixed and sells or offers to sell tobacco products to a licensed retailer or
13 tobacco product vendor. An isolated sale or exchange of cigarettes between licensed retailers does not
14 constitute those retailers as subjobbers.
15 (s) (i) "Tobacco product" means : cigarettes and all other products containing tobacco that are
16 (A) a product containing, made, or derived from tobacco or that contains nicotine that is intended
17 for human consumption or use i s likely to be consumed, whether smoked, heated, chewed, absorbed,
18 dissolved, inhaled, or ingested by any other means, including but not limited to a cigarette, a cigar, pipe
19 tobacco, chewing tobacco, snuff, and snus; and
20 (B) any substance, regardless of whether or not it contains nicotine, consumed during the use of a
21 device that can be used to deliver nicotine or another substance in any form, including aerosolized or
22 vaporized, to the person inhaling from the device, including but not limited to an e-cigarette, e-cigar, e-pipe,
23 vape pen, or e-hookah.
24 (ii) The term does not include:
25 (A) drugs, devices, or combination products, as defined in the Federal Food, Drug, and Cosmetic
26 Act, authorized by the United States food and drug administration for sale as a tobacco cessation product or for
27 other therapeutic purposes when the product is marketed and sold solely for such an approved purpose; or
28 (B) filters, rolling papers, pipes, or a device described in subsection (2)(s)(i)(B).
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1 (S) "TOBACCO PRODUCT" MEANS:
2 (I) CIGARETTES AND ALL OTHER PRODUCTS CONTAINING TOBACCO THAT ARE INTENDED FOR HUMAN
3CONSUMPTION OR USE; OR
4 (JJ)VAPOR PRODUCTS.
5 (t) (i) "Tobacco product vendor" means a person doing business in the state who purchases
6 tobacco products through a wholesaler, subjobber, or retailer for 10 or more tobacco product vending machines
7 that the person operates for a profit in premises or locations other than the person's own.
8 (ii) A tobacco product vendor must be treated as a wholesaler.
9 (U) (I) "VAPOR PRODUCT" MEANS A NONCOMBUSTIBLE PRODUCT THAT MAY CONTAIN NICOTINE AND THAT
10USES A HEATING ELEMENT, POWER SOURCE, ELECTRONIC CIRCUIT, OR OTHER ELECTRONIC, CHEMICAL, OR MECHANICAL
11MEANS, REGARDLESS OF SHAPE OR SIZE, TO PRODUCE VAPOR FROM A SOLUTION OR OTHER SUBSTANCE. THE TERM
12INCLUDES AN ELECTRONIC CIGARETTE, ELECTRONIC CIGAR, ELECTRONIC CIGARILLO, ELECTRONIC PIPE, OR SIMILAR
13PRODUCT OR DEVICE AND A VAPOR CARTRIDGE OR OTHER CONTAINER THAT MAY CONTAIN NICOTINE IN A SOLUTION OR
14OTHER FORM THAT IS INTENDED TO BE USED WITH OR IN AN ELECTRONIC CIGARETTE, ELECTRONIC CIGAR, ELECTRONIC
15CIGARILLO, ELECTRONIC PIPE, OR SIMILAR PRODUCT OR DEVICE.
16 (II) THE TERM DOES NOT INCLUDE A PRODUCT REGULATED AS A DRUG OR DEVICE BY THE UNITED STATES
17FOOD AND DRUG ADMINISTRATION UNDER CHAPTER V OF THE FEDERAL FOOD, DRUG, AND COSMETIC ACT.
18 (u)(V) "Wholesale price" means the established price for which a manufacturer sells a tobacco
19 product to a wholesaler or any other person before any discount or reduction.
20 (v)(W) "Wholesaler" means a person who:
21 (i) purchases tobacco products from a manufacturer for the purpose of selling tobacco products to
22 subjobbers, tobacco product vendors, wholesalers, or retailers; or
23 (ii) purchases tobacco products from a sole distributor, another wholesaler, or any other person for
24 the purpose of selling tobacco products to subjobbers, tobacco product vendors, wholesalers, or retailers."
25
26SECTION 2. SECTION 16-11-111, MCA, IS AMENDED TO READ:
27 "16-11-111. Cigarette, tobacco products, and moist snuff sales tax -- exemption for sale to
28tribal member. (1) (a) A tax on the purchase of cigarettes for consumption, use, or any purpose other than
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1 resale in the regular course of business is imposed and must be precollected by the wholesaler and paid to the
2 state of Montana. The tax is $1.70 on each package containing 20 cigarettes. Whenever packages contain
3 other than 20 cigarettes, there is a tax on each cigarette equal to 1/20 the tax on a package containing 20
4 cigarettes.
5 (b) The tax computed under subsection (1)(a) applies to illegally packaged cigarettes under 16-11-
6 307.
7 (2) The tax imposed in subsection (1) does not apply to quota cigarettes.
8 (3) Subject to the refund or credit provided in subsection (4), the tax must be precollected on all
9 cigarettes entering a Montana Indian reservation.
10 (4) Pursuant to the procedure provided in subsection (5), a wholesaler making a sale of cigarettes
11 to a retailer within the boundaries of a Montana Indian reservation may apply to the department for a refund or
12 credit for taxes precollected on cigarettes sold by the retailer to a member of the federally recognized Indian
13 tribe or tribes on whose reservation the sale is made. A wholesaler who does not file a claim within 1 year of the
14 shipment date forfeits the refund or credit.
15 (5) The distribution of tax-free cigarettes to a tribal member must be implemented through a
16 system of preapproved wholesaler shipments. A licensed Montana wholesaler shall contact the department for
17 approval prior to the shipment of the untaxed cigarettes. The department may authorize sales based on
18 whether the quota, as established in a cooperative agreement between the department and an Indian tribe or
19 as set out in this chapter, has been met. If authorized as a tax-exempt sale, the wholesaler, upon providing
20 proof of order and delivery to a retailer within the boundaries of a Montana Indian reservation selling cigarettes
21 to members of a federally recognized tribe or tribes of that reservation, must be given a refund or credit. Once
22 the quota has been filled, the department shall immediately notify all affected wholesalers that further sales on
23 that reservation must be taxed and that a claim for a refund or credit will not be honored for the remainder of
24 the quota period. Quota allocations are not transferable between quota periods or between reservations.
25 (6) The total amount of refunds or credits allowed by the department to all wholesalers claiming the
26 refund or credit under subsection (4) for any month may not exceed an amount that is equal to the tax due on
27 the quota allocation. The department shall determine the amount of refunds or credits for each Indian
28 reservation at the beginning of each fiscal year, using the most recent census data available from the bureau of
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1 Indian affairs or as provided in a cooperative agreement with the tribe or tribes of the Indian reservation.
2 (7) There must be collected and paid to the state of Montana a tax of 50% of the wholesale price,
3 to the wholesaler, of all tobacco products other than cigarettes, premium cigars, vapor products, and moist
4 snuff. The tax on a premium cigar is the lesser of 50% of the wholesale price or 35 cents a premium cigar. The
5 tax on moist snuff is 85 cents an ounce based upon the net weight of the package listed by the manufacturer.
6 For packages of moist snuff that are less than or greater than 1 ounce, the tax must be proportional to the size
7 of the package. The tax on vapor products that contain nicotine is 20% of the wholesale price. Tobacco
8 products shipped from Montana and destined for retail sale and consumption outside the state are not subject
9 to this tax.
10 (8) The tax imposed by subsection (7) must be precollected and paid by a wholesaler to the
11 department upon sale to a Montana retailer. A wholesaler who fails to report or pay the tax required by this part
12 must be assessed penalty and interest as provided in 15-1-216.
13 (9) A retailer who purchases tobacco products for resale on which the tobacco products tax has
14 not been collected and paid to the department shall comply with all the provisions of this part and the rules
15 adopted to implement this part as if it were a wholesaler.
16 (10) A retailer must assume that the tobacco products tax has not been collected and paid to the
17 department in the absence of a statement on the retailer's invoice or sales slip for the tobacco products that
18 states that the applicable Montana tobacco products tax is included in the total billing cost."
19
20 NEW SECTION. Section 3. Applicability. [This act] applies to tobacco products sold by wholesalers
21 after June 30, 2025.
22 - END -