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ENGROSSED HOUSE
BILL NO. 3983 By: Caldwell (Trey) and Lawson
of the House
and
Paxton of the Senate
[ cigarettes - administration of cigarette excise
taxes - definition – partial exemption – timeline –
references - effective date ]
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 68 O.S. 2021, Section 301, is
amended to read as follows:
Section 301. For purposes of Section 301 et seq. of this title:
1. The term "cigarette" is defined to mean and include all
rolled tobacco or any substitute therefor, wrapped in paper or any
substitute therefor, intended to be heated or burned, and weighing
not to exceed three (3) pounds per thousand cigarettes;
2. The term "person" is defined to mean and include any
individual, company, partnership, joint venture, joint agreement,
association (mutual or otherwise), limited liability company,
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corporation, estate, trust, business trust receiver, or trustee
appointed by any state or federal court, or otherwise, syndicate, or
any political subdivision of the state or combination acting as a
unit, in the plural or singular number;
3. The term "wholesaler", "distributor" and/or "jobber" is
defined to mean and include a person, firm or corporation organized
and existing, or doing business, primarily to sell cigarettes to,
and render service to retailers in the territory such person, firm
or corporation chooses to serve, and that:
a. purchases cigarettes directly from the manufacturer,
b. at least seventy-five percent (75%) of whose gross
sales are made at wholesale,
c. handles goods in wholesale quantities and sells
through salespersons, advertising and/or sales
promotion devices,
d. carries at all times at its principal place of
business a representative stock of cigarettes for
sale, and
e. comes into the possession of cigarettes for the
purpose of selling them to retailers or to persons
outside or within the state who might resell or retail
such cigarettes to consumers.
In addition to the foregoing, and irrespective of the percentage
or type of sales, the term "wholesaler", "distributor" and/or
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"jobber" shall also include all purchasers of cigarettes making
purchases directly from the manufacturer for distribution at
wholesale or retail sale and this shall not affect the requirements
relating to retail licenses;
4. The term "retailer" is defined to be:
a. a person who comes into the possession of cigarettes
for the purpose of selling, or who sells them at
retail, or
b. a person, not coming within the classification of
wholesaler, distributor and/or jobber as herein
defined, having possession of more than one thousand
cigarettes;
5. The term "consumer" is defined to be a person who receives
or who in any way comes into possession of cigarettes for the
purpose of consuming them, giving them away, or disposing of them in
a way other than by sale, barter or exchange;
6. The term "Tax Commission" is defined to mean the Oklahoma
Tax Commission;
7. The term "sale" and/or "sales" is hereby defined to be and
declared to include sales, barters, exchanges and every other
manner, method and form of transferring the ownership of personal
property from one person to another, and is also declared to be the
use or consumption in this state in the first instance of cigarettes
received from without the state or of any other cigarettes upon
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which the tax has not been paid. The term "first sale" shall mean
and include the first sale or distribution of cigarettes in
intrastate commerce or the first use or consumption of cigarettes
within this state;
8. The term "stamp" as herein used shall mean the stamp or
stamps by use of which:
a. the tax levied pursuant to the provisions of Section
301 et seq. of this title is paid,
b. the tax levied pursuant to the provisions of Section
349 of this title is paid, or
c. the payment in lieu of taxes authorized pursuant to a
compact entered into by the State of Oklahoma and a
federally recognized Indian tribe or nation pursuant
to the provisions of subsection C of Section 346 of
this title is paid;
9. The term "drop shipment" shall mean and include any delivery
of cigarettes received by any person within this state when payment
for such cigarettes is made to the shipper or seller by or through a
person other than the consignee;
10. The term "distributing agent" shall mean and include every
person in this state who acts as an agent of any person outside the
state by receiving cigarettes in interstate commerce and storing
such cigarettes subject to distribution or delivery upon order from
the person outside the state to distributors, wholesale dealers and
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retail dealers, or to consumers. The term "distributing agent"
shall also mean and include any person who solicits or takes orders
for cigarettes to be shipped in interstate commerce to a person in
this state by a person residing outside of Oklahoma, the tax not
having been paid on such cigarettes;
11. The term "vending machine" shall mean and include any coin
operating machine, contrivance, or device, by means of which
cigarettes are sold or dispensed in their original container;
12. The term "use" means and includes the exercise of any right
or power over cigarettes incident to the ownership or possession
thereof, except that it shall not include the sale of cigarettes in
the regular course of business;
13. a. The term "delivery sale" means any sale of cigarettes
to a consumer in Oklahoma where either:
(1) the purchaser submits the order for such sale by
means of a telephonic or other method of voice
transmission, the mails mail or any other
delivery service, or the Internet or other online
service, or
(2) the cigarettes are delivered by use of the mails
mail or other delivery service.
b. A sale of cigarettes which satisfies the criteria in
subparagraph a of this paragraph shall be a delivery
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sale regardless of whether the seller is located
within or outside of Oklahoma.
c. A sale of cigarettes not for personal consumption to a
person who is a wholesale dealer or a retail dealer
shall not be a delivery sale.
d. For purposes of this paragraph, any sale of cigarettes
to an individual in Oklahoma shall be treated as a
sale to a consumer unless such individual is licensed
as a distributor or retailer of cigarettes by the Tax
Commission;
14. The term "delivery service" means any person, including but
not limited to the United States Postal Service, that is engaged in
the commercial delivery of letters, packages, or other containers;
15. The term "manufacturer" means any person who manufactures,
fabricates, assembles, processes, or labels a finished cigarette; or
imports, either directly or indirectly, a finished cigarette for
sale or distribution in this state;
16. The term "mails" "mail" or "mailing" means the shipment of
cigarettes through the United States Postal Service;
17. The term "shipping container" means a container in which
cigarettes are shipped in connection with a delivery sale; and
18. The term "shipping documents" means bills of lading,
airbills, or any other documents used to evidence the undertaking by
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a delivery service to deliver letters, packages, or other
containers.
SECTION 2. AMENDATORY 68 O.S. 2021, Section 321, is
amended to read as follows:
Section 321. A. The following sales are hereby exempted from
the stamp excise tax levied pursuant to the provisions of Section
301 et seq. of this title:
1. All cigarettes sold to veterans hospitals and state operated
domiciliary homes for veterans located in the State of Oklahoma, for
distribution or sale to disabled ex-servicemen or disabled ex-
servicewomen interned in, or inmates of, such hospitals, or
residents of such homes;
2. All sales to the United States;
3. All sales to a federally recognized Indian tribe or nation
which has entered into a compact with the State of Oklahoma pursuant
to the provisions of subsection C of Section 1 346 of this act title
or to a licensee of such a tribe or nation, upon which the payment
in lieu of taxes required by the compact has been paid; and
4. All sales to a federally recognized Indian tribe or nation
or to a licensee of such a tribe or nation upon which the tax levied
pursuant to the provisions of Section 4 349 of this act title has
been paid.
B. To the sale of cigarettes that are intended to be heated
rather than burned shall be applied a tax exemption equal to fifty
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percent (50%) of the tax levied pursuant to the provisions of
Section 301 et seq. of this title.
SECTION 3. AMENDATORY 68 O.S. 2021, Section 322, is
amended to read as follows:
Section 322. The Oklahoma Tax Commission shall prescribe such
rules and make such regulations as to the sale or distribution of
cigarettes, and the exemption from the stamp excise tax thereof, as
shall be deemed necessary to comply with the provisions of the
preceding section Section 301 et seq. of this title, including the
creation of distinct stamps to affix to packages of cigarettes that
are intended to be heated rather than burned, and provide that such
stamps be made available on or before the effective date of this
act.
SECTION 4. AMENDATORY 68 O.S. 2021, Section 402, is
amended to read as follows:
Section 402. There shall be levied, assessed, collected and
paid in respect to the articles containing tobacco enumerated in
Section 401 et seq. of this title, a tax in the following amounts:
1. Little Cigars. Upon cigars of all descriptions made of
tobacco, or any substitute therefor, and weighing not more than
three (3) pounds per thousand, the tax levied on the products coming
under this paragraph shall be equal to the tax on such products that
is reported and paid as cigarette tax under Sections 301 through 325
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of this title. Further, the tax levied herein shall be paid in the
same manner as required in Sections 301 through 325 of this title;
2. Cigars. Upon cigars of all descriptions made of tobacco, or
any substitute therefor, weighing more than three (3) pounds per
thousand and having a manufacturer's recommended retail selling
price, under the Federal Code, of not exceeding four cents ($0.04)
per cigar, one cent ($0.01) for each cigar;
3. Cigars. Upon all other cigars of all descriptions made of
tobacco, or any substitute therefor, and weighing more than three
(3) pounds per thousand, Twenty Dollars ($20.00) per thousand. For
the purpose of computing the tax, cheroots, stogies, etc., are
hereby classed as cigars;
4. Smoking Tobacco. Upon all smoking tobacco, the tax shall be
twenty-five percent (25%) of the factory list price exclusive of any
trade discount, special discount or deals; and
5. Smokeless Tobacco. Upon smokeless tobacco, the tax shall be
twenty percent (20%) of the factory list price exclusive of any
trade discount, special discount or deals One Dollar and seventy-two
cents ($1.72) per ounce and a proportionate tax at the same rate on
all fractional parts of an ounce thereof. The tax on smokeless
tobacco shall be imposed based on the net weight of the product as
listed by the manufacturer.
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It shall not be permissible for a retailer to advertise that the
retailer will absorb the tax due on the taxable merchandise
described herein. Such tax shall be paid by the consumer.
Notwithstanding any other provision of law, the tax levied
pursuant to the provisions of Section 401 et seq. of this title
shall be part of the gross proceeds or gross receipts from the sale
of tobacco products, or both, as those terms are defined in
paragraph 12 of Section 1352 of this title.
SECTION 5. AMENDATORY 68 O.S. 2021, Section 402-1, is
amended to read as follows:
Section 402-1. In addition to the tax levied by Section 402 of
this title, there is hereby levied upon the sale, use, exchange or
possession of articles containing tobacco as defined in Section 402
of this title, a tax in the following amounts:
1. Upon cigars of all descriptions made of tobacco, or any
substitute therefor, and weighing more than three (3) pounds per
thousand, and having a manufacturer's recommended retail selling
price, under the Federal Code, of more than four cents ($0.04) for
each cigar, Ten Dollars ($10.00) per thousand. For the purpose of
computing the tax, cheroots, stogies, etc., are hereby classed as
cigars; and
2. Upon all smoking tobacco, the tax shall be fifteen percent
(15%) of the factory list price exclusive of any trade discount,
special discount or deals; and
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3. Upon smokeless tobacco, the tax shall be ten percent (10%)
of the factory list price exclusive of any trade discount, special
discount or deals.
This tax shall be paid by the consumer and no retailer may
advertise that he will pay or absorb this tax.
The tax herein levied on tobacco products shall be collected on
the same basis and in the same manner and in all respects as the tax
levied by the Tobacco Products Tax Law. The revenue from this
additional tax shall be apportioned by the Oklahoma Tax Commission
in the same manner as provided in Section 404 of this title, for the
apportionment of other tobacco products tax revenue.
SECTION 6. AMENDATORY 68 O.S. 2021, Section 402-3, is
amended to read as follows:
Section 402-3. A. In addition to the tax levied in Sections
402 and 402-1 of this title, effective January 1, 2005, there shall
be levied, assessed, collected, and paid in respect to the articles
containing tobacco enumerated in Section 401 et seq. of this title,
a tax in the following amounts:
1. Cigars. Upon all cigars of all descriptions made of
tobacco, or any substitute therefor, and weighing more than three
(3) pounds per thousand, Ninety Dollars ($90.00) per thousand. For
the purpose of computing the tax, cheroots, stogies, etc., are
hereby classed as cigars; and
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2. Smoking Tobacco. Upon all smoking tobacco, the tax shall be
forty percent (40%) of the factory list price exclusive of any trade
discount, special discount or deals; and
3. Smokeless Tobacco. Upon smokeless tobacco, the tax shall be
thirty percent (30%) of the factory list price exclusive of any
trade discount, special discount or deals.
B. Except as provided in subsection C of this section, the
revenue resulting from the additional tax levied in subsection A of
this section shall be apportioned by the Oklahoma Tax Commission and
transmitted to the State Treasurer as follows:
1. Twenty-two and six-hundredths percent (22.06%) shall be
placed to the credit of the Health Employee and Economy Improvement
Act Revolving Fund created in Section 1010.1 of Title 56 of the
Oklahoma Statutes;
2. Three and nine-hundredths percent (3.09%) shall be placed to
the credit of the Comprehensive Cancer Center Debt Service Revolving
Fund created in Section 160.1 of Title 62 of the Oklahoma Statutes;
3. Before July 1, 2008, seven and fifty-hundredths percent
(7.50%) shall be placed to the credit of the Trauma Care Assistance
Revolving Fund created in Section 1-2530.9 of Title 63 of the
Oklahoma Statutes. On and after July 1, 2008, seven and fifty-
hundredths percent (7.50%) shall be allocated as follows:
a. every month, an amount equal to the actual amount
placed to the credit of the Trauma Care Assistance
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Revolving Fund pursuant to this paragraph for the same
month of the 2008 fiscal year shall be credited to the
Trauma Care Assistance Revolving Fund,
b. every month, any amount over and above the amount
placed to the credit of the Trauma Care Assistance
Revolving Fund pursuant to subparagraph a of this
paragraph shall be credited to the Oklahoma Emergency
Response Systems Stabilization and Improvement
Revolving Fund as created in Section 1-2512.1 of Title
63 of the Oklahoma Statutes until the combined amount
credited to the Oklahoma Emergency Response Systems
Stabilization and Improvement Revolving Fund pursuant
to this section and Section 302-5 of this title is
equal to Two Million Five Hundred Thousand Dollars
($2,500,000.00) each year, and
c. any additional revenue allocated pursuant to this
paragraph shall be placed to the credit of the Trauma
Care Assistance Revolving Fund;
4. Three and nine-hundredths percent (3.09%) shall be placed to
the credit of the Oklahoma State University College of Osteopathic
Medicine Revolving Fund created in Section 160.2 of Title 62 of the
Oklahoma Statutes;
5. Twenty-six and thirty-eight-hundredths percent (26.38%)
shall be placed to the credit of the Oklahoma Health Care Authority
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Medicaid Program Fund created in Section 5020 of Title 63 of the
Oklahoma Statutes for the purposes of maintaining programs and
services funded under the federal "Jobs and Growth Tax Relief
Reconciliation Act of 2003", reimbursing city/county-owned
hospitals, increasing emergency room physician rates, and providing
TEFRA 134, also known as "Katie Beckett" services;
6. Two and sixty-five-hundredths percent (2.65%) shall be
placed to the credit of the Department of Mental Health and
Substance Abuse Services Revolving Fund created in Section 2-303 of
Title 43A of the Oklahoma Statutes;
7. Forty-four-hundredths of one percent (0.44%) shall be placed
to the credit of the Belle Maxine Hilliard Breast and Cervical
Cancer Treatment Revolving Fund created in Section 1-559 of Title 63
of the Oklahoma Statutes;
8. One percent (1%) shall be placed to the credit of the
Teachers' Retirement System Revolving Fund created in Section 158 of
Title 62 of the Oklahoma Statutes;
9. Two and seven-hundredths percent (2.07%) shall be placed to
the credit of the Education Reform Revolving Fund created in Section
34.89 of Title 62 of the Oklahoma Statutes;
10. Sixty-six-hundredths percent (0.66%) shall be placed to the
credit of the Tobacco Prevention and Cessation Revolving Fund
created in Section 1-105d of Title 63 of the Oklahoma Statutes;
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11. Sixteen and eighty-three-hundredths percent (16.83%) shall
be placed to the credit of the General Revenue Fund; and
12. For fiscal years beginning July 1, 2004, and ending June
30, 2006, fourteen and twenty-three-hundredths percent (14.23%)
shall be apportioned to municipalities and counties that levy a
sales tax, in the proportions which total municipal and county sales
tax revenue was apportioned by the Tax Commission in the preceding
month.
For fiscal years beginning July 1, 2006, and thereafter, the
apportionment percentage specified in paragraph 12 of this
subsection will be adjusted by dividing the total municipal and
county sales tax revenue collected in the calendar year immediately
preceding the commencement of the fiscal year by the sum of the
state sales tax revenue and total municipal and county sales tax
revenue collected in the same year. This ratio shall be divided by
the ratio of the total municipal and county sales tax revenue
collected in the calendar year beginning January 1, 2004, and ending
December 31, 2004, divided by the sum of the state sales tax revenue
and total municipal and county sales tax revenue collected in the
same year. The resulting quotient shall be multiplied by fourteen
and twenty-three-hundredths percent (14.23%) to determine the
apportionment percentage for the fiscal year.
For fiscal years beginning July 1, 2006, and thereafter, any
adjustment to the percentage of revenues apportioned to
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municipalities and counties shall be reflected in the percent of
revenues apportioned to the General Revenue Fund.
C. The net amount of any revenue resulting from a payment in
lieu of excise taxes on little cigars, cigars, and smoking tobacco
and smokeless tobacco levied by this section, pursuant to a compact
with a federally recognized Indian tribe or nation after deductions
for deposits into trust accounts pursuant to such compacts, shall be
apportioned by the Tax Commission and transmitted to the State
Treasurer as follows:
1. Thirty-three and forty-nine-hundredths percent (33.49%)
shall be placed to the credit of the Health Employee and Economy
Improvement Act Revolving Fund created in Section 1010.1 of Title 56
of the Oklahoma Statutes;
2. Four and sixty-nine-hundredths percent (4.69%) shall be
placed to the credit of the Comprehensive Cancer Center Debt Service
Revolving Fund created in Section 160.1 of Title 62 of the Oklahoma
Statutes;
3. Before July 1, 2008, eleven and thirty-nine-hundredths
percent (11.39%) shall be placed to the credit of the Trauma Care
Assistance Revolving Fund created in Section 1-2530.9 of Title 63 of
the Oklahoma Statutes. On and after July 1, 2008, eleven and
thirty-nine-hundredths percent (11.39%) shall be allocated as
follows:
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a. every month, an amount equal to the actual amount
placed to the credit of the Trauma Care Assistance
Revolving Fund pursuant to this paragraph for the same
month of the 2008 fiscal year shall be credited to the
Trauma Care Assistance Revolving Fund,
b. every month, any amount over and above the amount
placed to the credit of the Trauma Care Assistance
Revolving Fund pursuant to subparagraph a of this
paragraph shall be credited to the Oklahoma Emergency
Response Systems Stabilization and Improvement
Revolving Fund as created in Section 1-2512.1 of Title
63 of the Oklahoma Statutes until the combined amount
credited to the Oklahoma Emergency Response Systems
Stabilization and Improvement Revolving Fund pursuant
to this section and Section 302-5 of this title is
equal to Two Million Five Hundred Thousand Dollars
($2,500,000.00) each year, and
c. any additional revenue allocated pursuant to this
paragraph shall be placed to the credit of the Trauma
Care Assistance Revolving Fund;
4. Four and sixty-nine-hundredths percent (4.69%) shall be
placed to the credit of the Oklahoma State University College of
Osteopathic Medicine Revolving Fund created in Section 160.2 of
Title 62 of the Oklahoma Statutes;
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5. Forty and six-hundredths percent (40.06%) shall be placed to
the credit of the Oklahoma Health Care Authority Medicaid Program
Fund created in Section 5020 of Title 63 of the Oklahoma Statutes
for the purposes of maintaining programs and services funded under
the federal "Jobs and Growth Tax Relief Reconciliation Act of 2003",
reimbursing city/county-owned hospitals, increasing emergency room
physician rates, and providing TEFRA 134, also known as "Katie
Beckett" services;
6. Four and one-hundredths percent (4.01%) shall be placed to
the credit of the Department of Mental Health and Substance Abuse
Services Revolving Fund created in Section 2-303 of Title 43A of the
Oklahoma Statutes;
7. Sixty-seven-hundredths percent (0.67%) shall be placed to
the credit of the Belle Maxine Hilliard Breast and Cervical Cancer
Treatment Revolving Fund created in Section 1-559 of Title 63 of the
Oklahoma Statutes; and
8. One percent (1%) shall be placed to the credit of the
Tobacco Prevention and Cessation Revolving Fund created in Section
1-105d of Title 63 of the Oklahoma Statutes.
D. It shall not be permissible for a retailer to advertise that
the retailer will absorb the tax due on the taxable merchandise
described herein. Such tax shall be paid by the consumer.
SECTION 7. This act shall become effective November 1, 2026.
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Passed the House of Representatives the 25th day of March, 2026.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2026.
Presiding Officer of the Senate