Bill Summary – FastDemocracy

SENATE BILL NO. 648
     November 09, 2023, Introduced by Senators CHANG, SHINK and CHERRY and referred to the
       Committee on Regulatory Affairs.
          A bill to amend 1993 PA 327, entitled
    "Tobacco products tax act,"
    by amending the title and sections 2, 3, 6, 7, 8, 11, and 12 (MCL
422, 205.423, 205.426, 205.427, 205.428, 205.431, and 205.432),
    the title as amended by 2012 PA 188 and sections 2, 3, 6, 7, 8, 11,
    and 12 as amended by 2022 PA 171.
                    THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
                                         TITLE
       An act to provide for a tax upon on the sale and distribution
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 of tobacco, other nicotine, and similar products; to regulate and
 license manufacturers, wholesalers, secondary wholesalers, vending
 machine operators, unclassified acquirers, transportation
 companies, transporters, and retailers of tobacco, other nicotine,
 and similar products; to prescribe the powers and duties of the
 revenue division and the department of treasury in regard to
 tobacco, other nicotine, and similar products; to provide for the
 administration, collection, and disposition of the tax; to levy an
 assessment; to provide for the administration, collection, defense,
 and disposition of the assessment; to provide for the enforcement
 of this act; to provide for the appointment of special
 investigators as peace officers for the enforcement of this act; to
 prescribe penalties and provide remedies for the violation of this
 act; to make and supplement appropriations; and to repeal acts and
 parts of acts.
       Sec. 2. As used in this act:
       (a) "Cigar" means any roll of tobacco wrapped in leaf tobacco
 or in any substance containing tobacco. Cigar does not include a
 cigarette.
       (b) "Cigarette" means a roll for smoking or heating that is
 made wholly or in part of tobacco, irrespective of size or shape
 and irrespective of the tobacco being flavored, adulterated, or
 mixed with any other ingredient, which roll has a wrapper or cover
 made of paper or any other material. Cigarette does not include
 cigars.
       (c) "Cigarette making machine" means any machine or other
 mechanical device that meets all of the following criteria:
       (i) Is capable of being loaded with loose tobacco, cigarette
 tubes or cigarette papers, and any other components related to the
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 production of cigarettes, including, but not limited to, cigarette
 filters.
       (ii) Is designed to automatically or mechanically produce,
 roll, fill, dispense, or otherwise generate cigarettes.
       (iii) Is commercial-grade or otherwise designed or suitable for
 commercial use.
       (iv) Is designed to be powered or otherwise operated by a main
 or primary power source other than human power.
       (d) "Container" or "shipping case" means an individual
 receptacle within which a tobacco product or group of tobacco
 products is placed for shipment, storage, or distribution, such as
 a box, case, or tote. A container or shipping case does not include
 any of the following:
       (i) An individual package of cigarettes or cigarette carton
 containing cigarettes that are not counterfeit cigarettes.
       (ii) Except for counterfeit cigarettes, the package or other
 article containing the tobacco product that is sold or transferred
 directly to the ultimate consumer.
       (iii) A bag or similar package containing bulk or loose hookah
 tobacco, pipe tobacco, or roll-your-own cigarette tobacco that a
 retailer uses to fill bins, barrels, or tubs located at the
 retailer's place of business from which either the retailer sells a
 specified quantity of those tobacco products or a blend or mixture
 of those tobacco products to the consumer, or the consumer removes
 or draws a specified quantity of those tobacco products or a blend
 or mixture of those tobacco products for purchase at retail from
 the retailer.
       (iv) A pallet or similar article or device upon on which an
 individual receptacle or group of receptacles, containing the
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 tobacco products, is placed for shipment, storage, or distribution.
       (v) Property used as a protective covering for, or to keep
 together during shipment, storage, or distribution, a receptacle or
 group of receptacles within which the tobacco product is placed for
 shipment, storage, or distribution including shrink wrap or other
 wrapping materials, but excluding the protective covering that
 forms, gives shape to, or otherwise constitutes the receptacle
 within which the tobacco product is placed for shipment, storage,
 or distribution.
       (e) "Counterfeit cigarette" means a cigarette in an individual
 package of cigarettes or other container with a false manufacturing
 label or a cigarette in an individual package of cigarettes or
 other container with a counterfeit stamp.
       (f) "Counterfeit cigarette paper" means a cigarette paper with
 a false manufacturing label or that has not been printed,
 manufactured, or made by authority of the trademark owner.
       (g) "Counterfeit stamp" means any stamp, label, or print,
 indicium, or character, that evidences, or purports to evidence,
 the payment of any tax levied under this act and that has not been
 printed, manufactured, or made by authority of the department as
 provided in this act and has not been issued, sold, or circulated
 by the department.
       (h) "Department" means the department of treasury.
       (i) "Electronic smoking device" means, except as otherwise
 provided in subdivision (j), any device that can be used to deliver
 any aerosolized or vaporized nicotine to the person inhaling from
 the device, including, but not limited to, an e-cigarette, e-cigar,
 e-pipe, vape pen, or e-hookah. Electronic smoking device includes
 all of the following, whether or not sold separately:
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       (i) Any substance intended to be aerosolized or vaporized
 during the use of the device, except marihuana, whether or not the
 substance contains nicotine derived from any source.
       (ii) Mixing kits that contain component parts necessary to
 produce a substance that can be aerosolized or vaporized using the
 device.
       (j) Electronic smoking device does not include drugs, devices,
 or combination products authorized for sale as tobacco cessation
 products by the United States Food and Drug Administration, as
 those terms are defined for purposes of subchapter V of the federal
 food, drug, and cosmetic act, 21 USC 351 to 360fff-8.
       (k) (i) "Financially sound" means a determination by the
 department that the wholesaler or unclassified acquirer is able to
 pay the tax due on the tobacco products it sells, imports, or
 acquires, as applicable, in the ordinary course of business based
 on criteria including, but not limited to, all of the following:
       (i) Past filing and payment history with the department.
       (ii) Outstanding liabilities.
       (iii) Review of current financial statements including, but not
 limited to, balance sheets and income statements.
       (iv) Duration that the wholesaler or unclassified acquirer has
 been licensed under this act.
       (v) Ability to pay for its stamps, if required under this act.
       (l) (j) "Gray market cigarette" means any cigarette the package
 of which bears any statement, label, stamp, sticker, or notice
 indicating that the manufacturer did not intend the cigarettes to
 be sold, distributed, or used in the United States, including, but
 not limited to, a label stating "For Export Only", "U.S. Tax
 Exempt", "For Use Outside U.S.", or similar wording.
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       (m) (k) "Gray market cigarette paper" means any cigarette
 paper the package of which bears any statement, label, stamp,
 sticker, or notice indicating that the manufacturer did not intend
 the cigarette papers to be sold, distributed, or used in the United
 States, including, but not limited to, a label stating "For Export
 Only", "U.S. Tax Exempt", "For Use Outside U.S.", "For Use in
 ______________ (another country) Only", or similar wording.
       (n) (l) "Hookah tobacco" means tobacco that is designed,
 manufactured, or otherwise intended for consumption by smoking in a
 hookah and that is flavored with honey, molasses, fruit, or other
 natural or artificial flavors. Hookah tobacco includes those
 products commonly known or referred to as narghile, argileh,
 shisha, hubble-bubble, molasses tobacco, waterpipe tobacco,
 maassel, or goza.
       (o) (m) "Hookah" means a device, including a waterpipe, used
 for smoking hookah tobacco that consists of a tube connected to a
 chamber where the smoke is cooled passing through water.
       (p) (n) "Individual package" means an individual packet or
 pack used to contain or to convey cigarettes to the consumer.
 Individual package does not include cartons, cases, or shipping or
 storage containers that contain smaller packaging units of
 cigarettes.
       (q) (o) "Licensee" means a person licensed under this act.
       (r) (p) "Manufacturer" means, except as otherwise provided in
 subdivision (q), (s), any of the following:
       (i) A person who that manufactures or produces a tobacco
 product.
       (ii) A person who that operates or who that permits any other
 person to operate a cigarette making machine in this state for the
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 purpose of producing, filling, rolling, dispensing, or otherwise
 generating cigarettes. A person who that is a manufacturer under
 this subparagraph constitutes a nonparticipating manufacturer for
 purposes of sections 6c and 6d.
         (iii) Beginning October 1, 2024, mixes or blends 2 or more
 different components to create a custom mix or blend of a substance
 that can be aerosolized or vaporized for use in an electronic
 smoking device if either of the components is not a finished
 tobacco product. As used in this subparagraph, "finished tobacco
 product" means a tobacco product that the person could or does
 otherwise sell to consumers and on which the tax under this act has
 been paid.
         (s) (q) Manufacturer does not include any of the following:
         (i) A person who that operates or otherwise uses a machine or
 other mechanical device, other than a cigarette making machine, to
 produce, roll, fill, dispense, or otherwise generate cigarettes as
 long as if the cigarettes are produced or otherwise generated in
 that person's dwelling and for that person's self-consumption. As
 used in this subparagraph and subparagraph (ii), "self-consumption"
 means production for personal consumption or use and not for sale,
 resale, or any other profit-making endeavor.
         (ii) A person who that does any of the following:
         (A) Mixes or blends 2 or more different tobacco products to
 create a custom mix or blend of those products if each of the
 constituent tobacco products mixed or blended together is a
 finished tobacco product that the person could or does otherwise
 sell to consumers and upon on which the tax under this act has been
 paid.
         (B) Creates or produces, by filling a fruit with hookah
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 tobacco, what is commonly known as a fruit bowl or fruit head for
 use in a hookah.
       (C) Rolls a cigar for his or her the person's own self-
 consumption.
       (t) "Marihuana" means that term as defined in section 3 of the
 Michigan Regulation and Taxation of Marihuana Act, 2018 IL 1, MCL
 333.27953. For purposes of this act, "marihuana" and "marijuana"
 are synonymous.
       (u) (r) "Noncigarette smoking tobacco" means tobacco sold in
 loose or bulk form that is intended for consumption by smoking and
 also includes roll-your-own cigarette tobacco, hookah tobacco, pipe
 tobacco, or a wrap.
       (v) (s) "Person" means an individual, partnership, fiduciary,
 association, limited liability company, corporation, or other legal
 entity.
       (w) (t) "Pipe tobacco" means any tobacco that, because of its
 appearance, type, packaging, or labeling, is suitable for use and
 likely to be offered to, or purchased by, consumers as tobacco to
 smoke in a pipe.
       (x) (u) "Place of business" means a place where a tobacco
 product is sold or where a tobacco product is brought or kept for
 the purpose of sale or consumption, including a vessel, airplane,
 train, or vending machine.
       (y) (v) "Remote retail sale" means a sale of a tobacco product
 to a consumer in this state if either of the following applies:
       (i) The consumer submits the order for the sale by means of a
 telephone or other method of voice transmission, the mail, or the
 internet or other online service, or the seller is otherwise not in
 the physical presence of the purchaser when the request for
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 purchase or order is made.
       (ii) The tobacco product is delivered to the purchaser by
 common carrier, private delivery service, or other method of remote
 delivery, or the seller is not in the physical presence of the
 purchaser when the purchaser obtains possession of the tobacco
 product.
       (z) (w) "Retailer" means a person other than a transportation
 company who that operates a place of business in this state, or who
 that directs, manages, or has control over the day-to-day
 operations of a place of business in this state, for the purpose of
 making, or who that does make, sales of a tobacco product at
 retail. other than a remote retail sale. A person described in this
 subdivision qualifies as a retailer regardless of whether that
 person owns the place of business.
       (aa) (x) "Roll-your-own cigarette tobacco" means any tobacco
 that, because of its appearance, type, packaging, or labeling, is
 suitable for use and likely to be offered to, or purchased by,
 consumers as tobacco for making cigarettes.
       (bb) (y) "Sale" means a transaction by which the ownership of
 tangible personal property is transferred for consideration and
 applies also to use, gifts, exchanges, barter, and theft.
       (cc) (z) "Secondary wholesaler" means either of the following:
       (i) A person, other than a manufacturer or a person licensed
 under this act as a vending machine operator, wholesaler, or
 unclassified acquirer, who that engages in the sale of a tobacco
 product for resale.
       (ii) A retailer, not otherwise licensed under this act, who
 that transfers or exchanges a tobacco product from one place of
 business of the retailer to another place of business of the
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 retailer.
       (dd) (aa) "Smokeless tobacco" means snuff, snus, chewing
 tobacco, moist snuff, and any other tobacco that is intended to be
 used or consumed, whether chewed, absorbed, dissolved, inhaled,
 snorted, sniffed, or ingested, by any means other than smoking or
 combustion.
       (ee) (bb) "Stamp" means a distinctive character, indication,
 or mark, as determined by the department, attached or affixed to an
 individual package of cigarettes by mechanical device or other
 means authorized by the department to indicate that the tax imposed
 under this act has been paid.
       (ff) (cc) "Stamping agent" means a wholesaler or unclassified
 acquirer who that is licensed and authorized by the department to
 affix stamps to individual packages of cigarettes on behalf of
 themselves and other wholesalers or unclassified acquirers.
       (gg) (dd) "Tobacco product" means, a product containing any
 amount of tobacco regardless of form except as otherwise provided
 in subdivision (hh), any of the following:
       (i) Any product containing, made of, or derived from tobacco or
 nicotine from any source that is intended for human consumption or
 is likely to be consumed, whether inhaled, absorbed, or ingested by
 any other means, including, but not limited to, cigarettes, cigars,
 noncigarette smoking tobacco, or smokeless tobacco.
       (ii) Beginning October 1, 2024, any electronic smoking device.
       (hh) A tobacco product does not include drugs, devices, or
 combination products authorized for sale as tobacco cessation
 products by the United States Food and Drug Administration, as
 those terms are defined in for purposes of subchapter V of the
 federal food, drug, a