REPORT TITLE: 
Cigarette stamp tax


DESCRIPTION:
Provides that the excise tax on cigarettes shall be imposed and
collected through the use of stamps purchased by licensees, and
affixed to cigarette packages.  Includes provisions for civil
and criminal penalties, and for forfeitures of cigarettes, to be
enforced by the police departments, liquor commissions, the
attorney general, and prosecuting attorneys.  Mandates repeal of
the law in 2005 upon a finding by the legislative auditor that
the law has not reduced the loss of tax revenue due to the
illegal sale of untaxed cigarettes. (SB788 HD2)


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        788
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                H.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TAXATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 245, Hawaii Revised Statutes, is amended
 
 2 by adding a new part to be appropriately designated and to read
 
 3 as follows:
 
 4                 "PART   .  STAMPING OF CIGARETTES
 
 5      245-A  Payment of tax through use of stamps.(a)  The tax
 
 6 imposed under section 245-3 upon the sale or use of cigarettes
 
 7 shall be paid by licensees through the use of stamps.
 
 8      (b)  The department shall furnish stamps for sale.
 
 9      245-B  Sales through financial institutions; rules.  The
 
10 department may enter into agreements to permit the sale of stamps
 
11 by designated financial institutions located within the State.  A
 
12 list of financial institutions designated to sell stamps shall be
 
13 made available at the department.  The department may adopt rules
 
14 as necessary for this purpose pursuant to chapter 91.
 
15      245-C  Designs, specifications, and denominations of
 
16 stamps; affixation; cancellation.  Stamps shall be of such
 
17 designs, specifications, and denominations as may be prescribed
 
18 by the department.  The department shall adopt rules pursuant to
 
19 chapter 91, on the method and manner in which stamps are to be
 

 
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 1 affixed to packages of cigarettes, and may provide for the
 
 2 cancellation of stamps.
 
 3      245-D  Affixation prior to distribution.(a)  Beginning
 
 4 April 15, 2000, a licensee, or designee of a licensee, may apply
 
 5 to the department for stamps as provided in this section.
 
 6      (b)  Beginning May 1, 2000, a licensee or the authorized
 
 7 agent or designee of a licensee, shall affix a stamp to the
 
 8 bottom of each individual package of cigarettes, prior to
 
 9 distribution.
 
10      (c)  Beginning September 1, 2000, an individual package of
 
11 cigarettes, not affixed with the stamp required under this
 
12 section, shall not be sold or offered for sale to the general
 
13 public.
 
14      (d)  Beginning September 1, 2000, a cigarette package, not
 
15 affixed with the stamp required under this section, shall not be
 
16 placed or stored in a vending machine. 
 
17      245-E  Approval of department required for transfer of
 
18 stamps.  Unaffixed stamps shall not be sold, exchanged, or in any
 
19 manner transferred by a licensee to another person without prior
 
20 written approval of the department.  Any person who violates this
 
21 section shall be fined not less than $500 and not more than
 
22 $1,000 for each violation.
 

 
 
 
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 1      245-F  Authority to order purchases for wholesaler or
 
 2 dealer; duration; revocation.  A licensee shall, in writing,
 
 3 authorize those persons who may order purchases of stamps for the
 
 4 licensee at a location where stamps are sold.  The authorization
 
 5 shall continue in effect until written notice of revocation of
 
 6 the authority is delivered at the sales location in the manner
 
 7 prescribed by rules adopted by the department pursuant to chapter
 
 8 91.
 
 9      245-G  Payment of tax without use of stamps in certain
 
10 transactions; rules.  The department may provide by rule pursuant
 
11 to chapter 91 that the tax imposed by this chapter with respect
 
12 to cigarettes may be paid without the use of stamps in connection
 
13 with a particular type of transaction.
 
14      245-H  Price; payment; deferred payment purchases.(a)
 
15 Stamps shall be sold to licensees at their denominated values,
 
16 plus a state stamp fee of .2 per cent to pay for the cost to the
 
17 State of providing the stamps; provided that the department may
 
18 adopt rules, pursuant to chapter 91, to modify the state stamp
 
19 fee to reflect the actual costs incurred by the State in
 
20 providing the stamps.
 
21      (b)  Licensees may include in the price of cigarettes to
 
22 which there is affixed the stamp required under this part, a
 
23 distributor's stamp fee of      per cent of the denominated value
 
24 of the stamp, to cover the stamp fee paid to the State as well as
 

 
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 1 other costs incurred by licensees in affixing the stamp; provided
 
 2 that the department may adopt rules, pursuant to chapter 91, to
 
 3 modify the distributor's fee to reflect the actual costs incurred
 
 4 by licensees to acquire and affix the stamps.
 
 5      (c)  Payment for stamps shall be made at the time of
 
 6 purchase; provided that the department may adopt rules pursuant
 
 7 to chapter 91 to permit a licensee to defer payments therefor as
 
 8 provided for in section 245-I.
 
 9      245-I  Application to fix maximum amount and time of
 
10 deferred-payment purchases; bonding; designation of sales
 
11 locations.(a)  A licensee may apply to the department to set
 
12 the maximum amount of deferred-payment purchases of stamps that
 
13 may remain unpaid by the licensee during the time specified under
 
14 section 245-J.  Upon receipt of the application and any bond
 
15 required pursuant to subsection (b), the department shall set the
 
16 amount for deferred-payment purchases.
 
17      (b)  The department of taxation may require that a licensee
 
18 who submits an application for deferred-payment purchases of
 
19 stamps post a bond in an amount of up to one hundred per cent of
 
20 the maximum amount of allowed deferred-payment purchases as a
 
21 condition of approval of the application by the department.
 

 
 
 
 
 
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 1      245-J  Time for payment of deferred-payment purchases;
 
 2 manner of payment.  Amounts owing for stamps purchased on the
 
 3 deferred-payment basis in any calendar month shall be due and
 
 4 payable on or before the last day of the following calendar
 
 5 month.  Payment shall be made by a remittance payable to the
 
 6 department.
 
 7      245-K  Suspension of privilege to purchase on deferred-
 
 8 payment basis or reduction of amount of permissible purchases.
 
 9 The department may suspend, without prior notice, a licensee's
 
10 privilege to purchase stamps on the deferred-payment basis, or
 
11 may reduce the amount of deferred-payment purchases allowed the
 
12 licensee, if:
 
13      (1)  The licensee fails to promptly pay for stamps when
 
14           payment is due;
 
15      (2)  The bond or bonds required of the licensee are
 
16           canceled, become void, impaired, or unenforceable for
 
17           any reason; or
 
18      (3)  In the opinion of the department, collection of any
 
19           amounts unpaid or due from the licensee under this
 
20           chapter is jeopardized.
 
21      245-L  Penalty for failure to make timely payment.  A
 
22 licensee who fails to pay any amount owing for the purchase of
 
23 stamps within the time required shall pay a penalty of ten per
 

 
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 1 cent of the amount due in addition to the amount due plus
 
 2 interest at the rate specified in section 231-39, from the date
 
 3 on which the amount became due and payable until the date of
 
 4 payment.
 
 5      245-M  Unused stamps.  The department shall adopt rules
 
 6 pursuant to chapter 91 for a refund or credit to a licensee in
 
 7 the amount of the denominated values of any unused stamps.
 
 8      245-N  Cigarettes and tobacco products shipped outside the
 
 9 State for sale or use outside the State; refund or credit of
 
10 taxes.(a)  The department shall adopt rules pursuant to chapter
 
11 91 to provide a tobacco tax refund or credit to a licensee who
 
12 has paid a tobacco tax on the distribution of cigarettes or
 
13 tobacco products that are shipped to a point outside the State
 
14 for subsequent sale or use outside the State.
 
15      (b)  This section shall not apply to cigarettes or tobacco
 
16 products that are distributed in this State to consumers and that
 
17 are subsequently taken outside the State.
 
18      245-O  Monthly report on distributions of cigarettes and
 
19 tobacco products, and purchases of stamps.(a)  On or before the
 
20 last day of each month, every licensee shall file, on forms
 
21 prescribed by the department, a report of the licensee's
 
22 distributions of cigarettes and purchases of stamps during the
 

 
 
 
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 1 preceding month, and any other information that the department
 
 2 may require to carry out this section.
 
 3      (b)  On or before the last day of each month, every licensee
 
 4 shall file, on forms prescribed by the department, a report of
 
 5 the licensee's distributions of tobacco products and the
 
 6 wholesale costs of tobacco products during the preceding month,
 
 7 and any other information that the department may require to
 
 8 carry out this part.
 
 9      245-P  Counterfeiting stamps.  Any person who:
 
10      (1)  Falsely or fraudulently makes, forges, alters, reuses,
 
11           or counterfeits any stamp provided for or authorized
 
12           under this part;
 
13      (2)  Causes any stamp to be falsely or fraudulently made,
 
14           forged, altered, reused, or counterfeited; or
 
15      (3)  Knowingly and wilfully utters, publishes, passes, or
 
16           tenders as genuine, any false, forged, altered, reused,
 
17           or counterfeited stamp,
 
18 is guilty of a class B felony and shall be imprisoned for not
 
19 less than one year and not more than ten years, and may be fined
 
20 not more than $50,000, or both.
 
21      245-Q  Sale or purchase of packages of cigarettes without
 
22 stamps; fines and penalties.(a)  Beginning September 1, 2000, a
 
23 person who knowingly possesses, keeps, stores, acquires,
 

 
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 1 transports, or retains for the purpose of sale, or sells or
 
 2 offers to sell, three thousand or more cigarettes with an
 
 3 aggregate wholesale price of $250 or more, to which there are not
 
 4 affixed the stamps required under this part, regardless of the
 
 5 source of, or method of obtaining the cigarettes, is guilty of a
 
 6 class C felony, and upon conviction thereof, shall be fined not
 
 7 more than $10,000, and may be imprisoned not less than one year
 
 8 and not more than five years, or both; provided that a
 
 9 corporation shall be fined not more than $50,000.
 
10      (b)  Beginning September 1, 2000, a person who knowingly
 
11 possesses, keeps, stores, acquires, transports, or retains for
 
12 the purpose of sale, or sells or offers to sell, one thousand two
 
13 hundred or more, but not more than two thousand nine hundred
 
14 ninety-nine, cigarettes with an aggregate wholesale value of $100
 
15 or more, but less than $250, to which there are not affixed the
 
16 stamps required under this part, regardless of the source of, or
 
17 method of obtaining the cigarettes, is guilty of a misdemeanor,
 
18 and upon conviction thereof, shall be fined not more than $5,000,
 
19 and may be imprisoned not more than one year, or both; provided
 
20 that a corporation shall be fined not more than $25,000.
 
21      (c)  Beginning September 1, 2000, a person who knowingly
 
22 violates a provision of this part for which a criminal punishment
 
23 is not otherwise provided is guilty of a misdemeanor, and may be
 

 
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 1 fined not more than $2,000 or imprisoned not more than one year,
 
 2 or both.
 
 3      245-R  Vending unstamped cigarettes; offense; punishment.
 
 4 Beginning September 1, 2000, a person in possession or control
 
 5 of, or having access to, a cigarette vending machine, who
 
 6 knowingly or wilfully places for sale in the vending machine any
 
 7 cigarettes not contained in packages to which are affixed Hawaii
 
 8 tax stamps, shall be guilty of a class C felony, and upon
 
 9 conviction thereof:
 
10      (1)  Shall be fined not more than $10,000;
 
11      (2)  May be imprisoned not less than one year and not more
 
12           than ten years; or 
 
13      (3)  Both;
 
14 provided that a corporation shall be fined not more than $50,000.
 
15      245-S  Treatment of unstamped cigarettes.  Beginning
 
16 September 1, 2000, all persons in possession or control of
 
17 unstamped cigarettes shall destroy the unstamped cigarettes or
 
18 return the unstamped cigarettes to the manufacturers.  Failure to
 
19 comply may subject persons in possession or control of unstamped
 
20 cigarettes to the criminal penalties and administrative fines
 
21 provided for in sections 245-Q, 245-R, 245-U, 245-V, 245-W, and
 
22 245-X.
 

 
 
 
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 1      245-T  Enforcement; injunction; disposition of fines.(a)
 
 2 Enforcement of this part shall be under the concurrent
 
 3 jurisdiction of the attorney general, liquor commission,
 
 4 prosecuting attorney, and police department.
 
 5      (b)  Notwithstanding the existence of other remedies at law,
 
 6 the attorney general or prosecuting attorney may apply for, and
 
 7 the court may grant, a temporary or permanent injunction
 
 8 restraining any person from violating or continuing to violate
 
 9 this part.  The injunction shall be issued without bond.
 
10      (c)  Where a police department, working with either the
 
11 attorney general or prosecuting attorney, initiates and conducts
 
12 an investigation resulting in the imposition and collection of a
 
13 criminal fine pursuant to this part, one hundred per cent of the
 
14 fine shall be equally distributed between the police department
 
15 whose officers or employees initiated and conducted the
 
16 investigation, and either the office of the attorney general or
 
17 of the prosecuting attorney, whichever obtained the underlying
 
18 conviction.
 
19      245-U  Liquor commission hearing, counterfeiting stamps,
 
20 or selling, purchasing, or vending unstamped cigarettes.(a)
 
21 The liquor commission or liquor control adjudication board may
 
22 assess and collect a fine against, or reprimand any person who
 
23 counterfeits Hawaii tax stamps, or sells, purchases, or vends
 

 
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 1 unstamped cigarettes in violation of this part or of any rule or
 
 2 regulation applicable thereto.  Any reprimand or fine imposed by
 
 3 the commission or board pursuant to this section shall be in
 
 4 addition to any other fine that may be imposed by law.  The fine
 
 5 assessed and collected pursuant to this section shall not exceed
 
 6 the sum of $2,000 for each violation.
 
 7      (b)  In every case where proceedings under this section in
 
 8 which a fine may be imposed are conducted, the person subject to
 
 9 those proceedings shall be entitled to notice and hearing in
 
10 conformity with chapter 91.  The person shall be entitled to be
 
11 heard in person or through counsel, and shall be given a full and
 
12 fair opportunity to present facts showing that the alleged cause
 
13 or causes for the proposed action do not exist, or to show any
 
14 other reason why no fine should be imposed.  Testimony taken at
 
15 the hearing shall be under oath and recorded stenographically, or
 
16 by machine.  The parties shall not be bound by strict rules of
 
17 evidence.  At the request of the person subject to the
 
18 proceedings, certified copies of any transcript and of any other
 
19 record made of, or at the hearing, shall be provided upon payment
 
20 by the requester of the costs of providing the certified copies.
 
21      (c)  The notice required by this section shall be served in
 
22 the following manner:
 

 
 
 
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 1      (1)  Written notice of the violation shall be given to the
 
 2           person charged with the violation within a reasonable
 
 3           period of time after the alleged violation is
 
 4           discovered, and the person charged shall be requested
 
 5           to acknowledge receipt of the notice;
 
 6      (2)  If the person charged cannot be found after diligent
 
 7           search, notice may be served by leaving a certified
 
 8           copy of the written notice at the person's dwelling
 
 9           house or usual place of abode with any person of
 
10           suitable age and discretion residing therein;
 
11      (3)  If the person charged cannot be found after diligent
 
12           search, and service cannot be made, then service may be
 
13           made by mailing a certified copy of the written notice
 
14           by way of the United States post office certified mail,
 
15           postage prepaid, and addressed to the person at the
 
16           person's last known residence address; and
 
17      (4)  Where a partnership, corporation, unincorporated
 
18           association, or limited liability company is charged,
 
19           service may be made upon any partner, officer, or
 
20           member thereof.
 
21      245-V  Seizure and confiscation of unstamped cigarettes.
 
22 The attorney general, liquor commission, prosecuting attorney,
 
23 and the police department may seize and confiscate any cigarette,
 

 
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 1 package of cigarettes, or carton of cigarettes that is possessed,
 
 2 kept, stored, acquired, transported, or retained for the purpose
 
 3 of sale, or sold or offered for sale in violation of this part,
 
 4 subject to the requirements of chapter 281.
 
 5      245-W  Arrest; abetters.  The owner, keeper, and any person
 
 6 having custody of any cigarette, package of cigarettes, or carton
 
 7 of cigarettes seized as provided in section 245-V, may be
 
 8 arrested without necessity of warrant and brought before the
 
 9 district court of the circuit in which the seizure occurred.  If
 
10 the owner or keeper of the cigarette, package of cigarettes, or
 
11 carton of cigarettes seized is unknown to the police officer
 
12 making the seizure, or if no person is found in apparent
 
13 possession or custody of them, the police officer may arrest and
 
14 bring before the court the owner or occupant of the building,
 
15 place, or premises, or the driver, operator, owner, or other
 
16 person in charge of the conveyance in which the cigarette,
 
17 package of cigarettes, or carton of cigarettes is found, if such
 
18 person is known or can be ascertained.  Any person who has
 
19 knowingly engaged in, aided, assisted, or abetted the obtaining,
 
20 keeping, or sale of any cigarette, package of cigarettes, or
 
21 carton of cigarettes seized as provided in section 245-V, or has
 
22 been privy thereto, or has knowingly permitted the use of any
 
23 place, building, premises, or conveyance for such unlawful
 

 
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 1 purpose, shall be guilty of a misdemeanor and be punished as
 
 2 provided in section 245-Q(c).
 
 3      245-X  Forfeitures; disposition.(a)  Any cigarette,
 
 4 package of cigarettes, or carton of cigarettes unlawfully
 
 5 possessed, kept, stored, acquired, transported, or retained for
 
 6 the purpose of sale, or sold or offered for sale, in violation of
 
 7 this part, may be ordered forfeited pursuant to chapter 281 by an
 
 8 appropriate administrative or judicial proceeding. 
 
 9      (b)  Any cigarette, package of cigarettes, or carton of
 
10 cigarettes forfeited pursuant to this section shall be sold to a
 
11 licensed wholesaler or dealer.
 
12      (c)  All proceeds from the sale of any cigarette, package of
 
13 cigarettes, or carton of cigarettes forfeited as provided in this
 
14 section shall, after payment of expenses of administration and
 
15 sale, be distributed equally between:
 
16      (1)  Either the county police department or county liquor
 
17           commission whose officers, investigators, or employees
 
18           initiated and conducted an investigation resulting in
 
19           the forfeiture and sale of cigarettes pursuant to this
 
20           section; and
 
21      (2)  The attorney general or prosecuting attorney who
 
22           instituted the action producing the forfeiture.
 

 
 
 
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 1      (d)  Money distributed to the attorney general, liquor
 
 2 commission, police department, or prosecuting attorney shall be
 
 3 used for law enforcement purposes, and shall complement but not
 
 4 supplant the funds regularly appropriated for such purposes.
 
 5      245-Y  Appeals.  A claimant of a cigarette, package of
 
 6 cigarettes, or carton of cigarettes forfeited pursuant to section
 
 7 245-X, may appeal the forfeiture in the same manner as appeals
 
 8 are allowed in other cases governed by chapter 281.  If the
 
 9 claimant fails to appear, or to diligently prosecute the appeal,
 
10 or fails to secure a reversal of the judgment in the appellate
 
11 court, the judgment appealed from shall be carried out.
 
12      245-Z  Claims.  If the owner or possessor of any cigarette,
 
13 package of cigarettes, or carton of cigarettes seized under this
 
14 part appears and makes claim to the item, the owner or possessor
 
15 shall file with the court before whom the proceedings are
 
16 pending, a claim in writing, setting forth the claimant's
 
17 interest therein, and the reason why the items claimed should not
 
18 be forfeited.  The claimant shall also give bond in favor of the
 
19 State, sufficient in amount and sureties, as required by the
 
20 court, and conditioned so that if the claim is diligently
 
21 prosecuted and decided against the claimant, the claimant shall
 
22 pay the costs of the proceedings conducted to resolve the claim.
 
23 If the judgment is against the claimant, the cigarette, package
 

 
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 1 of cigarettes, carton of cigarettes, and all containers thereof
 
 2 shall be forfeited and shall be disposed of as provided in
 
 3 section 245-X.
 
 4      245-AA  Prosecutions not to exclude other remedies
 
 5 affecting goods.  The criminal penalties and administrative fines
 
 6 authorized under this part shall be in addition to any
 
 7 forfeitures imposed pursuant to section 245-X."
 
 8      SECTION 2.  Section 245-1, Hawaii Revised Statutes, is
 
 9 amended by adding nine new definitions to be appropriately
 
10 inserted and to read as follows:
 
11      ""Attorney general" means the attorney general or deputy
 
12 attorneys general of the State of Hawaii.
 
13      "Department" means the department of taxation.
 
14      "License" means any license granted under this chapter.
 
15      "Licensee" means a holder of a license granted under this
 
16 chapter.
 
17      "Liquor commission" means the liquor commission of the
 
18 various counties.
 
19      "Liquor control adjudication board" or "board" means a board
 
20 established by county charter, within a county, that shall have
 
21 the jurisdiction to hear and determine complaints or violations
 
22 of chapter 281 and to impose penalties as may be provided in
 
23 chapter 281.
 

 
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                                     S.B. NO.           S.D. 2
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 1      "Police department" means the police department of the
 
 2 various counties.
 
 3      "Prosecuting attorney" means the prosecuting attorney or
 
 4 deputy prosecuting attorneys of the various counties.
 
 5      "Stamp" means a stamp printed, manufactured, or made by
 
 6 authority of the department, as provided in this chapter, which
 
 7 is issued, sold, or circulated by the department, and by the use
 
 8 of which the tax levied under this chapter is paid."
 
 9      SECTION 3.  Section 245-3, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "245-3  Taxes[; limitations].(a)  Every [wholesaler or
 
12 dealer,] licensee, in addition to any other taxes provided by
 
13 law, shall pay for the privilege of conducting business and other
 
14 activities in the State an:
 
15      (1)  Excise tax equal to:
 
16           (A)  4.00 cents for each cigarette sold, used, or
 
17                possessed by the [wholesaler or dealer,] licensee
 
18                after August 31, 1997; and
 
19           (B)  5.00 cents for each cigarette sold, used, or
 
20                possessed by a [wholesaler or dealer] licensee
 
21                after June 30, 1998,
 
22           whether or not sold at wholesale, or if not sold then
 

 
 
 
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 1           at the same rate upon the use by the wholesaler or
 
 2           dealer; and
 
 3      (2)  Excise tax equal to forty per cent of the wholesale
 
 4           price of each article or item of tobacco products sold
 
 5           by the [wholesaler or dealer,] licensee, whether or not
 
 6           sold at wholesale, or if not sold then at the same rate
 
 7           upon the use by the [wholesaler or dealer] licensee.
 
 8      Where the tax imposed has been paid on cigarettes or tobacco
 
 9 products which thereafter become the subject of a casualty loss
 
10 deduction allowable under chapter 235, the tax paid shall be
 
11 refunded or credited to the account of the [wholesaler or
 
12 dealer.] licensee.   In applying the tax[,] to tobacco products,
 
13 the tax shall be applied against the latest of the activities of
 
14 selling, using, or possessing.  The tax shall be imposed at the
 
15 time of the last of the following activities to occur:  the sale;
 
16 the use; or the possession of [cigarettes or] tobacco products.
 
17 The tax shall be applied to cigarettes through the use of stamps.
 
18      (b)  The taxes, however, are subject to the following
 
19 limitations:
 
20      (1)  The measure of the taxes shall not include any
 
21           cigarettes or tobacco products exempted, and so long as
 
22           the same are exempted, from the imposition of taxes by
 
23           the Constitution or laws of the United States; and
 

 
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 1      (2)  The taxes shall be paid only once in respect of the
 
 2           same cigarettes or tobacco product.  This limitation
 
 3           shall not prohibit the imposition of the excise tax on
 
 4           receipts from sales of tobacco products under
 
 5           subsection (a)(2); provided that the amount subject to
 
 6           the tax on each sale shall not include amounts
 
 7           previously taxed under this chapter.
 
 8      (c)       cents of the cigarette tax assessed after May 1,
 
 9 2000, shall be paid to the county liquor commissions as follows:
 
10      (1)       per cent shall be paid to the liquor commission
 
11           for the city and county of Honolulu;
 
12      (2)       per cent shall be paid to the liquor commission
 
13           for the county of Hawaii;
 
14      (3)       per cent shall be paid to the liquor commission
 
15           for the county of Maui; and
 
16      (4)      per cent shall be paid to the liquor commission for
 
17           the county of Kauai."
 
18      SECTION 4.  Section 245-5, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "245-5  Returns.  Every licensee, on or before the last day
 
21 of each month, shall file with the department [of taxation] a
 
22 return showing the cigarettes and tobacco products sold,
 
23 possessed, or used by the licensee during the preceding calendar
 

 
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 1 month and of the taxes chargeable against the taxpayer in
 
 2 accordance with this chapter.  The form of the return shall be
 
 3 prescribed by the department and shall [contain such information
 
 4 including] include [a]:
 
 5      (1)  A separate statement of the number and wholesale price
 
 6           of cigarettes[,];
 
 7      (2)  The amount of stamps purchased and used; [and the]
 
 8      (3)  The wholesale price of tobacco products, sold,
 
 9           possessed, or used[, as it]; and
 
10      (4)  Any other information that the department may deem
 
11           necessary,
 
12 for the proper administration of this chapter."
 
13      SECTION 5.  Section 245-6, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "245-6  Payment of taxes; penalties.  At the time of the
 
16 filing of the return required under section 245-5 and within the
 
17 time prescribed therefor, each licensee shall pay to the
 
18 department [of taxation] the taxes imposed by this chapter,
 
19 required to be shown by the return[.], including the unpaid
 
20 amount of taxes imposed by this chapter.
 
21      Penalties and interest shall be added to and become a part
 
22 of the taxes, when and as provided by section 231-39."
 

 
 
 
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 1      SECTION 6.  Section 245-8, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  Every [wholesaler and dealer] licensee shall keep a
 
 4 record of [every]:
 
 5      (1)  Every sale or use of cigarettes and tobacco products by
 
 6           the [wholesaler or dealer, the] licensee;
 
 7      (2)  The number and wholesale price of cigarettes[, and
 
 8           the];
 
 9      (3)  The wholesale price of tobacco products, sold,
 
10           possessed, or used[, and of the];
 
11      (4)  The taxes payable [thereon,] on tobacco products sold,
 
12           possessed, or used, if any[,]; and
 
13      (5)  The amounts of stamps purchased and used,
 
14 in such form as the department [of taxation] may prescribe.  The
 
15 records shall be offered for inspection and examination at any
 
16 time upon demand by the department and shall be preserved for a
 
17 period of five years, except that the department, in writing, may
 
18 consent to their destruction within the five-year period or may
 
19 require that they be kept longer.  The department, by rule, may
 
20 require the licensee to keep such other records as it may deem
 
21 necessary for the proper enforcement of this chapter."
 
22      SECTION 7.  Section 245-15, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "245-15  Disposition of revenues.  All moneys collected
 
 2 pursuant to this chapter shall be paid into the state treasury as
 
 3 state realizations to be kept and accounted for as provided by
 
 4 law[.], except for the amounts designated by:
 
 5      (1)  Sections 245-T, 245-U, and 245-X, for distribution to
 
 6           the liquor commission, the police department, or the
 
 7           prosecuting attorney; and
 
 8      (2)  Section 245-3 to be paid to the county liquor
 
 9           commissions."
 
10      SECTION 8.  Section 281-17, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "281-17  Jurisdiction and powers.  The liquor commission,
 
13 within its own county, shall have the sole jurisdiction, power,
 
14 authority, and discretion, subject only to this chapter[:] and
 
15 chapter 245:
 
16      (1)  To grant, refuse, suspend, and revoke any licenses for
 
17           the manufacture, importation, and sale of liquors;
 
18      (2)  To take appropriate action against a person who,
 
19           directly or indirectly, manufactures or sells any
 
20           liquor without being authorized pursuant to this
 
21           chapter; provided that in counties which have
 
22           established by charter a liquor control adjudication
 
23           board, the board shall have the jurisdiction, power,
 

 
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 1           authority, and discretion to hear and determine
 
 2           administrative complaints of the director regarding
 
 3           violations of the liquor laws of the State or of the
 
 4           rules of the liquor commission, and impose penalties
 
 5           [[]for[]] violations thereof as may be provided by law;
 
 6      (3)  To take appropriate action against a person who
 
 7           counterfeits stamps, or sells, purchases, or vends
 
 8           unstamped cigarette packages in violation of chapter
 
 9           245 or any rule thereof;
 
10     [(3)] (4)  To control, supervise, and regulate the
 
11           manufacture, importation, and sale of liquors by
 
12           investigation, enforcement, and education; provided
 
13           that any educational program shall be limited to
 
14           licensees and their employees and shall be financed
 
15           through the money collected from the assessment of
 
16           fines against licensees;
 
17     [(4)] (5)  From time to time to make, amend, and repeal such
 
18           rules, not inconsistent with this chapter, as in the
 
19           judgment of the commission seem appropriate for
 
20           carrying out this chapter and for the efficient
 
21           administration thereof, and the proper conduct of the
 
22           business of all licensees, including every matter or
 
23           thing required to be done or which may be done with the
 

 
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 1           approval or consent or by order or under the direction
 
 2           or supervision of or as prescribed by the commission;
 
 3           which rules, when adopted as provided in chapter 91
 
 4           shall have the force and effect of law;
 
 5     [(5)] (6)  Subject to chapters 76 and 77, to appoint and
 
 6           remove an administrator, who may also be appointed an
 
 7           investigator and who shall be responsible for the
 
 8           operations and activities of the staff.  The
 
 9           administrator may hire and remove hearing officers,
 
10           investigators, and clerical or other assistants as its
 
11           business may from time to time require, to prescribe
 
12           their duties, and fix their compensation; to engage the
 
13           services of experts and persons engaged in the practice
 
14           of a profession, if deemed expedient.  Every
 
15           investigator, within the scope of the investigator's
 
16           duties, shall have the powers of a police officer.  No
 
17           employee of any commission, aside from exercising the
 
18           right to vote, shall support, advocate, or aid in the
 
19           election or defeat of any candidate for public office,
 
20           and upon satisfactory proof of such prohibited activity
 
21           the offender shall be summarily dismissed;
 
22     [(6)] (7)  To limit the number of licenses of any class or
 
23           kind within the county, or the number of licenses of
 

 
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 1           any class or kind to do business in any given locality,
 
 2           when in the judgment of the commission such limitations
 
 3           are in the public interest;
 
 4     [(7)] (8)  To prescribe the nature of the proof to be
 
 5           furnished, the notices to be given, and the conditions
 
 6           to be met or observed in case of the issuance of a
 
 7           duplicate license in place of one alleged to have been
 
 8           lost or destroyed, including a requirement of any
 
 9           indemnity deemed appropriate to the case;
 
10     [(8)] (9)  To fix the hours between which licensed premises
 
11           of any class or classes may regularly be open for the
 
12           transaction of business, which shall be uniform
 
13           throughout the county as to each class respectively;
 
14     [(9)] (10)  To prescribe all forms to be used for the
 
15           purposes of this chapter not otherwise provided for in
 
16           this chapter, or in chapter 245, and the character and
 
17           manner of keeping of books, records, and accounts to be
 
18           kept by licensees of this chapter and chapter 245 in
 
19           any matter pertaining to their business;
 
20    [(10)] (11)  To investigate violations of this chapter,
 
21           chapter 244D, and chapter 245 and, notwithstanding any
 
22           law to the contrary, violations of the applicable
 
23           department of health's allowable noise levels, through
 

 
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 1           its investigators or otherwise, to include covert
 
 2           operations, and to report violations to the prosecuting
 
 3           officer for prosecution and, where appropriate, the
 
 4           director of taxation to hear and determine complaints
 
 5           against any licensee;
 
 6    [(11)] (12)  To prescribe, by rule, the terms, conditions, and
 
 7           circumstances under which persons or any class of
 
 8           persons may be employed by holders of licenses;
 
 9    [(12)] (13)  To prescribe, by rule, the term of any license or
 
10           solicitor's and representative's permit authorized by
 
11           this chapter, the annual or prorated amount, the manner
 
12           of payment of fees for the licenses and permits, and
 
13           the amount of filing fees; and
 
14    [(13)] (14)  To prescribe, by rule, the circumstances and
 
15           penalty for the unauthorized manufacturing or selling
 
16           of any liquor.
 
17    Subject only to this chapter, the commission or board and each
 
18 member thereof shall have the same powers respecting the
 
19 administering of oaths, compelling the attendance of witnesses
 
20 and the production of documentary evidence, and examining the
 
21 witnesses as are possessed by a circuit court, except that the
 
22 commission or board and each member thereof shall not be bound by
 
23 the strict legal rules of evidence.  In addition, the commission
 

 
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 1 or board shall have the power to require the production of, and
 
 2 to examine any books, papers, and records of any [licensee]
 
 3 person licensed under this chapter or chapter 245, which may
 
 4 pertain to the licensee's business under the license or which may
 
 5 pertain to a matter at a hearing before the commission or board
 
 6 or to an investigation by the commission or board.
 
 7    The exercise by the commission or board of the power,
 
 8 authority, and discretion vested in it pursuant to this chapter
 
 9 shall be final and shall not be reviewable by or appealable to
 
10 any court or tribunal, except as otherwise provided in this
 
11 chapter or chapter 91."
 
12    SECTION 9.  Chapter 245, Hawaii Revised Statutes, is amended
 
13 by designating sections 245-1 to 245-15 as part I and inserting a
 
14 title before section 245-1 to read as follows:
 
15                   "PART I.  GENERAL PROVISIONS"
 
16    SECTION 10.  This Act does not affect the rights and duties
 
17 that matured, penalties that were incurred, and proceedings that
 
18 were begun, before its effective date.
 
19    SECTION 11.  In codifying the new part added to chapter 245,
 
20 Hawaii Revised Statutes, by section 1 of this Act, the revisor of
 
21 statutes shall substitute appropriate section numbers for the
 
22 letters used in designating the new sections in this Act.
 

 
 
 
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 1    SECTION 12.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3    SECTION 13.  This Act shall take effect upon its approval;
 
 4 provided that in the event that the legislative auditor finds
 
 5 that this Act has not had the effect of reducing the loss of
 
 6 cigarette tax revenue to the State from the illegal sale of
 
 7 untaxed cigarettes, on June 30, 2005, this Act shall be repealed
 
 8 and sections 245-1, 245-3, 245-5, 245-6, 245-8, 245-15, and 281-
 
 9 17, Hawaii Revised Statutes, are reenacted in the form in which
 
10 they read on the day before the approval of this Act.