REPORT TITLE: 
Cigarette Stamp Tax


DESCRIPTION:
Establishes a system for imposing the tax upon cigarettes
through the use of stamps.  (CD1)


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                     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 two new parts to be appropriately designated and to
 
 3 read as follows:
 
 4                 "PART   .  STAMPING OF CIGARETTES
 
 5      245-A  Payment of tax through use of stamps; exemptions.
 
 6 (a)  The tax imposed under section 245-3 upon the sale or use of
 
 7 cigarettes shall be paid by licensees through the use of stamps.
 
 8      (b)  The department may provide by rule that the tax imposed
 
 9 under section 245-3 upon the sale or use of cigarettes may be
 
10 paid without the use of stamps in connection with a particular
 
11 type of transaction.
 
12      245-B  Affixation; required prior to distribution; method
 
13 and manner.(a)  Beginning January 1, 2001, a licensee or the
 
14 authorized agent or designee of a licensee shall affix a stamp to
 
15 the bottom of each individual package of cigarettes prior to
 
16 distribution.
 
17      (b)  Beginning April 1, 2001, no individual package of
 
18 cigarettes may be sold or offered for sale to the general public
 
19 unless affixed with the stamp required under this section.
 
20      (c)  Beginning April 1, 2001, no cigarette package may be
 

 
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 1 placed or stored in a vending machine unless affixed with the
 
 2 stamp required under subsection (a).
 
 3      (d)  The department shall adopt rules describing the method
 
 4 and manner in which stamps are to be affixed to packages of
 
 5 cigarettes.
 
 6      245-C  Department to furnish stamps; designs,
 
 7 specifications, and denominations; procurement.  The department
 
 8 shall furnish stamps for sale to licensees.  Stamps shall be of
 
 9 such designs, specifications, and denominations as may be
 
10 prescribed by the department.  Purchase by the department of
 
11 stamps from a vendor shall be exempt from the requirements of
 
12 chapter 103D.
 
13      245-D  Sales through financial institutions.  The
 
14 department may enter into agreements to permit the sale of stamps
 
15 by designated financial institutions located within the State.  A
 
16 list of financial institutions designated to sell stamps shall be
 
17 made available at the department.
 
18      245-E  Purchase of stamps; when; by licensee or designee.
 
19 (a)  A licensee may apply to the department to purchase stamps
 
20 beginning December 15, 2000.
 
21      (b)  A licensee may authorize a designee to order purchases
 
22 of stamps for the licensee at a location where stamps are sold.
 
23 Authorization of a designee shall be in writing.  The written
 

 
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 1 authorization shall continue in effect until written notice of
 
 2 revocation of the authority is delivered at the sales location in
 
 3 the manner prescribed by rule.
 
 4      245-F  Price; payment; deferred payment purchases.(a)
 
 5 Stamps shall be sold at their denominated values, plus a stamp
 
 6 fee of 1.7 per cent of the denominated value of each stamp sold,
 
 7 composed of the aggregate of:
 
 8      (1)  .2 per cent of the denominated value of the stamp to
 
 9           pay for the cost to the State of providing the stamps;
 
10           and
 
11      (2)  1.5 per cent of the denominated value of the stamp to
 
12           pay for the cost of enforcing the stamp tax;
 
13 provided that the department by rule may modify the stamp fee to
 
14 reflect actual costs incurred by the State in providing the
 
15 stamps.
 
16      (b)  Payment for stamps shall be made at the time of
 
17 purchase; provided that a licensee may defer payments pursuant to
 
18 section 245-G.
 
19      245-G  Maximum amount of deferred-payment purchases; bond.
 
20 (a)  A licensee may apply to the department to set the maximum
 
21 amount of deferred-payment purchases of stamps that may remain
 
22 unpaid by the licensee during the time specified under section
 
23 245-H.  Upon receipt of the application and any bond required
 

 
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 1 pursuant to subsection (b), the department shall set the amount
 
 2 for deferred-payment purchases.
 
 3      (b)  The department may require that a licensee who submits
 
 4 an application for deferred-payment purchases of stamps post a
 
 5 bond in an amount of up to one hundred per cent of the maximum
 
 6 amount of allowed deferred-payment purchases as a condition of
 
 7 department approval of the application.
 
 8      245-H  Time for payment of deferred-payment purchases;
 
 9 manner of payment.  Amounts owing for stamps purchased on the
 
10 deferred-payment basis in any calendar month shall be due and
 
11 payable on or before the last day of the following calendar
 
12 month.  Payment shall be made by a remittance payable to the
 
13 department.
 
14      245-I  Suspension or reduction of privilege to purchase on
 
15 deferred-payment basis.  The department may suspend, without
 
16 prior notice, the privilege to purchase stamps on the deferred-
 
17 payment basis or may reduce the amount of deferred-payment
 
18 purchases allowed the licensee if:
 
19      (1)  The licensee fails to promptly pay for stamps when
 
20           payment is due;
 
21      (2)  The bond or bonds required of the licensee are canceled
 
22           or become void, impaired, or unenforceable for any
 
23           reason; or
 

 
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 1      (3)  In the opinion of the department, collection of any
 
 2           amounts unpaid or due from the licensee under this
 
 3           chapter is jeopardized.
 
 4      245-J  Penalty for failure to make timely payment.  A
 
 5 licensee who fails to pay any amount owing for the purchase of
 
 6 stamps within the time required shall pay a penalty of:
 
 7      (1)  Ten per cent of the amount due in addition to the
 
 8           amount due; and 
 
 9      (2)  Interest at the rate specified in section 231-39 from
 
10           the date on which the amount became due and payable
 
11           until the date of payment.
 
12      245-K  Monthly report on distributions of cigarettes and
 
13 tobacco products, and purchases of stamps.(a)  On or before the
 
14 last day of each month, every licensee shall file on forms
 
15 prescribed by the department:
 
16      (1)  A report of the licensee's distributions of cigarettes
 
17           and purchases of stamps during the preceding month; and
 
18      (2)  Any other information that the department may require
 
19           to carry out this part.
 
20      (b)  On or before the last day of each month, every licensee
 
21 shall file on forms prescribed by the department:
 
22      (1)  A report of the licensee's distributions of tobacco
 
23           products and the wholesale costs of tobacco products
 

 
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 1           during the preceding month; and
 
 2      (2)  Any other information that the department may require
 
 3           to carry out this part.
 
 4      245-L  Tax refund or credit for cigarettes and tobacco
 
 5 products shipped for sale or use outside the State.(a)  The
 
 6 department shall adopt rules to provide a tobacco tax refund or
 
 7 credit to a licensee who has paid a tobacco tax on the
 
 8 distribution of cigarettes or tobacco products that are shipped
 
 9 to a point outside the State for subsequent sale or use outside
 
10 the State.
 
11      (b)  This part shall not apply to cigarettes or tobacco
 
12 products that are distributed in this State to consumers and that
 
13 are subsequently taken outside the State.
 
14      245-M  Unused stamps; cancellation of stamps.  The
 
15 department shall adopt rules for a refund or credit to a licensee
 
16 in the amount of the denominated values of any unused stamps.
 
17 The department may provide by rule for the cancellation of
 
18 stamps.
 
19      245-N  Approval of department required for transfer of
 
20 stamps.  Unaffixed stamps shall not be sold, exchanged, or in any
 
21 manner transferred by a licensee to another person without prior
 
22 written approval of the department.  Any person who violates this
 
23 section shall be subject to a fine of not less than $500 and not
 

 
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 1 more than $1,000 for each violation.
 
 2      245-O  Unlicensed possession or use of stamps.  A person
 
 3 who is not licensed under this chapter and who knowingly possess
 
 4 or uses a stamp shall be guilty of a class B felony.
 
 5      245-P  Counterfeiting stamps.  A person shall be guilty of
 
 6 a class B felony if the person:
 
 7      (1)  Intentionally or knowingly makes, alters, or reuses a
 
 8           stamp as defined in section 245-1; or
 
 9      (2)  Knowingly possesses or distributes a stamp that has
 
10           been falsely made, altered, or reused.
 
11      245-Q  Sale or purchase of packages of cigarettes without
 
12 stamps; fines and penalties.(a) Beginning April 1, 2001, a
 
13 person shall be guilty of a class C felony if the person:
 
14      (1)  Is not a licensee, and knowingly possesses, keeps,
 
15           stores, acquires, or transports three thousand or more
 
16           cigarettes that do not have stamps affixed to the
 
17           cigarette packages as required by this part; or
 
18      (2)  Knowingly sells one thousand or more cigarettes that do
 
19           not have stamps affixed to the cigarette packages as
 
20           required by this part.
 
21      (b)  Beginning April 1, 2001, a person shall be guilty of a
 
22 misdemeanor if the person:
 
23      (1)  Is not a licensee, and knowingly possesses, keeps,
 

 
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 1           stores, acquires, or transports one thousand or more
 
 2           cigarettes that do not have stamps affixed to the
 
 3           cigarette packages as required by this part; or
 
 4      (2)  Knowingly sells less than one thousand cigarettes that
 
 5           do not have stamps affixed to the cigarette packages as
 
 6           required by this part.
 
 7      (c)  In addition to any other authorized disposition, a
 
 8 corporation found in violation of:
 
 9      (1)  Subsection (a) is subject to a fine in an amount not to
 
10           exceed $50,000; and
 
11      (2)  Subsection (b) is subject to a fine in an amount not to
 
12           exceed $25,000. 
 
13      245-R  Vending unstamped cigarettes.(a)  Beginning April
 
14 1, 2001, any person who knowingly places for sale in a cigarette
 
15 vending machine any cigarettes not contained in cigarette
 
16 packages to which are affixed stamps as required by this part,
 
17 shall be guilty of a class C felony.
 
18      (b)  In addition to any other authorized disposition, a
 
19 corporation found in violation of subsection (a) may be fined in
 
20 an amount not to exceed $50,000.
 
21      245-S  Penalty exemptions.(a)  Sections 245-Q and 245-R
 
22 shall not apply to cigarettes that are exempt from taxes as
 
23 provided by section 245-3(b).
 

 
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 1      (b)  Sections 245-Q and 245-R shall not apply to the resale
 
 2 of tax-exempt cigarettes that were purchased from sales outlets
 
 3 operated under the regulations of the Armed Services of the
 
 4 United States.
 
 5      245-T  Forfeitures; disposition.  Any cigarette, package of
 
 6 cigarettes, or carton of cigarettes unlawfully possessed, kept,
 
 7 stored, acquired, transported, or sold in violation of this part
 
 8 may be ordered forfeited pursuant to chapter 712A.
 
 9      245-U  Enforcement; injunction; disposition of fines.(a)
 
10 Enforcement of this part shall be under the jurisdiction of the
 
11 attorney general.
 
12      (b)  Notwithstanding the existence of other remedies at law,
 
13 the attorney general may apply for a temporary or permanent
 
14 injunction restraining any person from violating or continuing to
 
15 violate this part.  The injunction shall be issued without bond.
 
16      (c)  Where the attorney general initiates and conducts an
 
17 investigation resulting in the imposition and collection of a
 
18 criminal fine pursuant to this part, one hundred per cent of the
 
19 fine shall be distributed to the attorney general; provided that
 
20 if the attorney general engages the prosecuting attorney for the
 
21 investigation or prosecution, or both, resulting in the
 
22 imposition and collection of a criminal fine under this part, the
 
23 fine shall be shared equally between the attorney general and the
 

 
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 1 prosecuting attorney.
 
 2      245-V  Rules.  The department shall adopt rules pursuant to
 
 3 chapter 91 to implement this part."
 
 4      SECTION 2.  Chapter 245, Hawaii Revised Statutes, is amended
 
 5 by designating sections 245-1 to 245-15 as part I and inserting a
 
 6 title before section 245-1 to read as follows:
 
 7                   "PART I.  GENERAL PROVISIONS"
 
 8      SECTION 3.  Section 245-1, Hawaii Revised Statutes, is
 
 9 amended by adding twelve new definitions to be appropriately
 
10 inserted and to read as follows:
 
11      ""Attorney general" means the state attorney general or
 
12 deputy attorneys general.
 
13      "Cigarette package" means a sealed package of cigarettes
 
14 originating from the manufacturer and bearing the health warning
 
15 required by law.
 
16      "Department" means the department of taxation.
 
17      "Falsely alter" means to change a stamp in any manner so
 
18 that the altered stamp falsely appears or purports to have a
 
19 value or validity that is not authorized or consented to by the
 
20 department.
 
21      "Falsely make" means to print, manufacture, or make what
 
22 purports to be a stamp without the authority or consent of the
 
23 department.
 

 
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 1      "Falsely reuse" means to affix a stamp that was previously
 
 2 affixed to a package of cigarettes, to another package of
 
 3 cigarettes.
 
 4      "License" means a license granted under this chapter, that
 
 5 authorizes the holder to engage in the business of a wholesaler
 
 6 or dealer of cigarettes or tobacco products in the State.
 
 7      "Licensee" means the holder of a license granted under this
 
 8 chapter.
 
 9      "Prosecuting attorney" means the prosecuting attorney or the
 
10 deputy prosecuting attorneys of each of the respective counties.
 
11      "Sale" includes every act of selling.
 
12      "Sell" means to:
 
13      (1)  Solicit and receive an order for;
 
14      (2)  Have, keep, offer, or expose for sale;
 
15      (3)  Deliver for value or deliver in any other way than
 
16           purely gratuitously;
 
17      (4)  Peddle;
 
18      (5)  Keep with intent to sell; and
 
19      (6)  Traffic in.
 
20      "Stamp" means a stamp printed, manufactured, or made by
 
21 authority of the department, as provided in this chapter, that is
 
22 issued, sold, or circulated by the department, and by the use of
 
23 which the tax levied under this chapter is paid."
 

 
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 1      SECTION 4.  Section 245-3, Hawaii Revised Statutes, is
 
 2 amended by amending the title and subsection (a) to read as
 
 3 follows:
 
 4      "245-3  Taxes[; limitations].(a)  Every wholesaler or
 
 5 dealer, in addition to any other taxes provided by law, shall pay
 
 6 for the privilege of conducting business and other activities in
 
 7 the State[ an]:
 
 8      (1)  [Excise] An excise tax equal to[:
 
 9           (A)  4.00 cents for each cigarette sold, used, or
 
10                possessed by the wholesaler or dealer, after
 
11                August 31, 1997; and
 
12           (B)] 5.00 cents for each cigarette sold, used, or,
 
13           possessed by a wholesaler or dealer after June 30,
 
14           1998, whether or not sold at wholesale, or if not sold
 
15           then at the same rate upon the use by the wholesaler or
 
16           dealer; and
 
17      (2)  [Excise] An excise tax equal to forty per cent of the
 
18           wholesale price of each article or item of tobacco
 
19           products sold by the wholesaler or dealer, whether or
 
20           not sold at wholesale, or if not sold then at the same
 
21           rate upon the use by the wholesaler or dealer.
 
22 Where the tax imposed has been paid on cigarettes or tobacco
 
23 products which thereafter become the subject of a casualty loss
 

 
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 1 deduction allowable under chapter 235, the tax paid shall be
 
 2 refunded or credited to the account of the wholesaler or dealer.
 
 3 [In applying the tax, the tax shall be applied against the latest
 
 4 of the activities of selling, using, or possessing.  The tax
 
 5 shall be imposed at the time of the last of the following
 
 6 activities to occur:  the sale; the use; or the possession of
 
 7 cigarettes or tobacco products.] The tax shall be applied to
 
 8 cigarettes through the use of stamps."
 
 9      SECTION 5.  Section 245-5, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "245-5  Returns.  Every [licensee,] wholesaler or dealer,
 
12 on or before the last day of each month, shall file with the
 
13 department [of taxation] a return showing the cigarettes and
 
14 tobacco products sold, possessed, or used by the [licensee]
 
15 wholesaler or dealer during the preceding calendar month and of
 
16 the taxes chargeable against the taxpayer in accordance with this
 
17 chapter.  The form of the return shall be prescribed by the
 
18 department and shall [contain such information, including a]
 
19 include:
 
20      (1)  A separate statement of the number and wholesale price
 
21           of cigarettes[, and the];
 
22      (2)  The amount of stamps purchased and used;
 
23      (3)  The wholesale price of tobacco products, sold,
 

 
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 1           possessed, or used[, as it]; and
 
 2      (4)  Any other information that the department may deem
 
 3           necessary, for the proper administration of this
 
 4           chapter."
 
 5      SECTION 6.  Section 245-6, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "245-6  Payment of taxes; penalties.  At the time of the
 
 8 filing of the return required under section 245-5 and within the
 
 9 time prescribed [therefor], each [licensee] wholesaler or dealer
 
10 shall pay to the department [of taxation] the taxes imposed by
 
11 this chapter, required to be shown by the return[.], including
 
12 the unpaid amount of taxes imposed by this chapter.
 
13      Penalties and interest shall be added to and become a part
 
14 of the taxes, when and as provided by section 231-39."
 
15      SECTION 7.  Section 245-7, Hawaii Revised Statutes, is
 
16 amended by amending subsections (b) and (c) to read as follows:
 
17      "(b)  If it should appear upon [such] the examination or
 
18 [thereafter] within five years after the filing of the return, or
 
19 at any time if no return has been filed, as a result of the
 
20 examination, or as a result of any examination of the records of
 
21 the [licensee] wholesaler or dealer, or of any other inquiry or
 
22 investigation, that the correct amount of the taxes is greater
 
23 than that shown on the return, or that any taxes imposed by this
 

 
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 1 chapter have not been paid, an assessment of [such] the taxes may
 
 2 be made[,] in the manner provided in section 235-108(b).  The
 
 3 amount of the taxes for the period covered by the assessment
 
 4 shall not be reduced below the amount determined by an assessment
 
 5 so made, except upon appeal or in a proceeding brought pursuant
 
 6 to section 40-35.
 
 7      (c)  If the [licensee] wholesaler or dealer has paid or
 
 8 returned with respect to any month more than the amount
 
 9 determined to be the correct amount of taxes for the month, the
 
10 amount of the taxes so returned and any assessment of taxes made
 
11 pursuant to the return may be reduced, and any overpayment of
 
12 taxes may be credited upon the taxes imposed by this chapter, or
 
13 at the election of the [licensee,] wholesaler or dealer, the
 
14 [licensee] wholesaler or dealer not being delinquent in the
 
15 payment of any taxes owing to the State, may be refunded in the
 
16 manner provided in section 231-23(c); provided that no reduction
 
17 of taxes may be made when forbidden by subsection (b) or more
 
18 than five years after the filing of the return."
 
19      SECTION 8.  Section 245-8, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows: 
 
21      "(a)  [Every] Each wholesaler [and] or dealer shall keep a
 
22 record of [every]:
 
23      (1)  Every sale or use of cigarettes and tobacco products by
 

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

 
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 1 and reports under section 245-K, required to be kept or filed
 
 2 under this chapter, and books, papers, and records of any person
 
 3 engaged in the business of wholesaling or dealing cigarettes and
 
 4 tobacco products, to verify the accuracy of the payment of the
 
 5 taxes imposed by this chapter.  Every person in possession of any
 
 6 books, papers, and records, and the person's agents and
 
 7 employees, are directed and required to give to the department
 
 8 and the attorney general the means, facilities, and opportunities
 
 9 for the examinations."
 
10      SECTION 10.  Section 245-15, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "245-15  Disposition of revenues.  All moneys collected
 
13 pursuant to this chapter shall be paid into the state treasury as
 
14 state realizations to be kept and accounted for as provided by
 
15 law[.], except for the amounts designated by section 245-U for
 
16 distribution to the attorney general."
 
17      SECTION 11.  Section 712A-5, Hawaii Revised Statutes, is
 
18 amended by amending subsection (1) to read as follows:
 
19      "(1)  The following is subject to forfeiture:
 
20      (a)  Property described in a statute authorizing forfeiture;
 
21      (b)  Property used or intended for use in the commission of,
 
22           attempt to commit, or conspiracy to commit a covered
 
23           offense, or which facilitated or assisted such
 

 
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 1           activity;
 
 2      (c)  Any firearm which is subject to forfeiture under any
 
 3           other subsection of this section or which is carried
 
 4           during, visible, or used in furtherance of the
 
 5           commission, attempt to commit, or conspiracy to commit
 
 6           a covered offense, or any firearm found in proximity to
 
 7           contraband or to instrumentalities of an offense;
 
 8      (d)  Contraband[, which] or untaxed cigarettes in violation
 
 9           of chapter 245, shall be seized and summarily forfeited
 
10           to the State without regard to the procedures set forth
 
11           in this chapter;
 
12      (e)  Any proceeds or other property acquired, maintained, or
 
13           produced by means of or as a result of the commission
 
14           of the covered offense;
 
15      (f)  Any property derived from any proceeds which were
 
16           obtained directly or indirectly from the commission of
 
17           a covered offense; 
 
18      (g)  Any interest in, security of, claim against, or
 
19           property or contractual right of any kind affording a
 
20           source of influence over any enterprise which has been
 
21           established, participated in, operated, controlled, or
 
22           conducted in order to commit a covered offense;
 
23      (h)  All books, records, bank statements, accounting
 

 
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 1           records, microfilms, tapes, computer data, or other
 
 2           data which are used, intended for use, or which
 
 3           facilitated or assisted in the commission of a covered
 
 4           offense, or which document the use of the proceeds of a
 
 5           covered offense."
 
 6      SECTION 12.  Section 712A-16, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (1) to read as follows:
 
 8      "(1)  All property forfeited to the State under this chapter
 
 9 shall be transferred to the attorney general who:
 
10      (a)  May transfer property, other than currency, which shall
 
11           be distributed in accordance with subsection (2) to any
 
12           local or state government entity, municipality, or law
 
13           enforcement agency within the State;
 
14      (b)  May sell forfeited property to the public by public
 
15           sale; provided that for leasehold real property:
 
16           (i)  The attorney general shall first offer the holder
 
17                of the immediate reversionary interest the right
 
18                to acquire the leasehold interest and any
 
19                improvements built or paid for by the lessee for
 
20                the then fair market value of the leasehold
 
21                interest and improvements.  The holder of the
 
22                immediate reversionary interest shall have thirty
 
23                days after receiving written notice within which
 

 
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 1                to accept or reject the offer in writing; provided
 
 2                that the offer shall be deemed to be rejected if
 
 3                the holder of the immediate reversionary interest
 
 4                has not communicated acceptance to the attorney
 
 5                general within the thirty-day period.  The holder
 
 6                of the immediate reversionary interest shall have
 
 7                thirty days after acceptance to tender to the
 
 8                attorney general the purchase price for the
 
 9                leasehold interest and any improvements, upon
 
10                which tender the leasehold interest and
 
11                improvements shall be conveyed to the holder of
 
12                the immediate reversionary interest.
 
13          (ii)  If the holder of the immediate reversionary
 
14                interest fails to exercise the right of first
 
15                refusal provided in subparagraph (i), the attorney
 
16                general may proceed to sell the leasehold interest
 
17                and any improvements by public sale.
 
18         (iii)  Any dispute between the attorney general and the
 
19                holder of the immediate reversionary interest as
 
20                to the fair market value of the leasehold interest
 
21                and improvements shall be settled by arbitration
 
22                pursuant to chapter 658;
 
23      (c)  May sell or destroy all raw materials, products, and
 

 
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 1           equipment of any kind used or intended for use in
 
 2           manufacturing, compounding, or processing a controlled
 
 3           substance[;] or any untaxed cigarettes in violation of
 
 4           chapter 245;
 
 5      (d)  May compromise and pay valid claims against property
 
 6           forfeited pursuant to this chapter; or
 
 7      (e)  May make any other disposition of forfeited property
 
 8           authorized by law."
 
 9      SECTION 13.  The director of taxation shall submit findings
 
10 and recommendations to the legislature no later than twenty days
 
11 prior to the regular session of 2006 as to the effectiveness of
 
12 this Act in reducing the loss of cigarette tax revenue to the
 
13 State from illegal sales of untaxed cigarettes.  The director of
 
14 taxation may submit an interim report to the legislature on any
 
15 findings relating to the effectiveness of this Act before 2006.
 
16      SECTION 14.  The attorney general shall report to the
 
17 legislature no later than twenty days before the convening of
 
18 each of the regular sessions of 2002 and 2003 on its activities
 
19 relating to this Act, including expenses, fines, and penalties
 
20 collected, and forfeitures.
 
21      SECTION 15.  There is appropriated out of the general
 
22 revenues of the State of Hawaii the sum of $35,000, or so much
 
23 thereof as may be necessary for fiscal year 2000-2001 for start-
 

 
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 1 up costs for implementing the cigarette stamp tax system,
 
 2 including a one-year supply of stamps and stamp cylinders. 
 
 3      The sum appropriated shall be expended by the department of
 
 4 taxation for the purposes of this Act.
 
 5      SECTION 16.  There is appropriated out of the general
 
 6 revenues of the State of Hawaii the sum of $200,000 or so much
 
 7 thereof as may be necessary for fiscal year 2000-2001 for the
 
 8 attorney general to effectuate the provisions of this Act,
 
 9 including the hiring of necessary staff.  
 
10      The sum appropriated shall be expended by the attorney
 
11 general for the purposes of this Act.
 
12      SECTION 17.  This Act does not affect the rights and duties
 
13 that matured, penalties that were incurred, and proceedings that
 
14 were begun, before its effective date.
 
15      SECTION 18.  In codifying the new sections added to chapter
 
16 245, Hawaii Revised Statutes, by section 1 of this Act, and
 
17 referred to in this Act, the revisor of statutes shall substitute
 
18 appropriate section numbers for the letters used in designating
 
19 the new sections in this Act.
 
20      SECTION 19.  Statutory material to be repealed is bracketed.
 
21 New statutory material is underscored.
 
22      SECTION 20.  This Act shall take effect upon its approval;
 
23 provided that:
 

 
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 1      (1)  Sections 15 and 16 shall take effect on July 1, 2000;
 
 2           and
 
 3      (2)  On June 30, 2006, this Act shall be repealed and
 
 4           sections 245-1, 245-3, 245-5, 245-6, 245-7(b) and (c),
 
 5           245-8(a), 245-9, 245-15, 712A-5(1), and 712A-16(1),
 
 6           Hawaii Revised Statutes, shall be reenacted in the form
 
 7           in which they read on the day before the approval of
 
 8           this Act.