1999 Tax Law Changes - Tobacco Products Tax

III. Tobacco Products Tax

G.S. 105-113.4B - Cancellation of License: This new statute incorporates and revises the provisions of repealed G.S. 105-113.16, which set out the reasons and procedures for canceling a license issued to a cigarette distributor. The new statute is in Part 1 of the Tobacco Products Tax Article, which applies to both cigarettes and other tobacco products. New G.S. 105-113.4B is patterned after G.S. 105-449.76, which applies to motor fuel license holders.
Like repealed G.S. 105-113.16, new G.S. 105-113.4B allows the Secretary to cancel a license for a violation of the excise tax law after conducting a hearing on the matter. The same time limits on holding a hearing apply under new G.S. 105-113.4B. The new statute extends the ability to cancel a license after a hearing to include cancellation based on a violation of new G.S. 14-400.18, which imposes restrictions on the sale of certain cigarettes. Unlike repealed G.S. 105-113.16, the new statute allows the Secretary to summarily cancel a license when a license holder continues to incur liability for a tax imposed under the Tobacco Products Tax Article and has not paid a past tax due under that Article.
(Effective December 1, 1999; HB 74, s. 6, S.L. 99-333.)

G.S. 105-113.4C - Enforcement of Master Settlement Agreement: This new statute was added to Part 1 of Article 2A of Chapter 105 of the General Statutes to clarify the responsibilities of the Office of the Attorney General and the Secretary of Revenue in enforcing new Article 37 of Chapter 66 of the General Statutes. New Article 37 is required by the Master Settlement Agreement made between the Attorneys General of many states, including North Carolina's, and the major cigarette manufacturers. Article 37 establishes the Tobacco Reserve Fund and requires manufacturers who are not parties to the Master Settlement Agreement to pay an amount into that Fund based on the amount of their products sold in North Carolina.
New G.S. 105-113.4C makes it clear that the Attorney General must identify the nonparticipating manufacturers and their products and that, once the products are identified, the Secretary of Revenue must require taxpayers to report the amount of these products sold by them. After that, the Secretary must determine the amount of tobacco excise tax collections attributable to the products of the nonparticipating manufacturers and report this information to the Attorney General, who will proceed to collect the amounts due from the nonparticipating manufacturers based on the tax information. The tobacco excise tax forms will be modified to obtain the information needed about sales of products of nonparticipating manufacturers. The Secretary will report the required information on excise taxes to the Office of the Attorney General on a calendar-year basis as soon after January 1 as possible. Amounts owed the Tobacco Reserve Fund by nonparticipating manufacturers are due by April 15 of each year.
This new statute was designated G.S. 105-164.4B in the legislation that enacted it. That same statute number was given to the G.S. 105-164.4B that is described before this section. The Department asked the Codifier of Statutes to designate this new statute as G.S. 105-164.4C.
(Effective July 15, 1999; SB 915, S.L. 99-311.)

G.S. 105-113.16 - Conforming Repeal: This statute, Revocation of license, was repealed because its provisions were incorporated in new G.S. 105-113.4B.
(Effective December 1, 1999; HB 74, s. 7, S.L. 99-333.)

G.S. 105-113.27(c) - Technical Change: This subsection was amended to delete a reference to "tax stamps of another state or country" and substitute a reference to "tax paid to another state or country". The change was made because not all states, such as North Carolina, place stamps on cigarettes to indicate that tax has been paid. Under North Carolina law, it is unlawful for a person who is not a licensed distributor to possess more than 600 cigarettes on which tax has been paid to another state or country. This statute establishes a presumption that a person who has this quantity of tax-paid cigarettes has violated the law.
(Effective July 22, 1999; SB 55, s. 18, S.L. 99-337.)

G.S. 14-400.18 - Sale of certain packages of cigarettes prohibited: This new section was added to Article 52 of Chapter 14 of the General Statutes, which contains the criminal laws. The statute makes it a Class A1 misdemeanor to sell or hold for sale in this country a package of cigarettes that meets one or more of the following descriptions:

  1. The package differs in any respect with the requirements of the Federal Cigarette Labeling and Advertising Act.
  2. The package is labeled with wording such as "For Export Only" or "U.S. Tax Exempt," indicating that the manufacturer did not intend that the product be sold in the United States.
  3. The package was altered by adding or deleting the wording, labels, or warnings described in (1) and (2) above.
  4. The package was imported into the United States after January 1, 2000.
  5. The package violates federal trademark or copyright laws.

The contraband described above may be seized by a law enforcement officer, including an officer employed by the Department of Revenue. The procedure for seizure and disposition of this contraband is the same as that under G.S. 105-113.31 and G.S. 105-113.32 for non-tax-paid cigarettes.
(Effective December 1, 1999; HB 74, s. 5, S.L. 99-333.)