A BILL TO BE ENTITLED
AN ACT TO PROVIDE FOR PAYMENT OF CIGARETTE TAXES BY STAMP and TO LIMIT THE RECEIPT AND SALE OF NON‑TAX‑PAID CIGARETTES.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑113.4 reads as rewritten:
"§ 105‑113.4.  Definitions.
The following definitions apply in this Article:
(1)	Affiliated sales entity. – An entity that sells cigarettes or other tobacco products that it acquired from a manufacturer where one of the following is true:
a.	The entity controls, directly or indirectly, through one or more intermediaries, the manufacturer.
b.	The entity is controlled, directly or indirectly, through one or more intermediaries, by the manufacturer.
c.	The entity and manufacturer are commonly controlled, directly or indirectly, through one or more intermediaries, by another entity.
(1a)	Cigar. – A roll of tobacco wrapped in a substance that contains tobacco, other than a cigarette.
(1b)	Cigarette. – Any of the following:
a.	A roll of tobacco wrapped in paper or in a substance that does not contain tobacco.
b.	A roll of tobacco wrapped in a substance that contains tobacco and that, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subpart a. of this subdivision.
…
(3)	Distributor. – Either of the following:
a.	A person, wherever resident or located, who purchases non‑tax‑paid cigarettes directly from the manufacturer or importer of the cigarettes and stores, sells, or otherwise disposes of the cigarettes.
b.	A person who manufactures, produces, or imports cigarettes or causes them to be manufactured, produced, or imported.
(3a)	Duty‑free transaction. – A sale or distribution of cigarettes exempt from federal excise tax pursuant to 26 U.S.C. § 5704(b) or any successor provision, or pursuant to a diplomatic or consular treaty between the United States and one or more foreign governments.
…
(4a)	Importer. – A person who imports into the United States, either directly or indirectly, a finished cigarette sold or distributed within this State.
(4b)	Integrated wholesale dealer. – A wholesale dealer who is an affiliate of a manufacturer of tobacco products, other than cigarettes, is the only person to whom the manufacturer sells its products, and is not a retail dealer. An "affiliate" is a person who directly or indirectly controls, is controlled by, or is under common control with another person.
…
(6)	Manufacturer. – A person who manufactures, fabricates, assembles, processes, labels, or produces tobacco products sold or distributed within this State. For purposes of this section and G.S. 105‑113.5, 105‑113.10, 105‑113.18, 105‑113.20A, 105‑113.27, and 105‑113.28, the term "manufacturer" shall also include an "affiliated sales entity."
(6a)	Non‑tax‑paid cigarettes. – A package of cigarettes that does not bear a stamp as required by G.S. 105‑113.19.
…
(10b)	Stamp. – The indicia required to be placed on a package of cigarettes that evidence payment of the tax on cigarettes under G.S. 105‑113.5, or the indicia used to indicate that the cigarettes are intended for a sale or distribution within this State that is exempt from State tax under any applicable provision of law.
…
(12a)	U.S. government transaction. – A sale or distribution of cigarettes to an agency or instrumentality of the United States, including exchange and commissary services serving the armed forces of the United States.
.…"
SECTION 2.  G.S. 105‑113.18(1) reads as rewritten:
"(1)	Distributor's Report. –  Every distributor required to affix stamps as prescribed herein shall file a report on or before the twentieth day of each month, in such a form as the Secretary shall prescribe, which report shall disclose the quantity of cigarettes on hand on the first and last days of the calendar month immediately preceding the month in which such report is required, the amount of stamps purchased, used, and on hand during the report period, and such other information as the Secretary shall prescribe."
SECTION 3.  Part 2 of Article 2A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑113.19A.  Secretary to provide stamps.
(a)	The taxes levied by G.S. 105‑113.5 shall be paid or payment shall be evidenced by the use of tax stamps.
(b)	Tax‑exempt stamps shall be used to evidence exemption from the taxes levied by G.S. 105‑113.5.
(c)	The Secretary shall make arrangements for the manufacture of cigarette stamps provided for in this Article. The Secretary shall prescribe the form, design, denominations, and such other matters as may be necessary with respect to the stamps. Only the Secretary may sell stamps. The Secretary shall sell and distribute stamps exclusively to licensed distributors.
(d)	Any stamp required by this Article shall note whether the State tax under G.S. 105‑113.5 was paid or whether the package of cigarettes was not subject to the tax. Each roll or sheet of stamps shall have a separate and unique serial number that shall be clearly visible at the point of sale. The Secretary shall keep records of which licensed distributor purchases each roll or sheet of stamps identified by serial number. If the Secretary permits distributors to purchase partial rolls or sheets, in no case may stamps bearing the same serial number be sold to more than one distributor.
(e)	Payment in full shall accompany application for purchase of stamps; provided, however, a licensed distributor may purchase stamps on credit if the distributor has filed with the Secretary a bond satisfactory to the Secretary in an amount not less than the amount to be paid for the stamps and prior to the date any credit purchases are made. The licensed distributor shall pay for the credit purchases of stamps on or before the tenth day of the month next following the date of purchase, and the bond herein required shall be conditioned upon the payment. The bond shall be executed by the distributor as principal and by an indemnity company licensed to do business under the insurance laws of this State, as surety.
(f)	A licensed distributor using a stamp metering machine as provided for in G.S. 105‑113.23 may make payment upon the same terms and conditions as in the case of the purchase of stamps as set forth in subsection (e) of this section. Each licensed distributor authorized by the Secretary to use a stamp metering machine in lieu of using stamps shall be assigned a unique meter impression number, which shall not be used by any other distributor and shall be visible and easily identifiable at the point of sale. The Secretary shall keep records of which licensed distributor is assigned each meter impression number."
SECTION 4.  Part 2 of Article 2A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑113.20A.  Distributors to affix stamps.
Only licensed distributors shall affix stamps. A licensed distributor may only affix stamps to packages of cigarettes manufactured, imported, purchased, or obtained directly from a licensed distributor who is a manufacturer or importer of cigarettes. A licensed distributor shall not sell, borrow, loan, buy, or exchange stamps to, from, or with any other person.
Only licensed distributors may possess or receive non‑tax‑paid cigarettes. A licensed distributor who possesses or receives non‑tax‑paid cigarettes shall affix stamps to the packages of cigarettes prior to selling, distributing, or shipping the cigarettes to any other person, provided that a licensed distributor who is a manufacturer or importer of cigarettes may sell, distribute, or ship non‑tax‑paid cigarettes to another licensed distributor, and further provided that a licensed distributor may ship or cause to be delivered non‑tax‑paid cigarettes to a facility, wherever located, owned by such distributor.
Stamps shall be affixed by licensed distributors:
(1)	In a denomination that at least equals the tax due on cigarettes in the package, if the cigarettes are subject to tax under G.S. 105‑113.5.
(2)	On the smallest package of cigarettes that will be handled, sold, used, consumed, or distributed in this State.
(3)	To the bottom of each individual package of cigarettes in a manner so that the stamp cannot be removed from the package without being mutilated or destroyed.
Notwithstanding anything in this Article to the contrary, the receipt, shipment, or delivery of non‑tax‑paid cigarettes in a duty‑free transaction or a U.S. government transaction shall not constitute a violation of this section."
SECTION 5.  G.S. 105‑113.21(a1) reads as rewritten:
"(a1)	Discount. – On sales of stamps, the Secretary shall allow a discount per stamp as compensation for the services and expenses of the licensed distributor in handling and affixing such stamps to packages of cigarettes. The discount per stamp shall be two percent (2%) of the total tax due on each pack of cigarettes."
SECTION 6.  Part 2 of Article 2A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑113.23A.  Stamp metering machines.
The Secretary, if he shall determine that it is practicable in any case to permit licensed distributors to impress on or attach to each package of cigarettes evidence of tax payment by means of a metering machine, in lieu of stamps, may authorize any licensed distributor to use any metering machine approved by the Secretary, such machine to be sealed by the Secretary before being used and used in accordance with rules and regulations prescribed by the Secretary. All costs and expenses of procuring and using any metering machine shall be borne by the user."
SECTION 7.  Part 2 of Article 2A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑113.25A.  Redemption and refund.
The Secretary shall redeem any unused or mutilated, but identifiable, stamp that any distributor presents for redemption, and refund therefor the face value of the stamp, less the discount allowed at the time of the purchase of the stamp by the distributor. In the event any stamped cigarettes are shipped out of this State, or are sold to those agencies or instrumentalities that this State is prohibited from taxing under the Constitution or statutes of the United States, by any distributor, a refund of the face value of the stamp less the discount allowed by the Secretary at the time of the purchase of the stamp by said distributor shall be made upon the application of the distributor on forms prescribed by the Secretary together with such evidence and proof of sale as the Secretary shall require."
SECTION 8.  G.S. 105‑113.27 is amended by adding a new subsection to read:
"(d)	Only a licensed distributor may ship or otherwise cause to be delivered non‑tax‑paid cigarettes in, into, or from this State. Any person that ships or otherwise causes to be delivered non‑tax‑paid cigarettes into, within, or from this State shall ensure that the invoice or equivalent documentation and the bill of lading or freight bill for the shipment identifies the true name and address of the cosignor or seller, the true name and address of the cosignee or purchaser, and the quantity by brand style of the cigarettes transported, provided that this section shall not be construed as to impose any requirement or liability upon any common or contract carrier."
SECTION 9.  G.S. 105‑113.31(b)(4) reads as rewritten:
"(4)	Unless the claimant can show that the non‑tax‑paid cigarettes seized were not transported in violation of this Part and that the property seized belongs to the claimant or that in the case of property other than cigarettes, the property was used in transporting non‑tax‑paid cigarettes in violation of this Part without the claimant's knowledge or consent, with the right on the part of the claimant to have a jury pass upon this claim, the court shall order a sale by public auction of the property seized with the exception of the contraband cigarettes. The officer making the sale, after deducting the cost of the tax due, which the officer shall pay upon sale, expenses of keeping the property, the fee for the seizure, and the costs of the sale, shall pay all liens according to their priorities, which are established, by intervention or otherwise, at the hearing or in another proceeding brought for the purpose as being bona fide and as having been created without the lien or having any notice that the vehicle or vessel was being used for the unlawful transportation of non‑tax‑paid cigarettes, and shall pay the balance of the proceeds to the State Treasurer for the General Fund. All contraband cigarettes seized by this State must be destroyed. The Secretary may, prior to any destruction of cigarettes, permit the true holder of the trademark rights in the cigarette brand to inspect the contraband cigarettes, in order to assist the Secretary in any investigation regarding the cigarettes."
SECTION 10.  G.S. 105‑113.31(b)(5) reads as rewritten:
"(5)	All liens against property sold under the provisions of this section shall be transferred from the property to the proceeds of the sale of the property. If, however, no one is found claiming the vehicle or vessel, then the vehicle or vessel, along with a description, shall be advertised in a newspaper having circulation in the county where the items were taken, once a week for two weeks and by notices posted in three public places near the place of seizure, and if no claimant appears within ten days after the last publication of the advertisement, the property shall be sold, and the proceeds, after deducting the expenses and costs, shall be paid to the State Treasurer for the General Fund. All cigarettes seized by this State must be destroyed. The Secretary may, prior to any destruction of cigarettes, permit the true holder of the trademark rights in the cigarette brand to inspect such contraband cigarettes, in order to assist the Secretary in any investigation regarding such cigarettes."
SECTION 11.  Part 2 of Article 2A of Chapter 105 of the General Statutes is amended by adding three new sections to read:
"§ 105‑113.33A.  Limitation on retail sales.
A retail dealer shall not knowingly sell or distribute more than 10 cartons of cigarettes to any person in a single transaction or in a series of transactions within a 24‑hour period; provided, however, that a retail dealer that is licensed as a distributor may make any sales permitted to be made by a distributor under this Article when acting in that capacity.
"§ 105‑113.33B.  Penalty.
In addition to any other penalty provided by law, upon determination that a retail dealer has unlawfully sold or possessed non‑tax‑paid cigarettes, the Secretary shall impose a fine on the retail dealer as appropriate.
"§ 105‑113.34A.  Forging or counterfeiting stamps.
Any person who falsely or fraudulently makes, forges, alters, or counterfeits, or causes or procures to be falsely or fraudulently made, forged, altered, or counterfeited, any stamp prepared or prescribed by the Secretary under the authority of this Article, or who knowingly and willfully utters, publishes, passes, or tenders as true, any false, altered, forged, or counterfeited stamps for the purpose of evading the tax levied by this Article, is guilty of a felony, and upon conviction thereof shall be fined not more than two thousand dollars ($2,000) or imprisoned in the State prison for a term of not more than five years, or both, in the discretion of the court.
If any person secures, manufactures, or causes to be secured, or manufactured, or has in his possession a stamp or any counterfeit impression device not prescribed or authorized by the Secretary, such person shall be guilty of a felony, and upon conviction thereof shall be fined not more than two thousand dollars ($2,000) or imprisoned in the State prison for a term of not more than five years, or both, in the discretion of the court."
SECTION 12.  This act becomes effective July 1, 2009.