NO. 14.  AN ACT RELATING TO PROHIBITION OF CIGARETTE SALES.

(S.173)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  33 V.S.A. chapter 19, subchapter 1B is added to read:

Subchapter 1B.  Complementary Legislation to Nonparticipating

Tobacco Manufacturers Statutes

§ 1915.  Findings and Purpose

(a)  The general assembly finds that the provisions of this subchapter will enhance compliance with subchapter 1A of this chapter and further the policies and purposes of that subchapter.

(b)       The provisions of this subchapter are not intended to amend and shall not be interpreted as amending subchapter 1A of this chapter.

§ 1916.  Definitions

As used in this subchapter:

(1)  “Brand family” shall mean all styles of cigarettes sold under the same trademark and differentiated from one another by means of additional modifiers or descriptors, including “menthol,” “lights,” “kings,” and “100s,” and includes a brand name (alone or in conjunction with any other word), trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, a previously known brand of cigarettes.

(2)  “Cigarette” shall have the same meaning as in subdivision 1913(4) of this title. 

(3)  “Commissioner” shall mean the commissioner of taxes.

(4)  “Distributor” shall have the same meaning as in 32 V.S.A.

§ 7702(4).

(5)  “Master Settlement Agreement” shall have the same meaning as in subdivision 1913(5) of this title.

(6)  “Nonparticipating manufacturer” shall mean any tobacco product manufacturer that is not a participating manufacturer.

(7)  “Participating manufacturer” shall have the same meaning as in section II(jj) of the “Master Settlement Agreement” and all amendments thereto.

(8)  “Qualified escrow fund” shall have the same meaning as in subdivision 1913(6) of this title.

(9)  “Retail dealer” shall have the same meaning as in 32 V.S.A. § 7702(9).

(10)  “Stamping agent” shall mean a person or entity that is required to secure a license pursuant to 32 V.S.A. § 7731 or that is required to pay a tax on cigarettes imposed pursuant to chapter 205 of Title 32.

(11)  “Tobacco product manufacturer” shall have the same meaning as in subdivision 1913(9) of this title.

(12)  “Units sold” shall have the same meaning as in subdivision 1913(10) of this title.

§ 1917.  Certifications

(a)  Every tobacco product manufacturer whose cigarettes are sold in this state, whether directly or through a distributor, wholesale dealer, retailer, or similar intermediary or intermediaries, shall execute and deliver on a form prescribed by the attorney general a certification to the attorney general no later than April 30 each year certifying under penalty of perjury that, as of the date of such certification, such tobacco product manufacturer either is a participating manufacturer or is in full compliance with subchapter 1A of this chapter, including all quarterly installment payments required by section 1922 of this title.

(b)  A participating manufacturer shall:

(1)  include in its certification a list of its brand families;

(2)  update its list 30 calendar days prior to any addition to or modification of its brand families by executing and delivering a supplemental certification to the attorney general.

(c)  A nonparticipating manufacturer shall:

(1)  include in its certification:

(A)  a list of all of its brand families and the number of units sold for each brand family that were sold in the state during the previous calendar year;

(B)  a list of all of its brand families that have been sold in the state during the current calendar year;

(C)  a list of any brand family sold in the state during the preceding calendar year that is no longer being sold in the state as of the date of such certification; and

(D)  the name and business address of any other tobacco product manufacturer that has manufactured in the past calendar year or is currently manufacturing or selling any brand family listed in the nonparticipating manufacturer’s certification;

(2)  also certify:

(A)  that the nonparticipating manufacturer is registered to do business in the state or has appointed an in-state agent for service of process and provided notice thereof as required by this subchapter;

(B)  that the nonparticipating manufacturer has established and continues to maintain a qualified escrow fund; has executed an escrow agreement that both governs the qualified escrow fund and has been reviewed and approved by the attorney general; and is in full compliance with subchapter 1A of this chapter;

(C)  the following information with respect to each qualified escrow fund established pursuant to subchapter 1A of this chapter:

(i)  the name, address, and telephone number of the financial institution where the nonparticipating manufacturer has established such qualified escrow fund;

(ii)  the account number of such qualified escrow fund and any subaccount number for the state;

(iii)  the amount the nonparticipating manufacturer placed in such fund for cigarettes sold in the state during the preceding calendar year, the dates and amount of each deposit, and evidence or verification as may be deemed necessary by the attorney general to confirm the foregoing; and

(iv)  the amounts and dates of any withdrawal or transfer of funds the nonparticipating manufacturer made at any time from the fund;

(D)  that the nonparticipating manufacturer is in full compliance with this subchapter and any regulations promulgated pursuant thereto; and

(3)  update its list of brand families 30 calendar days prior to any addition or modification of its brand families by executing and delivering supplemental certification to the attorney general.

(d)(1)  A tobacco product manufacturer may not include a brand family in its certification unless:

(A)  in the case of a participating manufacturer, the participating manufacturer affirms that the brand family shall be deemed to be its cigarettes for purposes of calculating its payments under the Master Settlement Agreement for the relevant year,  in the volume and shares determined pursuant to the Master Settlement Agreement; and

(B)  in the case of a nonparticipating manufacturer, the nonparticipating manufacturer affirms that the brand family shall be deemed to be its cigarettes for purposes of subchapter 1A of this chapter.

(2)  Nothing in this subsection shall be construed as limiting or otherwise affecting the state’s right to contend that the manufacture or sale of a brand family constitutes cigarettes of a different tobacco product manufacturer for purposes of calculating payments under the Master Settlement Agreement or for purposes of subchapter 1A of this chapter.

(e)  A tobacco product manufacturer shall maintain all invoices and documentation of sales and other such information relied upon for such certification for a period of five years from the date the certification is executed, unless otherwise required by law to maintain them for a greater period of time.

§ 1918.  Directory of Cigarettes Approved for Stamping

               and Sale

(a)  The attorney general shall develop and publish on its website a directory listing all tobacco product manufacturers that have provided current and accurate certifications conforming to the requirements of this subchapter (the “directory”) and all brand families that are listed in such certifications, except as noted in this subsection.

(1)  The attorney general shall not include or retain in such directory any brand family of any nonparticipating manufacturer that has failed to provide the required certification or whose certification the attorney general determines is not in compliance with this subchapter, unless the attorney general determines that such violation has been cured to the satisfaction of the attorney general.

(2)  Neither a tobacco product manufacturer nor any brand family of the tobacco product manufacturer shall be included or retained in the directory if the attorney general concludes that either:

(A)  any escrow funds required to be deposited pursuant to subchapter 1A of this chapter for any period related to any brand family, whether or not listed by such tobacco product manufacturer in its certification, have not been placed into a qualified escrow fund governed by an escrow agreement that has been approved by the attorney general; or

(B)  any outstanding judgment, including interest thereon, obtained pursuant to subchapter 1A of this chapter related to that tobacco product manufacturer or any brand family of the tobacco product manufacturer has not been fully satisfied.

(b)       The attorney general shall update the directory in order to correct mistakes and add or remove a tobacco product manufacturer or brand family to keep the directory in conformity with the requirements of this subchapter, and the attorney general shall transmit by e‑mail or other practicable means to each stamping agent, and to any other entity that registers with the tax department or the attorney general requesting receipt of the same, notice at least 30 days prior to any addition to or removal from the directory of any tobacco product manufacturer or brand family.

(c)  Unless otherwise provided by agreement between a stamping agent and a tobacco product manufacturer, a stamping agent shall be entitled to a refund from a tobacco product manufacturer for any money paid by the stamping agent to the tobacco product manufacturer for any cigarettes of that tobacco product manufacturer still in the possession of the stamping agent on the date of the attorney general’s removal from the directory of that tobacco product manufacturer or the individual styles or brands of cigarettes of that tobacco product manufacturer.  Also, unless otherwise provided by agreement between a retail dealer and a distributor or a tobacco product manufacturer, a retail dealer shall be entitled to a refund from either a distributor or a tobacco product manufacturer for any money paid by the retail dealer to the distributor or tobacco product manufacturer for any cigarettes of that distributor or tobacco product manufacturer still in the possession of the retail dealer on the date of the attorney general’s removal from the directory of that tobacco product manufacturer or the individual styles or brands of cigarettes of that tobacco product manufacturer.  The attorney general shall not restore to the directory a tobacco product manufacturer or any individual styles or brands or cigarettes or, if applicable, brand families of that tobacco product manufacturer until the tobacco product manufacturer has paid all stamping agents any refund due pursuant to this section.

(d)  The commissioner shall refund to a retailer dealer or stamping agent any tax paid under chapter 205 of Title 32 on products no longer saleable in the state under this subchapter.

(e)  A determination of the attorney general not to list or to remove from the directory a tobacco product manufacturer, an individual style or brand of cigarette or, if applicable, brand family is a final agency decision with the same status as an agency decision or order in a contested case under the Vermont Administrative Procedure Act.  A tobacco product manufacturer aggrieved by a determination of the attorney general under this section may appeal to the superior court in Washington County, which shall review the matter pursuant to 3 V.S.A. § 815.

§ 1919.  Prohibition Against the Stamping and Sale of

               Cigarettes Not Included in the Directory

No person shall affix a tax stamp to or sell or offer for sale in this state any package or container of cigarettes manufactured by a tobacco product manufacturer or belonging to a brand family that is not included in the directory, or sell, offer, or possess for sale, in this state, cigarettes of a tobacco product manufacturer or brand family not included in the directory.

§ 1920.  Agent for Service of Process

(a)  Any nonresident or foreign nonparticipating manufacturer that has not registered to do business in the state as a foreign corporation or other business entity shall, as a condition precedent to having its brand families included or retained in the directory, appoint and continually engage without interruption the services of an agent in this state to act as agent for the service of process on whom all process, and any action or proceeding against it concerning or arising out of the enforcement of this subchapter or subchapter 1A of this chapter, or both, may be served in any manner authorized by law.  Such service shall constitute legal and valid service of process on the nonparticipating manufacturer.  The nonparticipating manufacturer shall provide the name, address, telephone number, and satisfactory proof of the appointment and availability of such agent to the attorney general.

(b)  The nonparticipating manufacturer shall provide notice to the attorney general 30 calendar days prior to termination of the authority of any such agent and shall further provide proof to the satisfaction of the attorney general of the appointment of a new agent no less than five calendar days prior to the termination of an existing agent appointment.  In the event an agent terminates an agent appointment, the nonparticipating manufacturer shall notify the attorney general of said termination within five calendar days and shall include proof to the satisfaction of the attorney general of the appointment of a new agent.

(c)  Any nonparticipating manufacturer whose cigarettes are sold in this state who has not appointed and engaged an agent as herein required shall be deemed to have appointed the secretary of state as such agent and may be proceeded against in courts of this state by service of process upon the secretary of state; provided, however, that the appointment of the secretary of state as such agent shall not satisfy the condition precedent, required by subsection (a) of this section, for having the individual styles or brands of cigarettes or, if applicable, brand families of the nonparticipating manufacturer included or retained in the directory.

§ 1921.  Reporting and Sharing of Information

(a)  At the date specified in 32 V.S.A. § 7785 or 7813, for monthly reports from wholesale dealers or distributors, or at such date and frequency as the commissioner may require for other stamping agents, which will be at least quarterly, each stamping agent shall submit such information as the commissioner requires to facilitate compliance with subchapter 1A of this chapter and this subchapter, including, but not limited to, a list by brand family of the total number of cigarettes, or, in the case of roll-your-own tobacco, the equivalent stick count, as determined pursuant to the formula set forth in subchapter 1A of this chapter, for which the stamping agent affixed stamps during the reporting period or otherwise paid the tax due for such cigarettes.  Stamping agents shall maintain, and make available to the commissioner, all documentation and other information relied upon in reporting to the commissioner for a period of six years.

(b)  The attorney general may require at any time from a nonparticipating manufacturer proof from the financial institution in which a tobacco product manufacturer has established a qualified escrow fund for the purpose of compliance with subchapter 1A of this chapter of the amount of money being held in such fund on behalf of the state and the dates of deposits, and listing the amounts of all withdrawals from such fund and the dates thereof; any such nonparticipating manufacturer shall provide the requisite proof within 10 business days of the date it is requested.  In the event that a nonparticipating manufacturer fails to provide the requisite proof within said time period, the attorney general shall remove the nonparticipating manufacturer and all of its styles or brands of cigarettes from the directory.

(c)  The attorney general is authorized to disclose to the commissioner and, notwithstanding the provisions of chapter 103 of Title 32, the commissioner is authorized to disclose to the attorney general any information received under this subchapter or subchapter 1A of this chapter, if such information is requested by the other for the purposes of determining compliance with or enforcing the provisions of those statutes.  The attorney general and commissioner shall share with each other the information received under this subchapter or subchapter 1A of this chapter, and may share such information with other federal, state, or local agencies as necessary for the purposes of enforcement of this subchapter, the state’s nonparticipating tobacco manufacturers’ statutes, or corresponding laws of other states.

§ 1922.  Quarterly Escrow Deposits

To promote compliance with the provisions of this subchapter, the attorney general may promulgate regulations requiring a nonparticipating manufacturer to make the escrow deposits required by subchapter 1A of this chapter in quarterly installments during the year in which the sales covered by such deposits are made.

§ 1923.  Penalties and Other Remedies

(a)  In addition to or in lieu of any other civil or criminal remedy provided by law, upon a determination that a stamping agent has violated this subchapter or any regulation adopted pursuant thereto, the attorney general may, for each violation of this subchapter, also impose a civil penalty in an amount not to exceed the greater of 500 percent of the retail value of the cigarettes sold, offered for sale, or possessed for sale in violation of this subchapter or $5,000.00.  Each stamp affixed and each sale or offer to sell cigarettes in violation of section 1919 of this subchapter shall constitute a separate violation.

(b)  The attorney general may seek an injunction to restrain a threatened or actual violation of this subchapter by a stamping agent and to compel the stamping agent to comply with the provisions of this subchapter.  In any action brought pursuant to this section, the state shall be entitled to recover the costs of investigation, expert witness fees, costs of the action, and reasonable attorney’s fees.

(c)  It shall be unlawful for a person to:

(1)  sell or distribute cigarettes that the person knows or should know are intended for distribution or sale in the state in violation of this subchapter; or

(2)  acquire, hold, own, possess, transport, import, or cause to be imported cigarettes that the person knows or should know are intended for distribution or sale in the state in violation of this subchapter.  A violation of this section shall be a misdemeanor punishable by imprisonment for not more than one year and a fine of not more than $5,000.00, or both.

(d)  A person who violates section 1919 of this subchapter engages in an unfair and deceptive trade practice in violation of the state’s Consumer Fraud Act, 9 V.S.A. §§ 2451 et seq.

(e)  If a court determines that a person has violated the provisions of this subchapter, the court shall order any profits, gain, gross receipts, or other benefit from the violation to be disgorged and paid to the state treasurer for deposit in the tobacco litigation settlement fund established pursuant to 32 V.S.A. § 435a.

(f)  Unless otherwise expressly provided, the penalties or remedies, or both, provided by this subchapter are cumulative to each other and to the penalties or remedies, or both, available under all other laws of this state.

§ 1924.  Miscellaneous Provisions

(a)  The first report of stamping agents required by section 1921 of this subchapter shall be due 30 days after the effective date of this subchapter; the initial certification of a tobacco product manufacturer required by section 1917 of this subchapter shall be due 45 days after the effective date of this subchapter; and the directory described in section 1918 of this subchapter shall be published or made available within 120 days after the effective date of this subchapter.

(b)  Both the attorney general and the commissioner may adopt regulations necessary to effect the purposes of this subchapter.

(c)  In any action brought by the state to enforce the provisions of this subchapter, the state shall be entitled to recover the costs of investigation, expert witness fees, costs of the action, and reasonable attorney’s fees.

(d)  If a court of competent jurisdiction finds that the provisions of this subchapter and subchapter 1A of this chapter conflict and cannot be harmonized, then such provisions of subchapter 1A shall control.  If any section, subsection, subdivision, sentence, or phrase of this subchapter causes subchapter 1A of this chapter to no longer constitute a qualifying act or model statute, as those terms are defined in the Master Settlement Agreement, then that portion of this subchapter shall not apply.  If any section, subsection, subdivision, sentence, or phrase of this subchapter is for any reason held to be invalid, unlawful, or unconstitutional, such decision shall not affect the validity of the remaining portions of this subchapter or any part thereof.

* * * Corresponding Amendments * * *

Sec. 2.  32 V.S.A. § 3102(d) is amended to read:

(d)  The commissioner shall disclose a return or return information:

* * *

(4)  to any other person specifically authorized by law to receive such information;

(5)  to the attorney general for purposes of investigating potential violations of and enforcing subchapters 1A and 1B of chapter 19 of Title 33.

Sec. 3.  32 V.S.A. § 7736 is amended to read:

§ 7736.  REVOCATION AND SUSPENSION OF LICENSES

     The commissioner may revoke or suspend the license of any wholesale dealer or distributor for failure to comply with any provision of this chapter, or for failure to comply with the provisions of chapter 15 of Title 11, or for failure to comply with the provisions of subchapter 1B of chapter 19 of Title 33.  Any person aggrieved by such revocation or suspension may apply to the commissioner for a hearing as provided in section 7782 of this title and may further appeal to the courts as provided in section 7783 of this title.

Sec. 4.  32 V.S.A. § 7777(a) is amended to read:

(a)  Each wholesale dealer and each retail dealer shall keep complete and accurate records of all cigarettes manufactured, produced, purchased, transferred, and sold by him the dealer.  Such records shall be of such kind and in such form as the commissioner may prescribe and shall be safely preserved for three six years in such manner as to insure permanency and accessibility for inspection by the commissioner and his authorized agents.  The commissioner or his authorized agents may enter in or upon any premises where he the commissioner or they have reason to believe that cigarettes are possessed, stored, or sold, for the purpose of determining whether the provisions of this chapter or subchapter 1A or 1B of chapter 19 of Title 33 are being obeyed and may examine and copy the books, papers, records, and cigarette stock of any wholesale dealer or retail dealer, for the purpose of determining whether the tax imposed by this chapter has been fully paid.

Sec. 5.  32 V.S.A. § 7785 is amended to read:

§ 7785.  MONTHLY REPORT

     Each wholesale dealer shall file with the commissioner, on or before the 15th day of each month, a report for the calendar month immediately preceding, in a form prescribed by the commissioner, showing the amount and source of cigarettes acquired, the amount of stamps purchased, a list identifying the brand families of a tobacco product manufacturer, as that term is defined in subchapters 1A and 1B of chapter 19 of Title 33, the total number of cigarettes upon which stamps were affixed or, in the case of roll-your-own tobacco, the equivalent stick count, as determined by the formula set forth in subchapter 1A of chapter 19 of Title 33, upon which the applicable tax was paid, and such other information as the commissioner may require.

Sec. 6.  7 V.S.A. § 1009 is added to read:

§ 1009.  Contraband and Seizure

Any cigarettes or other tobacco products that have been sold, offered for sale, or possessed for sale in violation of section 1003 of this title, section 7786 of Title 32, or section 1919 of Title 33 shall be deemed contraband, and such cigarettes shall be subject to seizure by the commissioner, the commissioner’s agents or employees, the commissioner of taxes or any agent or employee thereof, or by any peace officer of this state when directed to do so by the commissioner.  All such cigarettes or other tobacco products so seized and forfeited shall be destroyed and not resold.

* * * Corrective Amendments to the State’s Nonparticipating

Tobacco Manufacturers’ Statutes * * *

Sec. 7.  33 V.S.A. § 1914(b)(2) is amended to read:

(2)  to the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the state’s allocable share of the total payments that such manufacturer would have been required to make in that year under the Master Settlement Agreement (as determined pursuant to section IX(i)(2) of the Master Settlement Agreement, and before any of the adjustments or offsets described in section IX(i)(3) of that Agreement other than the Inflation Adjustment) the Master Settlement Agreement payments, as determined pursuant to section IX(i) of that Agreement, including after final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or

* * *

Sec. 8.  33 V.S.A. § 1914(c)(1) and (2) are amended to read:

(1)  be required within 15 days, to place such funds into escrow as shall bring the manufacturer it into compliance with this section.  The court, upon a finding of a violation of subdivision (a)(2) or subsection (b) of this section, may impose a civil penalty, payable to the general fund of the state, in an amount not to exceed five percent of the amount improperly withheld from escrow per day of the violation, and in a total amount not to exceed 100 percent of the original amount improperly withheld from escrow;

(2)  in the case of a knowing violation, be required within 15 days, to place such funds into escrow as shall bring it into compliance with this section.  The court, upon a finding of a knowing violation of subdivision (a)(2) or subsection (b) of this section, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed 15 percent of the amount improperly withheld from escrow per day of the violation, and in a total amount not to exceed 300 percent of the original amount improperly withheld from escrow;

Sec. 9.  SEVERABILITY

If this act, or any portion of the amendment to 33 V.S.A. § 1914(b)(2) made by this act, is held by a court of competent jurisdiction to be unconstitutional, subdivision (b)(2) shall be deemed to be repealed in its entirety.  If 33 V.S.A. 1914(b) shall thereafter be held by a court of competent jurisdiction to be unconstitutional, this act shall be deemed repealed, and subdivision 1914(b)(2) shall be restored as if no such amendments had been made.  Neither any holding of unconstitutionality nor the repeal of subdivision 1914(b)(2) shall affect, impair, or invalidate any other portion of section 1914 or the application of the section to any person or circumstance, and the remaining portions of section 1914 shall at all times continue in full force and effect.

Approved:  May 6, 2003