A BILL TO BE ENTITLED
AN ACT to improve the enforcement of the cigarette excise tax and to deter the unlawful sale of non-tax-paid cigarettes by reinstating the requirement that cigarettes bear a stamp indicating pAYMENT of the tax.
The General Assembly of North Carolina enacts:
SECTION 1.  Part 2 of Article 2A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑113.8A.  Stamps required on packages of cigarettes.
(a)	Requirement. – A package of cigarettes for sale or use in this State must be marked by a heat transfer stamp that indicates whether the package of cigarettes is taxable or nontaxable under this Article. A package of cigarettes that is subject to tax must be marked by a tax‑paid stamp and a package of cigarettes that is not subject to tax must be marked by a tax‑exempt stamp. 
(b)	Responsibility of Distributor. – It is unlawful for a person who is not a licensed distributor to receive or possess a package of unstamped cigarettes or to place a stamp on a package of cigarettes. A licensed distributor that receives a package of unstamped cigarettes must place a stamp on the package within 48 hours of its receipt, exclusive of Saturdays, Sundays, and legal holidays. A licensed distributor may obtain a cigarette stamp from the Secretary or, with the approval of the Secretary, from the producer of the stamps. A licensed distributor must place a stamp on a package of cigarettes in a manner that ensures the stamp will be torn or mutilated if a person tries to remove the stamp from the package. 
(c)	Responsibility of Secretary. – The Secretary must prescribe the design, denominations, and other details of a cigarette stamp and must provide for the production of the stamp. A stamp must display a unique serial number that is visible at the point of sale or use. The Secretary must collect the amount due for a tax‑paid stamp when the Secretary transfers, or authorizes the transfer of, the stamp to a licensed distributor. The charge for a tax‑paid stamp is the amount of tax payable under this Article on the package of cigarettes on which the stamp will be placed. No charge applies to a tax‑exempt stamp. The Secretary must keep a record of the tax‑paid and tax‑exempt stamps transferred to a licensed distributor."
SECTION 2.  G.S. 105‑113.9 reads as rewritten:
"§ 105‑113.9.  Out‑of‑state shipments.
A licensed distributor engaged in interstate business may, with the approval of the Secretary, set aside packages of cigarettes needed to conduct interstate business without stamping the packages as otherwise required by this Part.
"Interstate business" as used in this section means any of the following: 
(1)	The sale to a nonresident of packages of cigarettes the distributor delivers to the business location of the nonresident purchaser in another state.
(2)	The sale to a nonresident of packages of cigarettes the distributor delivers to another licensed distributor for subsequent sale outside the State."
SECTION 3.  G.S. 105‑113.10 reads as rewritten:
"§ 105‑113.10.  In‑state shipments of manufacturers and other distributors. 
It is unlawful for a person that is not a licensed distributor to ship an unstamped package of cigarettes into this State or between locations in this State. A licensed distributor may ship a package of unstamped cigarettes in the following circumstances but may not otherwise ship a package of unstamped cigarettes:
(1)	To a facility the distributor owns.
(2)	To another licensed distributor.
(3)	To a person in a transaction that is not subject to the federal excise tax on cigarettes.
(4)	To an agency or an instrumentality of the United States."
SECTION 4.  G.S. 105‑113.18 reads as rewritten:
"§ 105‑113.18.  Payment of tax; reports.
The tax levied in this Part on the sale or possession of a package of cigarettes by a distributor is payable by means of the tax‑paid stamp the distributor is required to obtain and place on the package of cigarettes. The tax levied in this Part on the sale or possession of a package of cigarettes by a person who is not a distributor is payable when the person is required to file a report. 
The following reports are required to be filed with the Secretary. A report must be in the form required by the Secretary and contain the information required by the Secretary.
(1)	Distributor's Report. – A distributor must file a monthly report that covers sales and other activities occurring in a calendar month. The report is due within 20 days after the end of the month covered by the report. The report must include the following information:
a.	The number of cigarettes on hand on the first and last days of the month.
b.	The number of tax‑paid and tax‑exempt cigarette stamps obtained during the month.
c.	The number of tax‑paid and tax‑exempt cigarette stamps placed on packages of cigarettes during the month.
d.	The number of packages of cigarettes the distributor transferred without charge after placing a tax‑paid stamp on the packages.
	(2)	Use Tax Report. –A person that is not a distributor and that acquires a package of unstamped cigarettes for sale, use, or consumption subject to the tax imposed by this Part must file a report within 96 hours after receiving the package of cigarettes. The report must state the number of cigarettes acquired and the amount of tax due.
(3)	Shipping Report. –A person that is not a licensed distributor and that transports cigarettes upon the public highways, roads, or streets of this State must, upon notice from the Secretary, file a report containing the information required by the Secretary.
(4)	Repealed by Session Laws 1981 (Regular Session, 1982), c. 1209, s. 1."
SECTION 5.  G.S. 105‑113.21 reads as rewritten:
"§ 105‑113.21.  Discount; refund.
(a)	Repealed by Session Laws 2003‑284, s. 45A.1(a), effective for reporting periods beginning on or after August 1, 2003.
(a1)	Discount. – A distributor is allowed a discount of two percent (2%) of the charge for a tax‑paid stamp when the distributor purchases the stamp. This discount covers the distributor's expenses in placing stamps on packages of cigarettes, preparing the reports required by this Part, maintaining the records required by this Part, and furnishing a bond.
(b)	Refund for Stale Product. – A distributor in possession of packages of stale or otherwise unsalable cigarettes upon which a tax‑paid stamp has been placed may return the cigarettes to the manufacturer and apply to the Secretary for a refund of the tax. The application must be in the form prescribed by the Secretary and be accompanied by an affidavit from the manufacturer stating the number of cigarettes returned to the manufacturer by the applicant. The Secretary must refund the tax paid, less the discount allowed, on the unsalable cigarettes.
(c)	Refund for Stamps. – A distributor that purchases a tax‑paid stamp is allowed a refund of the amount paid for the stamp, less the discount allowed, in the circumstances listed in this subsection. To obtain a refund, a distributor must apply to the Secretary for the refund. The circumstances are:
(1)	When the distributor purchases a tax‑paid stamp that it does not place on a package of cigarettes.
(2)	When the distributor purchases a tax‑paid stamp that is torn or otherwise unusable and cannot be placed on a package of cigarettes."
SECTION 6.  G.S. 105‑113.27 reads as rewritten:
"§ 105‑113.27.  Restrictions and presumption concerning cigarettes.
(a)	Restrictions. – Except as otherwise provided in this Article, licensed distributors shall not sell, borrow, loan, or exchange unstamped cigarettes to, from, or with other licensed distributors.
	(c)	Presumption. – The possession of more than six hundred cigarettes on which tax has been paid to another state or country, by any person other than a licensed distributor, is prima facie evidence that the cigarettes are possessed in violation of this Part."
SECTION 7.  G.S. 105‑113.33 reads as rewritten:
"§ 105‑113.33.  Criminal penalties.
Any person who violates a provision of this Article for which no other punishment is specifically prescribed is guilty of a Class 1 misdemeanor. A person who forges a stamp required under this Article or who knowingly places a forged stamp on a package of cigarettes is guilty of a Class H felony."
SECTION 8.  A distributor who has unstamped cigarettes on hand on the effective date of this act must stamp the cigarettes as required by this act within 48 hours of the effective date.
SECTION 9.  This act becomes effective January 1, 2011.