Title: Marijuana Revenue and Regulation Act
Policy area: Taxation

Summary:
Marijuana Revenue and Regulation Act
This bill amends the Internal Revenue Code to impose: (1) an excise tax on any marijuana product produced in or imported into the United States, and (2) an occupational tax on marijuana production facilities and export warehouses.
The term "marijuana product" does not include: (1) any article containing marijuana which has been approved by the Food and Drug Administration for sale for therapeutic purposes and is marketed and sold solely for such purpose, or (2) industrial hemp.
The excise tax includes exemptions for: (1) marijuana products that are used for research or by government entities for nonconsumption purposes; and (2) the transfer of products between production, import, and export facilities. A credit or refund of the tax must be issued for products that are withdrawn from the market, lost, or destroyed.
The bill requires producers, importers, and exporters of marijuana products to:
The bill also: (1) establishes penalties for violations of marijuana laws, and (2) prohibits the sale of more than one ounce of marijuana in any single retail transaction.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1823 Introduced in House (IH)]

<DOC>






115th CONGRESS
  1st Session
                                H. R. 1823

To amend the Internal Revenue Code of 1986 to provide for the taxation 
     and regulation of marijuana products, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 30, 2017

Mr. Blumenauer introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide for the taxation 
     and regulation of marijuana products, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Marijuana Revenue 
and Regulation Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                           TITLE I--TAXATION

Sec. 101. Establishment of taxes relating to marijuana products.

                           TITLE I--TAXATION

SEC. 101. ESTABLISHMENT OF TAXES RELATING TO MARIJUANA PRODUCTS.

    (a) In General.--Subtitle E of title I of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new chapter:

                    ``CHAPTER 56--MARIJUANA PRODUCTS

               ``subchapter a. tax on marijuana products

                    ``subchapter b. occupational tax

                    ``subchapter c. bond and permits

                       ``subchapter d. operations

                       ``subchapter e. penalties

               ``Subchapter A--Tax on Marijuana Products

``Sec. 5901. Imposition of tax.
``Sec. 5902. Definitions.
``Sec. 5903. Liability and method of payment.
``Sec. 5904. Exemption from tax.
``Sec. 5905. Credit, refund, or drawback of tax.

``SEC. 5901. IMPOSITION OF TAX.

    ``(a) Imposition of Tax.--There is hereby imposed on any marijuana 
product produced in or imported into the United States a tax equal to--
            ``(1) for any such product sold during the first 5 calendar 
        years in which this chapter becomes effective, the applicable 
        percentage of the price for which such product is sold, and
            ``(2) for any product sold during any calendar year after 
        the period described in paragraph (1), the applicable 
        equivalent rate.
    ``(b) Applicable Percentage.--For purposes of subsection (a)(1), 
the applicable percentage shall be determined as follows:
            ``(1) For any marijuana product sold during the first 2 
        calendar years in which this chapter becomes effective, 10 
        percent.
            ``(2) For any marijuana product sold during the calendar 
        year after the period described in paragraph (1), 15 percent.
            ``(3) For any marijuana product sold during the calendar 
        year after the period described in paragraph (2), 20 percent.
            ``(4) For any marijuana product sold during the calendar 
        year after the period described in paragraph (3), 25 percent.
    ``(c) Applicable Equivalent Rate.--
            ``(1) In general.--For purposes of subsection (a)(2), the 
        applicable equivalent rate for each calendar year shall be 
        equal to--
                    ``(A) in the case of any marijuana product not 
                described in subparagraph (B) which is sold during such 
                year, the applicable rate per ounce of such product 
                (and a proportionate tax at the like rate on all 
                fractional parts of an ounce of such product), and
                    ``(B) in the case of any marijuana product 
                containing a marijuana derivative which is sold during 
                such year, the applicable rate per gram of 
                tetrahydrocannabinol in such product (and a 
                proportionate tax at the like rate on all fractional 
                parts of a gram of tetrahydrocannabinol in such 
                product).
            ``(2) Applicable rate.--
                    ``(A) In general.--For purposes of paragraph 
                (1)(A), the applicable rate per ounce for any calendar 
                year shall be equal to 25 percent of the prevailing 
                sales price of marijuana sold in the United States 
                during the 12-month period ending one calendar quarter 
                before such calendar year, expressed on a per ounce 
                basis, as determined by the Secretary.
                    ``(B) Marijuana derivatives.--For purposes of 
                paragraph (1)(B), the applicable rate per gram of 
                tetrahydrocannabinol shall be equal to the quotient 
                obtained by dividing--
                            ``(i) the applicable rate per ounce (as 
                        determined under subparagraph (A)), by
                            ``(ii) 2.83495.
    ``(d) Time of Attachment on Marijuana Products.--The tax under this 
section shall attach to any marijuana product as soon as such product 
is in existence as such, whether it be subsequently separated or 
transferred into any other substance, either in the process of original 
production or by any subsequent process.

``SEC. 5902. DEFINITIONS.

    ``For purposes of this chapter:
            ``(1) Export warehouse.--The term `export warehouse' means 
        a bonded internal revenue warehouse for the storage of 
        marijuana products, upon which the internal revenue tax has not 
        been paid--
                    ``(A) for subsequent shipment to a foreign country, 
                Puerto Rico, the Virgin Islands, or a possession of the 
                United States, or
                    ``(B) for consumption beyond the jurisdiction of 
                the internal revenue laws of the United States.
            ``(2) Export warehouse proprietor.--The term `export 
        warehouse proprietor' means any person who operates an export 
        warehouse.
            ``(3) Importer.--The term `importer' means any person who--
                    ``(A) is in the United States and to whom 
                nontaxpaid marijuana products, produced in a foreign 
                country, Puerto Rico, the Virgin Islands, or a 
                possession of the United States, are shipped or 
                consigned,
                    ``(B) removes marijuana products for sale or 
                consumption in the United States from a customs bonded 
                warehouse, or
                    ``(C) smuggles or otherwise unlawfully brings 
                marijuana or marijuana products into the United States.
            ``(4) Marijuana.--The term `marijuana' has the meaning 
        given the term `marihuana' under section 102(16) of the 
        Controlled Substances Act (21 U.S.C. 802(16)).
            ``(5) Marijuana derivative.--The term `marijuana 
        derivative' means any article containing marijuana, or any 
        derivative thereof, which is not a naturally grown and 
        unadulterated marijuana flower.
            ``(6) Marijuana enterprise.--The term `marijuana 
        enterprise' means a producer, export warehouse proprietor, or 
        importer.
            ``(7) Marijuana product.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `marijuana product' means 
                any article which contains marijuana or any marijuana 
                derivative.
                    ``(B) Exceptions.--
                            ``(i) In general.--The term `marijuana 
                        product' shall not include--
                                    ``(I) any article containing 
                                marijuana which has been approved by 
                                the Food and Drug Administration for 
                                sale for therapeutic purposes and is 
                                marketed and sold solely for such 
                                purpose, or
                                    ``(II) industrial hemp.
                            ``(ii) Industrial hemp.--For purposes of 
                        clause (i)(II), the term `industrial hemp' 
                        means the plant Cannabis sativa L. and any part 
                        of such plant, whether growing or not, with a 
                        delta-9 tetrahydrocannabinol concentration of 
                        not more than 0.3 percent on a dry weight 
                        basis.
            ``(8) Marijuana production facility.--The term `marijuana 
        production facility' means an establishment which is qualified 
        under subchapter C to perform any operation for which such 
        qualification is required under such subchapter.
            ``(9) Producer.--The term `producer' means any person who--
                    ``(A) plants, cultivates, harvests, or otherwise 
                produces marijuana or marijuana products, or
                    ``(B) manufactures, compounds, converts, processes, 
                prepares, or packages marijuana products.
            ``(10) Removal; remove.--The terms `removal' or `remove' 
        mean--
                    ``(A) the removal of marijuana products from the 
                premises of a producer, or from internal revenue bond 
                under section 5904, as the Secretary shall by 
                regulation prescribe,
                    ``(B) release of such products from customs 
                custody, or
                    ``(C) smuggling or other unlawful importation of 
                such products into the United States.
            ``(11) Retailer.--The term `retailer' means a person who 
        sells marijuana products to consumers.

``SEC. 5903. LIABILITY AND METHOD OF PAYMENT.

    ``(a) Liability for Tax.--
            ``(1) Original liability.--The producer or importer of any 
        marijuana product shall be liable for the taxes imposed thereon 
        by section 5901.
            ``(2) Transfer of liability.--
                    ``(A) In general.--When marijuana products are 
                transferred, without payment of tax, pursuant to 
                section 5904, the liability for tax shall be 
                transferred in accordance with the provisions of this 
                paragraph.
                    ``(B) Transfer between producer and export 
                warehouse proprietor.--In the case of marijuana 
                products which are transferred between the bonded 
                premises of producers and export warehouse proprietors, 
                the transferee shall become liable for the tax upon 
                receipt by the transferee of such articles, and the 
                transferor shall thereupon be relieved of their 
                liability for such tax.
                    ``(C) Transfer from customs custody to producer.--
                In the case of marijuana products which are released in 
                bond from customs custody for transfer to the bonded 
                premises of a producer, the transferee shall become 
                liable for the tax on such articles upon release from 
                customs custody, and the importer shall thereupon be 
                relieved of their liability for such tax.
                    ``(D) Returned to bond.--All provisions of this 
                chapter applicable to marijuana products in bond shall 
                be applicable to such articles returned to bond upon 
                withdrawal from the market or returned to bond after 
                previous removal for a tax-exempt purpose.
    ``(b) Method of Payment of Tax.--
            ``(1) In general.--
                    ``(A) Determination and payment of tax.--The taxes 
                imposed by section 5901 shall be determined at the time 
                of removal of the marijuana products. Such taxes shall 
                be paid on the basis of return. The Secretary shall, by 
                regulations, prescribe the period or the event for 
                which such return shall be made and the information to 
                be furnished on such return.
                    ``(B) Postponement.--Any postponement under this 
                subsection of the payment of taxes determined at the 
                time of removal shall be conditioned upon the filing of 
                such additional bonds, and upon compliance with such 
                requirements, as the Secretary may prescribe for the 
                protection of the revenue. The Secretary may, by 
                regulations, require payment of tax on the basis of a 
                return prior to removal of the marijuana products where 
                a person defaults in the postponed payment of tax on 
                the basis of a return under this subsection or 
                regulations prescribed thereunder.
                    ``(C) Administration and penalties.--All 
                administrative and penalty provisions of this title, 
                insofar as applicable, shall apply to any tax imposed 
                by section 5901.
            ``(2) Time for payment of taxes.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, in the case of taxes on marijuana 
                products removed during any semimonthly period under 
                bond for deferred payment of tax, the last day for 
                payment of such taxes shall be the 14th day after the 
                last day of such semimonthly period.
                    ``(B) Imported articles.--In the case of marijuana 
                products which are imported into the United States, the 
                following provisions shall apply:
                            ``(i) In general.--The last day for payment 
                        of tax shall be the 14th day after the last day 
                        of the semimonthly period during which the 
                        article is entered into the customs territory 
                        of the United States.
                            ``(ii) Special rule for entry of 
                        warehousing.--Except as provided in clause 
                        (iv), in the case of an entry for warehousing, 
                        the last day for payment of tax shall not be 
                        later than the 14th day after the last day of 
                        the semimonthly period during which the article 
                        is removed from the first such warehouse.
                            ``(iii) Foreign trade zones.--Except as 
                        provided in clause (iv) and in regulations 
                        prescribed by the Secretary, articles brought 
                        into a foreign trade zone shall, 
                        notwithstanding any other provision of law, be 
                        treated for purposes of this subsection as if 
                        such zone were a single customs warehouse.
                            ``(iv) Exception for articles destined for 
                        export.--Clauses (ii) and (iii) shall not apply 
                        to any article which is shown to the 
                        satisfaction of the Secretary to be destined 
                        for export.
                    ``(C) Marijuana products brought into the united 
                states from puerto rico.--In the case of marijuana 
                products which are brought into the United States from 
                Puerto Rico, the last day for payment of tax shall be 
                the 14th day after the last day of the semimonthly 
                period during which the article is brought into the 
                United States.
                    ``(D) Special rule where due date falls on 
                saturday, sunday, or holiday.--Notwithstanding section 
                7503, if, but for this subparagraph, the due date under 
                this paragraph would fall on a Saturday, Sunday, or a 
                legal holiday (as defined in section 7503), such due 
                date shall be the immediately preceding day which is 
                not a Saturday, Sunday, or such a holiday.
                    ``(E) Special rule for unlawfully produced 
                marijuana products.--In the case of any marijuana 
                products produced in the United States at any place 
                other than the premises of a producer that has filed 
                the bond and obtained the permit required under this 
                chapter, tax shall be due and payable immediately upon 
                production.
            ``(3) Payment by electronic fund transfer.--Any person who 
        in any 12-month period, ending December 31, was liable for a 
        gross amount equal to or exceeding $5,000,000 in taxes imposed 
        on marijuana products by section 5901 (or section 7652) shall 
        pay such taxes during the succeeding calendar year by 
        electronic fund transfer (as defined in section 5061(e)(2)) to 
        a Federal Reserve Bank. Rules similar to the rules of section 
        5061(e)(3) shall apply to the $5,000,000 amount specified in 
        the preceding sentence.
    ``(c) Definition of Price.--
            ``(1) Containers, packing and transportation charges.--In 
        determining, for the purposes of this chapter, the price for 
        which an article is sold, there shall be included any charge 
        for coverings and containers of whatever nature, and any charge 
        incident to placing the article in condition packed ready for 
        shipment, but there shall be excluded the amount of tax imposed 
        by this chapter, whether or not stated as a separate charge. A 
        transportation, delivery, insurance, installation, or other 
        charge (not required by the preceding sentence to be included) 
        shall be excluded from the price only if the amount thereof is 
        established to the satisfaction of the Secretary in accordance 
        with regulations.
            ``(2) Constructive sale price.--
                    ``(A) In general.--If an article is sold directly 
                to consumers, sold on consignment, or sold (otherwise 
                than through an arm's length transaction) at less than 
                the fair market price, or if the price for which the 
                article sold cannot be determined, the tax under 
                section 5901(a) shall be computed on the price for 
                which such articles are sold, in the ordinary course of 
                trade, by producers thereof, as determined by the 
                Secretary.
                    ``(B) Arm's length.--
                            ``(i) In general.--For purposes of this 
                        section, a sale is considered to be made under 
                        circumstances otherwise than at arm's length 
                        if--
                                    ``(I) the parties are members of 
                                the same controlled group, whether or 
                                not such control is actually exercised 
                                to influence the sale price, or
                                    ``(II) the sale is made pursuant to 
                                special arrangements between a producer 
                                and a purchaser.
                            ``(ii) Controlled groups.--
                                    ``(I) In general.--The term 
                                `controlled group' has the meaning 
                                given to such term by subsection (a) of 
                                section 1563, except that `more than 50 
                                percent' shall be substituted for `at 
                                least 80 percent' each place it appears 
                                in such subsection.
                                    ``(II) Controlled groups which 
                                include nonincorporated persons.--Under 
                                regulations prescribed by the 
                                Secretary, principles similar to the 
                                principles of subclause (I) shall apply 
                                to a group of persons under common 
                                control where one or more of such 
                                persons is not a corporation.
    ``(d) Partial Payments and Installment Accounts.--
            ``(1) Partial payments.--In the case of--
                    ``(A) a contract for the sale of an article wherein 
                it is provided that the price shall be paid by 
                installments and title to the article sold does not 
                pass until a future date notwithstanding partial 
                payment by installments,
                    ``(B) a conditional sale, or
                    ``(C) a chattel mortgage arrangement wherein it is 
                provided that the sales price shall be paid in 
                installments,
        there shall be paid upon each payment with respect to the 
        article a percentage of such payment equal to the rate of tax 
        in effect on the date such payment is due.
            ``(2) Sales of installment accounts.--If installment 
        accounts, with respect to payments on which tax is being 
        computed as provided in paragraph (1), are sold or otherwise 
        disposed of, then paragraph (1) shall not apply with respect to 
        any subsequent payments on such accounts (other than subsequent 
        payments on returned accounts with respect to which credit or 
        refund is allowable by reason of section 6416(b)(5)), but 
        instead--
                    ``(A) there shall be paid an amount equal to the 
                difference between--
                            ``(i) the tax previously paid on the 
                        payments on such installment accounts, and
                            ``(ii) the total tax which would be payable 
                        if such installment accounts had not been sold 
                        or otherwise disposed of (computed as provided 
                        in paragraph (1)), except that
                    ``(B) if any such sale is pursuant to the order of, 
                or subject to the approval of, a court of competent 
                jurisdiction in a bankruptcy or insolvency proceeding, 
                the amount computed under subparagraph (A) shall not 
                exceed the sum of the amounts computed by multiplying--
                            ``(i) the proportionate share of the amount 
                        for which such accounts are sold which is 
                        allocable to each unpaid installment payment, 
                        by
                            ``(ii) the rate of tax under this chapter 
                        in effect on the date such unpaid installment 
                        payment is or was due.
                The sum of the amounts payable under this subsection in 
                respect of the sale of any article shall not exceed the 
                total tax.

``SEC. 5904. EXEMPTION FROM TAX.

    ``(a) In General.--Marijuana products on which the internal revenue 
tax has not been paid or determined may, subject to such regulations as 
the Secretary shall prescribe, be withdrawn from the bonded premises of 
any producer in approved containers free of tax and not for resale for 
use--
            ``(1) exclusively in scientific research by a laboratory,
            ``(2) by a proprietor of a marijuana production facility in 
        research, development, or testing (other than consumer testing 
        or other market analysis) of processes, systems, materials, or 
        equipment, relating to marijuana or marijuana operations, under 
        such limitations and conditions as to quantities, use, and 
        accountability as the Secretary may by regulations require for 
        the protection of the revenue, or
            ``(3) by the United States or any governmental agency 
        thereof, any State, any political subdivision of a State, or 
        the District of Columbia, for nonconsumption purposes.
    ``(b) Marijuana Products Transferred or Removed in Bond From 
Domestic Factories and Export Warehouses.--
            ``(1) In general.--Subject to such regulations and under 
        such bonds as the Secretary shall prescribe, a producer or 
        export warehouse proprietor may transfer marijuana products, 
        without payment of tax, to the bonded premises of another 
        producer or export warehouse proprietor, or remove such 
        articles, without payment of tax, for shipment to a foreign 
        country, Puerto Rico, the Virgin Islands, or a possession of 
        the United States, or for consumption beyond the jurisdiction 
        of the internal revenue laws of the United States.
            ``(2) Labeling.--Marijuana products may not be transferred 
        or removed under this subsection unless such products bear such 
        marks, labels, or notices as the Secretary shall by regulations 
        prescribe.
    ``(c) Marijuana Products Released in Bond From Customs Custody.--
Marijuana products imported or brought into the United States may be 
released from customs custody, without payment of tax, for delivery to 
a producer or export warehouse proprietor if such articles are not put 
up in packages, in accordance with such regulations and under such bond 
as the Secretary shall prescribe.
    ``(d) Marijuana Products Exported and Returned.--Marijuana products 
classifiable under item 9801.00.10 of the Harmonized Tariff Schedule of 
the United States (relating to duty on certain articles previously 
exported and returned), as in effect on the date of the enactment of 
the Marijuana Revenue and Regulation Act, may be released from customs 
custody, without payment of that part of the duty attributable to the 
internal revenue tax for delivery to the original producer of such 
marijuana products or to the export warehouse proprietor authorized by 
such producer to receive such products, in accordance with such 
regulations and under such bond as the Secretary shall prescribe. Upon 
such release such products shall be subject to this chapter as if they 
had not been exported or otherwise removed from internal revenue bond.

``SEC. 5905. CREDIT, REFUND, OR DRAWBACK OF TAX.

    ``(a) Credit or Refund.--
            ``(1) In general.--Credit or refund of any tax imposed by 
        this chapter or section 7652 shall be allowed or made (without 
        interest) to the producer, importer, or export warehouse 
        proprietor on proof satisfactory to the Secretary that the 
        claimant producer, importer, or export warehouse proprietor has 
        paid the tax on--
                    ``(A) marijuana products withdrawn from the market 
                by the claimant, or
                    ``(B) such products lost (otherwise than by theft) 
                or destroyed, by fire, casualty, or act of God, while 
                in the possession or ownership of the claimant.
            ``(2) Marijuana products lost or destroyed in bond.--
                    ``(A) Extent of loss allowance.--No tax shall be 
                collected in respect of marijuana products lost or 
                destroyed while in bond, except that such tax shall be 
                collected--
                            ``(i) in the case of loss by theft, unless 
                        the Secretary finds that the theft occurred 
                        without connivance, collusion, fraud, or 
                        negligence on the part of the proprietor of 
                        marijuana production facility, owner, 
                        consignor, consignee, bailee, or carrier, or 
                        their employees or agents,
                            ``(ii) in the case of voluntary 
                        destruction, unless such destruction is carried 
                        out as provided in paragraph (3), and
                            ``(iii) in the case of an unexplained 
                        shortage of marijuana products.
                    ``(B) Proof of loss.--In any case in which 
                marijuana products are lost or destroyed, whether by 
                theft or otherwise, the Secretary may require the 
                proprietor of a marijuana production facility or other 
                person liable for the tax to file a claim for relief 
                from the tax and submit proof as to the cause of such 
                loss. In every case where it appears that the loss was 
                by theft, the burden shall be upon the proprietor of 
                the marijuana production facility or other person 
                responsible for the tax under section 5901 to establish 
                to the satisfaction of the Secretary that such loss did 
                not occur as the result of connivance, collusion, 
                fraud, or negligence on the part of the proprietor of 
                the marijuana production facility, owner, consignor, 
                consignee, bailee, or carrier, or their employees or 
                agents.
                    ``(C) Refund of tax.--In any case where the tax 
                would not be collectible by virtue of subparagraph (A), 
                but such tax has been paid, the Secretary shall refund 
                such tax.
                    ``(D) Limitations.--Except as provided in 
                subparagraph (E), no tax shall be abated, remitted, 
                credited, or refunded under this paragraph where the 
                loss occurred after the tax was determined. The 
                abatement, remission, credit, or refund of taxes 
                provided for by subparagraphs (A) and (C) in the case 
                of loss of marijuana products by theft shall only be 
                allowed to the extent that the claimant is not 
                indemnified against or recompensed in respect of the 
                tax for such loss.
                    ``(E) Applicability.--The provisions of this 
                paragraph shall extend to and apply in respect of 
                marijuana products lost after the tax was determined 
                and before completion of the physical removal of the 
                marijuana products from the bonded premises.
            ``(3) Voluntary destruction.--The proprietor of a marijuana 
        production facility or other persons liable for the tax imposed 
        by this chapter or by section 7652 with respect to any 
        marijuana product in bond may voluntarily destroy such 
        products, but only if such destruction is under such 
        supervision and under such regulations as the Secretary may 
        prescribe.
            ``(4) Limitation.--Any claim for credit or refund of tax 
        under this subsection shall be filed within 6 months after the 
        date of the withdrawal from the market, loss, or destruction of 
        the products to which the claim relates, and shall be in such 
        form and contain such information as the Secretary shall by 
        regulations prescribe.
    ``(b) Drawback of Tax.--There shall be an allowance of drawback of 
tax paid on marijuana products, when shipped from the United States, in 
accordance with such regulations and upon the filing of such bond as 
the Secretary shall prescribe.

                    ``Subchapter B--Occupational Tax

``Sec. 5911. Imposition and rate of tax.
``Sec. 5912. Payment of tax.
``Sec. 5913. Provisions relating to liability for occupational taxes.
``Sec. 5914. Application to State laws.

``SEC. 5911. IMPOSITION AND RATE OF TAX.

    ``(a) In General.--Any person engaged in business as a producer or 
an export warehouse proprietor shall pay a tax of $1,000 per year 
(referred to in this subchapter as an `occupational tax') in respect of 
each premises at which such business is carried on.
    ``(b) Penalty for Failure To Register.--Any person engaged in 
business as a producer or an export warehouse proprietor who willfully 
fails to pay the occupation tax shall be fined not more than $5,000, or 
imprisoned not more than 2 years, or both, for each such offense.

``SEC. 5912. PAYMENT OF TAX.

    ``(a) Condition Precedent to Carrying on Business.--No person shall 
be engaged in or carry on any trade or business subject to the 
occupational tax until such person has paid such tax.
    ``(b) Computation.--
            ``(1) In general.--The occupational tax shall be imposed--
                    ``(A) as of on the first day of July in each year, 
                or
                    ``(B) on commencing any trade or business on which 
                such tax is imposed.
            ``(2) Period.--In the case of a tax imposed under 
        subparagraph (A) of paragraph (1), the occupational tax shall 
        be reckoned for 1 year, and in the case of subparagraph (B) of 
        such paragraph, it shall be reckoned proportionately, from the 
        first day of the month in which the liability to such tax 
        commenced, to and including the 30th day of June following.
    ``(c) Method of Payment.--
            ``(1) Payment by return.--The occupational tax shall be 
        paid on the basis of a return under such regulations as the 
        Secretary shall prescribe.
            ``(2) Stamp denoting payment of tax.--After receiving a 
        properly executed return and remittance of any occupational 
        tax, the Secretary shall issue to the taxpayer an appropriate 
        stamp as a receipt denoting payment of the tax. This paragraph 
        shall not apply in the case of a return covering liability for 
        a past period.

``SEC. 5913. PROVISIONS RELATING TO LIABILITY FOR OCCUPATIONAL TAXES.

    ``(a) Partners.--Any number of persons doing business in 
partnership at any one place shall be required to pay a single 
occupational tax.
    ``(b) Different Businesses of Same Ownership and Location.--
Whenever more than one of the pursuits or occupations described in this 
subchapter are carried on in the same place by the same person at the 
same time, except as otherwise provided in this subchapter, the 
occupational tax shall be paid for each according to the rates 
severally prescribed.
    ``(c) Businesses in More Than One Location.--
            ``(1) Liability for tax.--The payment of the occupational 
        tax shall not exempt from an additional occupational tax the 
        person carrying on a trade or business in any other place than 
        that stated in the register kept in the office of the official 
        in charge of the internal revenue district.
            ``(2) Storage.--Nothing contained in paragraph (1) shall 
        require imposition of an occupational tax for the storage of 
        marijuana products at a location other than the place where 
        such products are sold or offered for sale.
            ``(3) Place.--
                    ``(A) In general.--For purposes of this section, 
                the term `place' means the entire office, plant or area 
                of the business in any one location under the same 
                proprietorship.
                    ``(B) Divisions.--For purposes of this paragraph, 
                any passageways, streets, highways, rail crossings, 
                waterways, or partitions dividing the premises shall 
                not be deemed sufficient separation to require an 
                additional occupational tax, if the various divisions 
                are otherwise contiguous.
    ``(d) Death or Change of Location.--
            ``(1) In general.--In addition to the person who has paid 
        the occupational tax for the carrying on of any business at any 
        place, any person described in paragraph (2) may secure the 
        right to carry on, without incurring any additional 
        occupational tax, the same business at the same place for the 
        remainder of the taxable period for which the occupational tax 
        was paid.
            ``(2) Eligible persons.--The persons described in this 
        paragraph are the following:
                    ``(A) The surviving spouse or child, or executor or 
                administrator or other legal representative, of a 
                deceased taxpayer.
                    ``(B) A husband or wife succeeding to the business 
                of his or her living spouse.
                    ``(C) A receiver or trustee in bankruptcy, or an 
                assignee for benefit of creditors.
                    ``(D) The partner or partners remaining after death 
                or withdrawal of a member of a partnership.
            ``(3) Change of location.--When any person moves to any 
        place other than the place for which occupational tax was paid 
        for the carrying on of any business, such person may secure the 
        right to carry on, without incurring additional occupational 
        tax, the same business at the new location for the remainder of 
        the taxable period for which the occupational tax was paid. To 
        secure the right to carry on the business without incurring 
        additional occupational tax, the successor, or the person 
        relocating their business, must register the succession or 
        relocation with the Secretary in accordance with regulations 
        prescribed by the Secretary.
    ``(e) Federal Agencies or Instrumentalities.--Any tax imposed by 
this subchapter shall apply to any agency or instrumentality of the 
United States unless such agency or instrumentality is granted by 
statute a specific exemption from such tax.

``SEC. 5914. APPLICATION TO STATE LAWS.

    ``The payment of any tax imposed by this subchapter for carrying on 
any trade or business shall not be held to--
            ``(1) exempt any person from any penalty or punishment 
        provided by the laws of any State for carrying on such trade or 
        business within such State, or in any manner to authorize the 
        commencement or continuance of such trade or business contrary 
        to the laws of such State or in places prohibited by municipal 
        law, or
            ``(2) prohibit any State from placing a duty or tax on the 
        same trade or business, for State or other purposes.

                    ``Subchapter C--Bond and Permits

``Sec. 5921. Establishment and bond.
``Sec. 5922. Application for permit.
``Sec. 5923. Permit.

``SEC. 5921. ESTABLISHMENT AND BOND.

    ``(a) Prohibition on Production Outside of Bonded Marijuana 
Production Facility.--
            ``(1) In general.--Except as authorized by the Secretary or 
        on the bonded premises of a marijuana production facility duly 
        authorized to produce marijuana products according to law--
                    ``(A) no marijuana may be planted, cultivated, 
                harvested, or grown in any building or on any premises, 
                and
                    ``(B) no marijuana product may be manufactured, 
                compounded, converted, processed, prepared, or packaged 
                in any building or on any premises.
            ``(2) Authorized producers only.--No person other than a 
        producer which has filed the bond required under subsection (b) 
        and received a permit described in section 5923 may produce any 
        marijuana product.
    ``(b) Bond.--
            ``(1) When required.--Every person, before commencing 
        business as a producer or an export warehouse proprietor, shall 
        file such bond, conditioned upon compliance with this chapter 
        and regulations issued thereunder, in such form, amount, and 
        manner as the Secretary shall by regulation prescribe. A new or 
        additional bond may be required whenever the Secretary 
        considers such action necessary for the protection of the 
        revenue.
            ``(2) Approval or disapproval.--No person shall engage in 
        such business until he receives notice of approval of such 
        bond. A bond may be disapproved, upon notice to the principal 
        on the bond, if the Secretary determines that the bond is not 
        adequate to protect the revenue.
            ``(3) Cancellation.--Any bond filed hereunder may be 
        canceled, upon notice to the principal on the bond, whenever 
        the Secretary determines that the bond no longer adequately 
        protects the revenue.

``SEC. 5922. APPLICATION FOR PERMIT.

    ``(a) In General.--Every person, before commencing business as a 
marijuana enterprise, and at such other time as the Secretary shall by 
regulation prescribe, shall make application for the permit provided 
for in section 5923. The application shall be in such form as the 
Secretary shall prescribe and shall set forth, truthfully and 
accurately, the information called for on the form. Such application 
may be rejected and the permit denied if the Secretary, after notice 
and opportunity for hearing, finds that--
            ``(1) the premises on which it is proposed to conduct the 
        marijuana enterprise are not adequate to protect the revenue,
            ``(2) the activity proposed to be carried out at such 
        premises does not meet such minimum capacity or activity 
        requirements as the Secretary may prescribe, or
            ``(3) such person (including, in the case of a corporation, 
        any officer, director, or principal stockholder and, in the 
        case of a partnership, a partner)--
                    ``(A) is, by reason of their business experience, 
                financial standing, or trade connections or by reason 
                of previous or current legal proceedings involving a 
                felony violation of any other provision of Federal 
                criminal law relating to marijuana or marijuana 
                products, not likely to maintain operations in 
                compliance with this chapter,
                    ``(B) has been convicted of a felony violation of 
                any provision of Federal or State criminal law relating 
                to marijuana or marijuana products, or
                    ``(C) has failed to disclose any material 
                information required or made any material false 
                statement in the application therefor.

``SEC. 5923. PERMIT.

    ``(a) Issuance.--A person shall not engage in business as a 
marijuana enterprise without a permit to engage in such business. Such 
permit, conditioned upon compliance with this chapter and regulations 
issued thereunder, shall be issued in such form and in such manner as 
the Secretary shall by regulation prescribe. A new permit may be 
required at such other time as the Secretary shall by regulation 
prescribe.
    ``(b) Suspension or Revocation.--
            ``(1) Show cause hearing.--If the Secretary has reason to 
        believe that any person holding a permit--
                    ``(A) has not in good faith complied with this 
                chapter, or with any other provision of this title 
                involving intent to defraud,
                    ``(B) has violated the conditions of such permit,
                    ``(C) has failed to disclose any material 
                information required or made any material false 
                statement in the application for such permit,
                    ``(D) has failed to maintain their premises in such 
                manner as to protect the revenue,
                    ``(E) is, by reason of previous or current legal 
                proceedings involving a felony violation of any other 
                provision of Federal criminal law relating to 
                marijuana, not likely to maintain operations in 
                compliance with this chapter, or
                    ``(F) has been convicted of a felony violation of 
                any provision of Federal or State criminal law relating 
                to marijuana or marijuana products,
        the Secretary shall issue an order, stating the facts charged, 
        citing such person to show cause why their permit should not be 
        suspended or revoked.
            ``(2) Action following hearing.--If, after hearing, the 
        Secretary finds that such person has not shown cause why their 
        permit should not be suspended or revoked, such permit shall be 
        suspended for such period as the Secretary deems proper or 
        shall be revoked.
    ``(c) Information Reporting.--The Secretary may require--
            ``(1) information reporting by any person issued a permit 
        under this section, and
            ``(2) information reporting by such other persons as the 
        Secretary deems necessary to carry out this chapter.
    ``(d) Inspection or Disclosure of Information.--For rules relating 
to inspection and disclosure of returns and return information, see 
section 6103(o).

                       ``Subchapter D--Operations

``Sec. 5931. Inventories, reports, and records.
``Sec. 5932. Packaging and labeling.
``Sec. 5933. Purchase, receipt, possession, or sale of marijuana 
                            products after removal.
``Sec. 5934. Restrictions relating to marks, labels, notices, and 
                            packages.
``Sec. 5935. Restriction on importation of previously exported 
                            marijuana products.

``SEC. 5931. INVENTORIES, REPORTS, AND RECORDS.

    ``Every producer, importer, and export warehouse proprietor shall--
            ``(1) make a true and accurate inventory at the time of 
        commencing business, at the time of concluding business, and at 
        such other times, in such manner and form, and to include such 
        items, as the Secretary shall by regulation prescribe, with 
        such inventories to be subject to verification by any internal 
        revenue officer,
            ``(2) make reports containing such information, in such 
        form, at such times, and for such periods as the Secretary 
        shall by regulation prescribe, and
            ``(3) keep such records in such manner as the Secretary 
        shall by regulation prescribe, with such records to be 
        available for inspection by any internal revenue officer during 
        business hours.

``SEC. 5932. PACKAGING AND LABELING.

    ``(a) Packages.--All marijuana products shall, before removal, be 
put up in such packages as the Secretary shall by regulation prescribe.
    ``(b) Marks, Labels, and Notices.--Every package of marijuana 
products shall, before removal, bear the marks, labels, and notices if 
any, that the Secretary by regulation prescribes.
    ``(c) Lottery Features.--No certificate, coupon, or other device 
purporting to be or to represent a ticket, chance, share, or an 
interest in, or dependent on, the event of a lottery shall be contained 
in, attached to, or stamped, marked, written, or printed on any package 
of marijuana products.
    ``(d) Indecent or Immoral Material Prohibited.--No indecent or 
immoral picture, print, or representation shall be contained in, 
attached to, or stamped, marked, written, or printed on any package of 
marijuana products.
    ``(e) Exceptions.--Subject to regulations prescribed by the 
Secretary, marijuana products may be exempted from subsections (a) and 
(b) if such products are--
            ``(1) for experimental purposes, or
            ``(2) transferred to the bonded premises of another 
        producer or export warehouse proprietor or released in bond 
        from customs custody for delivery to a producer.

``SEC. 5933. PURCHASE, RECEIPT, POSSESSION, OR SALE OF MARIJUANA 
              PRODUCTS AFTER REMOVAL.

    ``(a) Restriction.--No person shall--
            ``(1) with intent to defraud the United States, purchase, 
        receive, possess, offer for sale, or sell or otherwise dispose 
        of, after removal, any marijuana products--
                    ``(A) upon which the tax has not been paid or 
                determined in the manner and at the time prescribed by 
                this chapter or regulations thereunder, or
                    ``(B) which, after removal without payment of tax 
                pursuant to section 5904, have been diverted from the 
                applicable purpose or use specified in that section,
            ``(2) with intent to defraud the United States, purchase, 
        receive, possess, offer for sale, or sell or otherwise dispose 
        of, after removal, any marijuana products which are not put up 
        in packages as required under section 5932 or which are put up 
        in packages not bearing the marks, labels, and notices, as 
        required under such section, or
            ``(3) otherwise than with intent to defraud the United 
        States, purchase, receive, possess, offer for sale, or sell or 
        otherwise dispose of, after removal, any marijuana products 
        which are not put up in packages as required under section 5932 
        or which are put up in packages not bearing the marks, labels, 
        and notices, as required under such section.
    ``(b) Exception.--Paragraph (3) of subsection (a) shall not prevent 
the sale or delivery of marijuana products directly to consumers from 
proper packages, nor apply to such articles when so sold or delivered.
    ``(c) Liability to Tax.--Any person who possesses marijuana 
products in violation of paragraph (1) or (2) of subsection (a) shall 
be liable for a tax equal to the tax on such articles.

``SEC. 5934. RESTRICTIONS RELATING TO MARKS, LABELS, NOTICES, AND 
              PACKAGES.

    ``No person shall, with intent to defraud the United States, 
destroy, obliterate, or detach any mark, label, or notice prescribed or 
authorized, by this chapter or regulations thereunder, to appear on, or 
be affixed to, any package of marijuana products before such package is 
emptied.

``SEC. 5935. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED 
              MARIJUANA PRODUCTS.

    ``(a) Export Labeled Marijuana Products.--
            ``(1) In general.--Marijuana products produced in the 
        United States and labeled for exportation under this chapter--
                    ``(A) may be transferred to or removed from the 
                premises of a producer or an export warehouse 
                proprietor only if such articles are being transferred 
                or removed without tax in accordance with section 5904,
                    ``(B) may be imported or brought into the United 
                States, after their exportation, only if such articles 
                either are eligible to be released from customs custody 
                with the partial duty exemption provided in section 
                5904(d) or are returned to the original producer of 
                such article as provided in section 5904(c), and
                    ``(C) may not be sold or held for sale for domestic 
                consumption in the United States unless such articles 
                are removed from their export packaging and repackaged 
                by the original producer into new packaging that does 
                not contain an export label.
            ``(2) Alterations by persons other than original 
        producer.--This section shall apply to articles labeled for 
        export even if the packaging or the appearance of such 
        packaging to the consumer of such articles has been modified or 
        altered by a person other than the original producer so as to 
        remove or conceal or attempt to remove or conceal (including by 
        the placement of a sticker over) any export label.
            ``(3) Exports include shipments to puerto rico.--For 
        purposes of this section, section 5904(d), section 5941, and 
        such other provisions as the Secretary may specify by 
        regulations, references to exportation shall be treated as 
        including a reference to shipment to the Commonwealth of Puerto 
        Rico.
    ``(b) Export Label.--For purposes of this section, an article is 
labeled for export or contains an export label if it bears the mark, 
label, or notice required under section 5904(b).

                       ``Subchapter E--Penalties

``Sec. 5941. Civil penalties.
``Sec. 5942. Criminal penalties.

``SEC. 5941. CIVIL PENALTIES.

    ``(a) Omitting Things Required or Doing Things Forbidden.--Whoever 
willfully omits, neglects, or refuses to comply with any duty imposed 
upon them by this chapter, or to do, or cause to be done, any of the 
things required by this chapter, or does anything prohibited by this 
chapter, shall in addition to any other penalty provided in this title, 
be liable to a penalty of $10,000, to be recovered, with costs of suit, 
in a civil action, except where a penalty under subsection (b) or (c) 
or under section 6651 or 6653 or part II of subchapter A of chapter 68 
may be collected from such person by assessment.
    ``(b) Failure To Pay Tax.--Whoever fails to pay any tax imposed by 
this chapter at the time prescribed by law or regulations, shall, in 
addition to any other penalty provided in this title, be liable to a 
penalty of 10 percent of the tax due but unpaid.
    ``(c) Sale of Marijuana or Marijuana Products for Export.--
            ``(1) Every person who sells, relands, or receives within 
        the jurisdiction of the United States any marijuana products 
        which have been labeled or shipped for exportation under this 
        chapter,
            ``(2) every person who sells or receives such relanded 
        marijuana products, and
            ``(3) every person who aids or abets in such selling, 
        relanding, or receiving,
shall, in addition to the tax and any other penalty provided in this 
title, be liable for a penalty equal to the greater of $10,000 or 10 
times the amount of the tax imposed by this chapter. All marijuana 
products relanded within the jurisdiction of the United States shall be 
forfeited to the United States and destroyed. All vessels, vehicles, 
and aircraft used in such relanding or in removing such marijuana 
products from the place where relanded, shall be forfeited to the 
United States.
    ``(d) Applicability of Section 6665.--The penalties imposed by 
subsections (b) and (c) shall be assessed, collected, and paid in the 
same manner as taxes, as provided in section 6665(a).
    ``(e) Cross References.--For penalty for failure to make deposits 
or for overstatement of deposits, see section 6656.

``SEC. 5942. CRIMINAL PENALTIES.

    ``(a) Fraudulent Offenses.--Whoever, with intent to defraud the 
United States--
            ``(1) engages in business as a marijuana enterprise without 
        filing the application and obtaining the permit where required 
        by this chapter or regulations thereunder,
            ``(2) fails to keep or make any record, return, report, or 
        inventory, or keeps or makes any false or fraudulent record, 
        return, report, or inventory, required by this chapter or 
        regulations thereunder,
            ``(3) refuses to pay any tax imposed by this chapter, or 
        attempts in any manner to evade or defeat the tax or the 
        payment thereof,
            ``(4) sells or otherwise transfers, contrary to this 
        chapter or regulations thereunder, any marijuana products 
        subject to tax under this chapter, or
            ``(5) with intent to defraud the United States, purchases, 
        receives, possesses, offers for sale, or sells or otherwise 
        disposes of, any marijuana product--
                    ``(A) upon which the tax has not been paid or 
                determined in the manner and at the time prescribed by 
                this chapter or regulations thereunder, or
                    ``(B) which, without payment of tax pursuant to 
                section 5904, have been diverted from the applicable 
                purpose or use specified in that section,
shall, for each such offense, be fined not more than $10,000, or 
imprisoned not more than 5 years, or both.
    ``(b) Offenses Relating to Retail Transactions.--Any retailer who 
sells, in any single transaction, more than 1 ounce of any marijuana 
product (or in the case of any marijuana product containing a marijuana 
derivative, an equivalent amount, as established by the Secretary) 
shall be, upon conviction, fined not more than $10,000, or imprisoned 
for not more than 5 years, or both.
    ``(c) Other Offenses.--Whoever, otherwise than as provided in 
subsections (a) and (b) and section 5911(b), violates any provision of 
this chapter, or of regulations prescribed thereunder, shall, for each 
such offense, be fined not more than $1,000, or imprisoned not more 
than 1 year, or both.
    ``(d) Liability to Tax.--Any person who possesses marijuana 
products in violation of subsection (a) shall be liable for a tax equal 
to the tax on such articles.''.
    (b) Study.--Not later than 2 years after the date of the enactment 
of this Act, and every 5 years thereafter, the Secretary of the 
Treasury, or the Secretary's delegate, shall--
            (1) conduct a study concerning the characteristics of the 
        marijuana industry, including the number of persons operating 
        marijuana enterprises at each level of such industry, the 
        volume of sales, the amount of tax collected each year, and the 
        areas of evasion, and
            (2) submit to Congress recommendations to improve the 
        regulation of the industry and the administration of the 
        related tax.
    (c) Conforming Amendment.--Section 6103(o)(1)(A) of the Internal 
Revenue Code of 1986 is amended by striking ``and firearms'' and 
inserting ``firearms, and marijuana''.
    (d) Clerical Amendment.--The table of chapters for subtitle E of 
title I of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new chapter:

                  ``Chapter 56. Marijuana Products''.

    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to sales, and applications for permits under section 5922 
        of the Internal Revenue Code of 1986 (as added by subsection 
        (a)), after 180 days after the date of the enactment of this 
        Act.
            (2) Special rules for existing businesses.--In the case of 
        any producer operating under a permit issued on or before the 
        date of the enactment of this Act under State law, the 
        requirements under section 5922 of such Code (as so added) 
        shall apply beginning on the date that is 6 months after the 
        date of the enactment of this Act.
                                 <all>