An Act To Strengthen the Collection of the Tax on Tobacco Products
Maine Legislature, Session 122, LD 2093
Committee: Taxation
Sponsors: CUMMINGS
Amends: 36 MRSA §4401, 36 MRSA §4402, 36 MRSA §4403, 36 MRSA §4404

Legislative Document 
No. 2093 
H.P.1485 
House of Representatives, March 28, 2006 
An Act To Strengthen the Collection of the Tax on Tobacco 
Products 
Reference to the Committee on Taxation suggested and ordered printed. 
'I7l~ /J7.7Il~ 
MILLICENT M. MacFARLAND 
Clerk 
Presented by Representative CUMMINGS of Portland. (GOVERNOR'S BILL) 
Pnnteu till recyt:ieJ papt'r 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §4401, sub-§2, as enac ted by PL 1985, c. 783, 
§16, is amended to read: 
2. 
Distributor. 
"Distributor" means any person engaged in 
the business of producing or manufacturing tobacco products in 
this State for sale in this State, any person engaged in the 
business of selling tobacco products in this State who brings, or 
causes to be brought, into this State any tobacco products for 
sale to a retailer or any person engaged in the business of 
selling tobacco products who ships or transports tobacco products 
to retailers for sale in this State or any retailer who imports, 
receives 
or 
acquires, 
from 
a 
person other 
than 
a 
licensed 
distributor, tobacco products for sale within the State. 
Sec. 2. 36 MRSA §4401, sub-§7, as enacted by PL 1985, c. 783, 
§16, is amended to read: 
7. 
Sale. 
"Sale" means any transfer, exchange, barter or 
gift 
in 
any 
manner 
or 
by 
any 
means 
whatsoever, 
for 
a 
consideration. 
it--shall--iBelyse "Sale" includes 
a gift for 
advertising by 
a 
person engaged in the business 
of selling 
tobacco products. 
Sec. 3. 36 MRSA §4401, sub-§8, as enacted by PL 1985, c. 783, 
§16, is repealed. 
Sec. 4. 36 MRSA §4401, sub-§9, as enacted by PL 1985, c. 783, 
§16, is amended to read: 
9. 
Tobacco products. 
"Tobacco 
products" 
means 
cigars; 
cheroots; 
stogies; 
pe~i~yes~ periques, 
granulated, 
plug cut, 
crimp cut, ready rubbed, and other smoking tobacco; snuff; snuff 
flour: 
cavendish: 
plug and twist tobacco; 
finecut 
and other 
chewing tobaccos; shorts; refuse scraps, clippings, cuttings and 
sweepings of tobacco; 
and other kinds 
and 
forms of tobacco, 
prepared in such manner as to be suitable for chewing or smoking 
in a pipe or otherwise, or both for chewing and smoking; but 
shall ~ 
not include tobacco products whieh that are subject to 
the tax provided by chapter 703. 
Sec. 5. 36 MRSA §4401, sub-§10, as enacted by PL 1985, c. 783, 
§16, is repealed. 
Sec. 6. 36 MRSA §4401, sub-§II, as enacted by PL 1985, c. 783, 
§16, is amended to read: 
11. 
Wholesale sales price. 
the estaalishes price for which 
"Wholesale sales price" means 
a manufacturer sells tobacco 
products to a distributor, exclusive of any discount or other 
reduction. 
Sec. 7. 36 MRSA §4402, as amended by PL 2003, c. 439, §4, is 
repealed and the following enacted in its place: 
§4402. Licenses 
1. 
Generally. 
Every distributor shall obtain a license 
from the State Tax Assessor before engaging in business. 
A 
retailer required to be licensed as a distributor pursuant to 
this chapter must also hold a current retail tobacco license 
issued under Title 22, section ISSI-A. 
2. 
Applications; forms. 
Every license application must be 
made on a form prescribed by the assessor and must state the name 
and address of the applicant, 
the address of the applicant's 
principal place of business and such other information as the 
~ssessor may 
require 
for 
the 
proper 
administration of 
this 
chapter. 
A person outside the State who ships or transports 
tobacco 
products 
to 
a 
retailer 
in 
this 
State 
must 
make 
application as a distributor and be granted by the assessor a 
license subject to all the provisions of this chapter and agree, 
upon applying for 
a 
license, 
to submit that person's books, 
accounts 
and 
records 
to 
examination 
by 
the 
bureau 
during 
reasonable business hours and to accept service of process by 
mail when service is made in any proceeding involving enforcement 
of this chapter. 
3. 
Expiration and reissuance. 
A license issued pursuant to 
this section expires on June 30th of each year unless sooner 
revoked 
by 
the 
assessor. 
The 
license 
must 
be 
prominentl~ 
displayed on the premises covered by the license and may not be 
transferred to any other person. 
~~~alties. The following penalties apply to a violation 
so 
of this section. 
A. 
A distributor that imports into this State any tobacco 
product without holding a distributor's license issued by 
the 
assessor 
pursuant 
to 
this 
section 
commits 
a 
civil 
violation for which a fine of not less than $2S0 and not 
more than $SOO must be adjudged. 
It. 
A ~istributor tnat violates paragraph A after having 
been previously adjudicated as violating paragraph A commits 
a civil violation for which a fine of not less than $SOO and 
not more than $1,000 must be adjudged for each subsequent 
violation. 
C. A distributor that sells at wholesale or retail, offers 
for sale at wholesale or retail or possesses with intent to 
sell at wholesale or retail any tobacco product without 
holding 
a 
distributor's 
license 
issued by 
the 
assessor 
pursuant to this section commits a civil violation for which 
a fine of not less than $250 and not more than $500 must be 
adjudged. 
D. 
A distributor that violates paragraph C after having 
been previously adjudicated as violating paragraph C commits 
a civil violation for which a fine of not less than $500 and 
not more than $1, 000 must be adjudged for each subseg:uent 
violation. 
5. 
Reyocation or suspension. 
The assessor may revoke or 
suspend the license of any distributor for failure to comply with 
any provision of this chapter or if the person no longer imports 
or sells tobacco products. A person aggrieved by a revocation or 
suspension may petition the assessor for a hearing as provided in 
section 151. 
6. 
Lic.enJite 
directory 
maintained. 
The 
aSSE!~sor 
shalJ" 
maintain a directory of distributors licensed pursuant to this 
~l:lapter. 
The assessor shall update the directory as necessary, 
but not less than annually. 
Notwithstanding the provisions of 
section 191, the list must be available to the public and must be 
posted 
on 
a 
publicly 
accessible 
website 
maintained 
by 
the 
assessor. 
The directory must be mailed annually to all retailers 
at or near the time of renewal of a retail tobacco license issued 
under Title 22, section 1551-A. 
7. 
Notification. 
A licensed distributor that does 
not 
renew or maintain a license, or that has its license suspended or 
revoked, shall inform in writing all its accounts in this State 
that it no longer holds a valid license under this section. The 
licensed distributor shall inform its accounts in this State 
within 10 business days of the event giving rise to such notice. 
Notwithstanding the provisions of section 191, the assessor may 
publish the 
names 
of distributors that have 
not 
renewed or 
maintained a license or that have had a license suspended or 
revoked. 
Sec. 8. 36 MRSA §4403, sub-§§l and 2, as amended by PL 2005, c. 
457, Pt. AA, §6 and affected by §8, are further amended to read: 
1. 
Smokeless tobacco. 
A tax is imposed on all smokeless 
tobacco, including Chewing tobacco and snuff, at the rate of 78% 
of the wholesale sales price beginning October 1, 2005. 
2. 
Other tobacco. 
A tax is imposed on cigars, pipe tobacco 
and other tobacco intended for smoking at the rate of 20% of the 
wholesale ~ 
price beginning October 1, 2005. 
Sec. 9. 36 MRS A §4403, sub-§3, as amended by PL 2001, c. 382, 
§2, is further amended to read: 
3. 
Imposition. 
The 
tax 
is 
imposed 
at 
the 
time 
the 
di s tr ibutorT--r:-e-t-a-i-J..-er--eF-~-as-s-i-f-i-ed--iH\peF1::eF br ings or causes 
to be brought into this State tobacco products that are for sale 
to consumers or to retailers or for use or at the time tobacco 
products are manufactured or fabricated in this State for sale in 
this State. 
Sec. 10. 36 MRSA §4404, as amended by PL 2001, c. 382, §3, is 
further amended to read: 
§4404. Returns; payment of tax and penalty 
Every 
distributorT--~-e-t~~~---aaa--~~~-~--iH\peF1::eF 
subject to the licensing requirement of section 4402 shall on or 
before the last day of each month submit, on a form prescribed 
and furnished by the State Tax Assessor, a report together with 
payment of the tax due under this chapter stating the quantity 
and the wholesale sale ~ 
price of all tobacco products held, 
purchased, manufactured, brought in or caused to be brought in 
from outside the State or shipped or transported to retailers 
within the State during the preceding calendar month. 
Every such 
distributorT--F~&ai~~-~-~~~~~~~-iH\pe~1::e~ shall 
keep 
a 
complete and accurate record at its principal place of business 
to substantiate all receipts of tobacco products. 
Such monthly reports must contain such further information 
as the State Tax Assessor may prescribe and must show a credit 
for any tobacco products exempted as provided in section 4403. 
Records 
must 
be 
maintained 
to 
substantiate 
the 
exemption. 
Tobacco 
products 
previously 
taxed 
that 
are 
returned 
to 
a 
manufacturer because the product has become unfit for use, sale 
or consumption may be taken as a credit on a subsequent return 
upon receipt of the credit notice from the original supplier. 
A person who is not a distributor licensed pursuant to this 
chapter 
who 
imports, 
receives 
or 
otherwise 
acquires 
tobacco 
products for use or consumption in the State from a person other 
than a licensed distributor shall file, on or before the last day 
of the month following each month in which tobacco products were 
acquired, a return on a form prescribed by the asseSsor together 
with payment of the tax imposed by this chapter at the rate 
provided in section 4403. The return must report the quantity of 
tobacco products imported, received or otherwise acquired from a 
person other than a licensed distributor or retailer during the 
previous calendar month and additional information the assessor 
may require. 
Sec. 11. 36 MRSA §§4404-A, 4404-B and 4404·C are enacted to 
read: 
§4404-A. 
ImPOrtation of tobacco products 
1. 
Generally. 
Except as provided in subsections 2 and 3, 
only 
a 
person licensed pursuant to section 4402 
may 
import 
tobacco products into this State. 
2. 
~ufacturers. 
A manufacturer 
may transport tobacco 
products into this State and may transport tobacco products from 
place to place within this State in Quantities greater than those 
excepted in section 3 for the purpose of marketing and sales if 
the sale or distribution of those tobacco products is accounted 
for and the taxes are paid by a person licensed pursuant to 
section 4402. 
3. 
Exception for personal use. 
A person who is not a 
licensed distributor may transport tobacco products into this 
State and may transport tobacco products from place to place 
within this State for personal use in a quantity not greater than 
cigars or one pound of other tobacco product. 
4. 
Evidence. 
The 
possession 
by 
a 
person 
who 
is 
not 
licensed pursuant to section 4402 of more than 50 cigars or one 
pound of other tobacco product for which the tax imposed by this 
chapter has not been paid is prima facie evidence of a violation 
of this section. 
5. 
Penalties. 
The following penalties apply to violations 
of this section. 
A. 
A person who violates this section commits a Class E 
crime. 
B. 
A person who violates this section when the person has 
one or more prior convictions for violation of this section 
commits a Class D crime. Title 17-A, section 9-A governs the 
use of prior convictions when determining a sentence. 
Violatio~~j~ection by a person other than a retailer 
is a strict liability crime as defined in Title 17-A, section 34, 
subsection 4-A. 
It is an affirmative defense to a prosecution 
under this section that a retailer, alleged to have imported 
tobacco products 
or 
caused tobacco products 
to 
be 
imported~ 
reasonably relied on licensing information annually mailed to the 
retCl.iler pursuant to section 4402, subsection 6 that listed~ 
~ompany from which the retailer obtained tobacco products as 
being a licensed distributor. 
§4404-B. 
Sales of tobacco products in contravention of law 
1. 
TQ~il.~9_PX9_clq~t~. 
A oi~liiQJAtor may not offer for sale 
or sell tobacco products if the package containing the tobacco 
products: 
A. Is subject to and does not comply with 15 United States 
Code, Section 4401, et seg., for the placement of labels, 
warnings or any other information for a package of tobacco 
products to be sold within the United States and 26 United 
States Code, Section 5723; 
B. Is labeled "For Export Q1l1y," "u. S. Tax Exempt." "For 
Outside U.S." or with other wording indicating that 
manufacturer did not intend that the product be sold in 
United States; 
Use 
the 
the 
C. Has been altered_by adding or deleting wording, labels or 
warnings described in paragraphs A and B; 
D. Has been imported into the United States in violation of 
United States Code, Section 5754; or 
E. In any way violates federal trademark or copyright laws. 
2. 
Shipment only to licensed retailers. 
A distributor may 
not sell or offer to sell tobacco products to a retailer unless 
the retailer has provided documentation to the distributor that 
the retailer holds a current retail tobacco license issued under 
Title 22, section 155l-A. 
3. 
Deceptive practice. 
A distributor that sells tobacco 
products described in subsection 1, with or without haying paid 
the appropriate 
tax, 
commits 
an unfair or 
deceptive act or 
practice under the Maine Unfair Trade Practices Act. 
4. 
Penalties. 
The following penalties apply to violations 
of this section. 
A. 
A distributor that violates this section commits a Class 
E crime. 
B. 
A distributor that violates this 
section when 
the 
distributor has one or more prior convictions for violation 
of this section commits a Class D crime. Title l7-A, section 
9-A governs the use of prior convictions when determining a 
sentence. 
Violation of this section is a strict liability crime as 
defined in Title l7-A, section 34, subsection 4-A. 
§4404-C. 
Seizure and forfeiture of contraband tobacco products 
1. 
Generally. 
Except as provided in SUbsection 2, 
any 
tobacco products for which the tax imposed by this chapter has 
not been paid or tobacco products described in section 4404-B, 
.s..ybsection 1 that are found in this State are contraband goods 
subject 
to 
seizure 
by 
and 
forfeiture 
to 
the 
State. 
A 
law 
enforcement officer, including a 
contract officer pursuant to 
Title 22, section l556-A, 
and a duly authorized agent of the 
State Tax Assessor may seize contraband tobacco products under 
the process described in subsection 3. 
2. 
Exceptions. 
The 
following 
tobacco products 
are not 
subject to seizure: 
A. 
Tobacco 
products 
in 
the 
possession 
distributor or manufacturer for which the 
this chapter has not been paid; 
of 
a 
licensed 
tax imposed by 
B. 
Tobacco products in the course of transit from without 
the State and consigned to a licensed distributor for which 
the tax imposed by this chapter has not been paid: and 
C. 
Tobacco products in a quantity of no more than 50 cigars 
or one pound of other tobacco product in the possession of 
an individual who is not a licensed distributor for which 
the tax imposed by this chapter has not been paid. 
N~twithstanding paragIaphs A, Band C, tobacco products described 
in section 4404-B, SUbsection 1 are subject to seizure under the 
process described in subsection 
unless the distributor can 
prove the tobacco products are to be exported out of the country. 
3. 
Procedure for seizure. 
Contraband tobacco products may 
be seized by a law enforcement officer or duly authorized agent 
of the assessor 
who 
has probable cause 
to believe that the 
tobacco products are untaxed or are tobacco products described in 
section 4404-B, subsection 1 under the following circumstances: 
/I.. 
When the 
where the law 
right to be in 
tobacco' products are discovered 
enforcement officer or agent has 
in a place 
the lawful 
the performance of official duties; or 
B. 
When the seizure is incident to a search under a valid 
search warrant or an inspection under a yalid administrative 
inspection warrant. 
4. 
Procedure for forfeiture. 
A petition for forfeiture 
must be filed as provided in this subsection. 
A. 
A district attorney or an assistant district attorney, 
or the Attorney General or an assistant attorney general, 
may petition the District Court in the name of the State in 
the nature of a proceeding in rem to order the forfeiture of 
contraband tobacco products. 
B. 
There may be no discovery other than under the Maine 
Rules of Ciyil Procedure, Rule 36 except by order of the 
court 
upon 
a 
showing 
of 
substantial 
need. 
An 
order 
permitting discovery must set forth in detail the areas in 
which substantial need has been shown and the extent to 
which discovery may take place. 
C. 
A petition for forfeiture filed pursuant to this section 
must 
be 
accepted 
by 
the 
District 
Court 
without 
the 
assessment 
or 
payment 
of 
civil 
entry 
or 
filing 
fees 
otherwise provided for by rule of court. 
5. 
JurisdictiQn and venue. 
Tobacco products subject to 
forfeiture under this section must be declared forfeited by the 
District Court haying jurisdiction oyer the tobacco products. 
Venue is in the location where the contraband tobacco products 
are seized or in Kennebec County. 
6. 
Type 
of 
action; 
burden 
of 
proof. 
A 
proceeding 
instituted pursuant to this section is an in rem civil action. 
The State has the burden of proving all material facts by a 
preponderance of the evidence. 
The owner of the tobacco products 
or other person claiming the tobacco products has the burden of 
proving by a preponderance of the evidence one of the exceptions 
set forth in subsection 2. 
7. 
Hearings: cHsposition: deposit of funds. 
At a hearing 
other than a default proceeding, the court shall hear evidence, 
make findings of fact, enter conclusions of law and file a final 
order to which the parties have the right of appeal. When tobacco 
~roducts are ordered forfeited, the final order must provide for 
the disposition of the tobacco products by the assessor by public 
auction or 
by the State Purchasing Agent. 
Proceeds 
must 
be 
deposited in the General 
Fund. 
Tobacco products described in 
section 4404-B, subsection 1 must be destroyed by the assessor in 
a manner that prevents their reintroduction into the marketplace. 
8. 
Default proceedings. 
Default proceedings must be held 
in the same manner as default proceedings in other civil actions, 
except that service of motions and affidavits related to the 
default proceedings need not be served upon any person who has 
not answered or otherwise defended in the action under this 
section. 
SUMMARY 
This bill strengthens the ability of the State to enforce 
the collection of the tax on tobacco products. 
The bill also 
permits the seizure and forfeiture of contraband tobacco products 
within the State. 
The bill also strengthens and clarifies the 
penalties 
for 
distributing 
or 
selling 
tobacco 
products 
in 
contravention of the law.