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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER JJCIGARETTE AND TOBACCO PRODUCTS REGULATION
RULE §3.1205Delivery Sales of Cigarettes (Health and Safety Code, Chapter 161, Subchapter R)

(a) Definitions. The following words and terms, when used in this section shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Delivery sale--A sale of cigarettes to a consumer in Texas in which:

    (A) the purchaser submits the order for the sale:

      (i) by telephone or any other method of voice transmission;

      (ii) by mail or any other delivery service; or

      (iii) through the Internet or another on-line service; or

    (B) the cigarettes are delivered by mail or another delivery service.

    (C) A sale of cigarettes not for personal consumption to a person who is a wholesale dealer or a retail dealer is not a delivery sale.

    (D) A sale of cigarettes is a delivery sale regardless of whether the seller is located outside or within Texas.

  (2) Delivery service--A person, including the United States Postal Service (U.S. Post Office), who is engaged in the commercial delivery of letters, packages, or other containers.

  (3) Shipping container--A container in which cigarettes are shipped in connection with a delivery sale.

  (4) Shipping document--A bill of lading, airbill, United States Post Office form, or any other document used to document a delivery.

  (5) Seller--A person, located outside or within Texas, who offers cigarettes for sale to the public by telephone order, mail order, or on the Internet.

(b) Seller requirements. A person who makes a delivery sale of cigarettes in Texas, must comply with the following requirements.

  (1) Registration. Sellers located outside of Texas, who wish to make delivery sales to Texas customers must apply for and obtain a cigarette distributor permit from the comptroller's office before making a delivery sale in Texas or before shipping cigarettes into Texas in connection with a delivery sale. Sellers located in Texas, who wish to make delivery sales to Texas customers must obtain a cigarette retailer permit and a state sales tax permit from the comptroller's office before making a delivery sale in Texas.

  (2) Collection and payment of taxes. The comptroller's office collects cigarette excise tax through the sale of cigarette tax stamps to permitted distributors. A seller located outside of Texas who has obtained a distributor permit is required to purchase and pay for tax stamps before the comptroller's office will ship the stamps to the seller. In addition, as provided in Tax Code, Chapter 151, a seller engaged in business in Texas is required to collect and remit to the comptroller's office sales tax on all cigarette sales made in Texas.

  (3) Stamping requirements. A seller located outside of Texas must affix a Texas tax stamp to each package of cigarettes that is to be shipped or delivered to a purchaser in Texas before shipment. A Texas seller can purchase only stamped packages of cigarettes from distributors and wholesalers.

  (4) Determine customer's age. Using the methods established in paragraphs (6) and (7) of this subsection, a seller must confirm the age of the prospective purchaser placing an order for cigarettes to be delivered by the U. S. Post Office or by a delivery service before the cigarettes can be mailed or delivered to a purchaser in Texas.

  (5) Disclosure requirements. A seller must send a prospective purchaser a notice that includes a prominent and clearly legible statement that:

    (A) state law prohibits cigarette sales to individuals younger than 18 years of age;

    (B) sales of cigarettes are restricted to individuals who can provide verifiable proof of age;

    (C) sales of cigarettes are taxable under Texas Tax Code, Chapter 154;

    (D) the excise tax due on the cigarettes has been paid by the purchase of a tax stamp for each cigarette package; and

    (E) that a tax stamp has been affixed to each cigarette package sold.

  (6) Written certification. A seller is required to obtain from the prospective purchaser a written certification that includes:

    (A) a reliable confirmation that the prospective purchaser is at least 18 years of age;

    (B) a statement signed by the prospective purchaser certifying the prospective purchaser's address and date of birth;

    (C) a confirmation that the prospective purchaser understands that signing another person's name to the certification is illegal, that state law prohibits the sale of cigarettes to, and the purchase of cigarettes by, an individual younger than 18 years of age; and

    (D) a confirmation that the prospective purchaser wants to receive mailings from a tobacco company.

  (7) Age verification. A seller must make a good faith effort to verify the information contained in the certification required under paragraph (6) of this subsection. A seller may compare the information against a commercially available database or obtain a photocopy or other image of a government-issued identification bearing a photograph and date of birth of the prospective purchaser.

  (8) Disclosure notice. A seller must send to the prospective purchaser, by e-mail or other means, a notice that complies with the requirements in paragraph (5) of this subsection.

(c) Purchaser requirements. A person placing an order for cigarettes to be mailed or delivered must first:

  (1) provide the seller with proof of age;

  (2) provide the seller with a signed written statement that confirms:

    (A) the purchaser's address and date of birth;

    (B) the purchaser's permission for a tobacco company to send mailings to the purchaser;

    (C) the purchaser's knowledge that signing another person's name to the written statement is illegal, and that state law prohibits the sales of cigarettes to, and the purchase of cigarettes by, an individual younger than 18 years of age; and

  (3) pay for the cigarettes ordered by mail or over the Internet by check or by a credit or debit card that has been issued in the purchaser's name.

(d) Seller shipping requirements. Anyone who mails, ships, or delivers cigarettes into Texas in connection with a delivery sale order must:

  (1) include as part of the shipping documents a clear and conspicuous statement: "CIGARETTES: TEXAS LAW PROHIBITS SHIPPING TO INDIVIDUALS UNDER 18 YEARS OF AGE AND REQUIRES THE PAYMENT OF ALL APPLICABLE TAXES";

  (2) use a method of mailing or shipping that obligates the delivery service to require:

    (A) for residential deliveries, the purchaser who placed the delivery sale order, or an adult who resides at the purchaser's address and who is at least 18 years of age, to sign to accept delivery of the shipping container and for the person accepting delivery to provide proof of identity and age by means of government-issued identification bearing a photograph;

    (B) for non-residential deliveries, the purchaser who placed the delivery sale order, or a person who is at least 18 years of age, to sign to accept delivery of the shipping container and to provide proof of identity and age by means of a government-issued identification bearing a photograph;

  (3) provide the delivery service with a written and signed statement that a Texas cigarette tax stamp has been affixed to each package of cigarettes included in the delivery sale. If the seller is located in Texas, the seller must also include a written and signed statement that the sales tax due on each package of cigarettes included in the delivery sale will be remitted to the comptroller's office.

(e) Seller reporting requirements. On or before the 10th day of each month, each seller who has made a delivery sale in Texas or shipped or delivered cigarettes into Texas in connection with a delivery sale during the previous month must file a Texas Cigarette Delivery Sales Report with the comptroller's office. This report must be completed and filed online. The report is available on the comptroller's Window on State Government Web site at www.window.state.tx.us. The first report required under this subsection is due February 10, 2004, and will cover the period of September 1, 2003 through January 31, 2004. A seller who submits a monthly "Jenkins Act" report required by 15 U.S.C. Section 376, as amended, to the comptroller's office has complied with the monthly delivery sales reporting requirement and no further report is required.

(f) Violations and Penalties. A seller commits an offense if the seller violates a provision of the Health and Safety Code, Chapter 161, Subchapter R, or Tax Code, Chapter 154.

  (1) Age violation. Making a delivery sale of cigarettes to a person younger than 18 years of age is a Class C misdemeanor for the first offense. A second and any subsequent offense is a Class B misdemeanor.

  (2) Intentional violations. A seller who knowingly violates a provision of the Health and Safety Code, Chapter 161, Subchapter R, or knowingly submits a certification in another person's name commits a third degree felony.

  (3) Non-payment of tax. A seller who fails to pay the cigarette tax or remit the sales tax must pay to the state a civil penalty in an amount equal to five times the amount of tax due. This penalty is in addition to penalties imposed under Tax Code, Chapter 154.

  (4) Forfeiture of cigarettes and property. Packages of cigarettes that a seller sold or attempted to sell in a delivery sale that do not comply with the Health and Safety Code, Chapter 161, Subchapter R, may be forfeited to the state and may be destroyed. Any equipment, material, or other personal property on the premises of a seller who, with the intent to defraud the state, fails to comply with the provisions of the Health and Safety Code, Chapter 161, Subchapter R, may also be forfeited to the state.

  (5) Tax code violations. If the comptroller finds that a seller violates Tax Code, Chapter 154, or a rule made pursuant to Chapter 154, the comptroller may impose a penalty of not more than $2,000 for each violation per day and/or suspend or revoke a permit pursuant to Texas Tax Code, §154.1141.


Source Note: The provisions of this §3.1205 adopted to be effective January 10, 2005, 30 TexReg 22

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