SB0850 100TH GENERAL ASSEMBLY

LRB100 04299 HLH 14305 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB0850

Introduced 2/7/2017, by Sen. Toi W. Hutchinson

SYNOPSIS AS INTRODUCED:

35 ILCS 130/3-3 new

Amends the Cigarette Tax Act. Requires the Department of Revenue to issue a request for proposal to acquire and use digital tax stamps. Provides that, upon implementation of the digital stamps, a stamp is considered affixed if 90% or more of the stamp is affixed to the individual package. Contains provisions concerning reimbursement of licensed distributors for costs associated with the initial purchase of a tax stamping machine, and provides a tax collection discount for licensed distributors.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Cigarette Tax Act is amended by adding Section 3-3 as follows:

(35 ILCS 130/3-3 new)

Sec. 3-3. Digital tax stamps.

(a) Within 180 days after the effective date of this amendatory Act of the 100th General Assembly, the Department shall issue a request for proposal to acquire and use digital stamps that contain a unique nonrepeating code that can be read by a device that identifies the taxed product and also contains other security and enforcement features as determined by the Department. The request for proposal shall include a provision that requires the successful bidder on the proposal to share digital stamp technology so that handheld devices, including, but not limited to, smartphones, can be readily utilized in furtherance of the implementation of the use of digital stamps, and so that the technology and equipment used by licensed distributors to affix the stamps to packages of cigarettes can be supplied, as may be permitted by the Department, by the successful bidder on the proposal or by any other provider. The request for proposal shall also include a provision permitting the Department to manage or restrict access rights to all or part of the information contained within, or accessible from, the stamps and a provision requiring the successful bidder on the proposal to guarantee that the stamps will be designed and manufactured to ensure that stamps can be affixed to individual packages of cigarettes in accordance with the requirements of this Act.

(b) Upon implementation of the digital stamps as provided in this amendatory Act of the 100th General Assembly, a stamp is considered affixed if 90% or more of the stamp is affixed to the individual package.

(c) Beginning in the first calendar month following the implementation of the use of digital stamps as provided in this Section, and continuing for the immediately succeeding 17 months, licensed distributors are entitled to reimbursement of direct costs actually incurred by the distributor, as determined by the Department, for the initial purchase of eligible equipment in an amount equal to 5.5% of the total net purchase price of the eligible equipment necessary to affix the digital stamp. The reimbursement provided under this subsection shall also include any applicable use or occupation taxes paid, and shipping and crating charges actually incurred, by the distributor in connection with the purchase, but shall exclude reimbursement for any other costs incurred by the distributor that are not otherwise expressly provided for in this Section, including, but not limited to, charges for installation and ongoing maintenance related to eligible equipment. A distributor may only receive reimbursement under this subsection to the extent that the eligible equipment purchased by the distributor does not exceed the total number of the distributor's existing equipment, as certified by the distributor on a form prescribed by the Department.

The total reimbursement available under this subsection shall not exceed $60,000 for all distributors combined.

(d) Beginning with the first calendar month following the implementation of the use of digital stamps as provided in this Section, a discount of 0.5% is allowed to each licensed distributor until the licensed distributor is compensated in an amount equal to the direct cost actually incurred by the distributor for the purchase of upgrades to technology and equipment, excluding the equipment reimbursed under subsection (c) of this Section, that are necessary to affix the digital stamp as determined by the Department.

Compensation under this subsection may also be claimed by a distributor for the direct costs actually incurred by the distributor, as determined by the Department and reflected in the net purchase price, for the initial and one-time purchase of case packers or similar machines or conveyors as follows:

(1) case packers or similar machines to be used exclusively to repack cigarette cartons into case boxes after digital stamps have been applied by eligible equipment to the individual packages of cigarettes contained within those cigarette cartons; compensation under this paragraph (1) may only be claimed by a distributor if the case packers or similar machines are in addition to, and not a replacement for, one or more case packers or similar machines used in connection with cigarette stamping machines that do not use digital stamps authorized under this Section;

(2) conveyors to be used exclusively for that portion of a cigarette stamping line that is necessary for and dedicated to cigarette stamping operations using eligible equipment to affix digital stamps to individual packages of cigarettes to be sold in this State; compensation under this paragraph may be claimed by a distributor only if the cigarette stamping line served by the conveyors is in addition to one or more distinct and existing cigarette stamping lines using stamping machines that do not use the digital stamps authorized under this Section, and that compensation shall not exceed a total of 50% of the amount reimbursed under subsection (c) for any particular distributor; and

(3) compensation under paragraphs (1) and (2) shall also include any applicable sales or use taxes paid, and shipping and crating charges actually incurred, by the distributor in connection with the purchase, but shall exclude any other costs incurred by the distributor not otherwise expressly provided for in this subsection, including, but not limited to, charges for installation and ongoing maintenance.

(e) As used in this Section:

"Eligible equipment" means a cigarette tax stamping machine that meets all of the following conditions:

(1) it was purchased by a licensed distributor on or after December 31, 2014;

(2) it enables the distributor to affix digital stamps to individual packages of cigarettes in accordance with the requirements of this Act; and

(3) it was purchased to be used for the primary purpose of permitting the distributor to affix digital stamps to individual packages of cigarettes to be sold in this State following the implementation of the use of digital stamps under this Section.

"Existing equipment" means a cigarette tax stamping machine that meets all of the following conditions:

(1) it was owned by a licensed distributor as of December 31, 2014; and

(2) it was a cigarette tax stamping machine used prior to January 1, 2015 by the distributor to apply stamps using stamp rolls of 30,000 stamps.

"Qualified Equipment" means equipment that was placed in service by a distributor during the first 8 months of digital stamp implementation that includes conveyors and additional associated electrical lines and compressed air lines in connection with the implementation of a digital stamping line approved by the Department. "Qualified equipment" does not include the cost of installation of a conveyor.

"Smartphone" means a device that combines a cell phone with a handheld computer and is capable of internet access, which allows a user, in conjunction with an encrypted digital tax stamp, to open a public portal.