Changes Made to Tobacco Products Provisions
Public Act 188 of 2012, effective June 20, 2012, makes changes to provisions of the Michigan tobacco products tax. The tobacco products tax is a tax imposed on the consumer of tobacco products at the time of purchase.
The definition of “manufacturer” has been amended to include a person who operates or who permits any other person to operate a cigarette-making machine in Michigan for the purpose of producing, filling, rolling, dispensing, or otherwise generating cigarettes. A person who is a manufacturer constitutes a nonparticipating manufacturer in the master settlement agreement. A person operating or otherwise using a machine or other mechanical device, other than a cigarette-making machine, to produce, fill, roll, dispense, or otherwise generate cigarettes is not considered a manufacturer so long as the cigarettes are produced or otherwise generated in that person’s dwelling and for his or her self-consumption.
A “cigarette making machine” is any machine or other mechanical device that meets all of the following criteria:
- it is capable of being loaded with loose tobacco, cigarette tubes or papers, and any other components related to the production of cigarettes, including filters;
- it is designed to automatically or mechanically produce, roll, fill, dispense, or otherwise generate cigarettes;
- it is commercial-grade or otherwise designed or suitable for commercial use; and
- it is designed to be powered or otherwise operated by a main or primary power source other than human power.
The legislation also does the following:
- it requires the Department of Treasury to issue a request for proposal to acquire and use digital stamps that contain a unique non-repeating 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;
- it allows stamping agents to retain 0.5% of the tax due on cigarettes as compensation for equipment and technology upgrades that are necessitated by digital stamps;
- it allows stamping agents to retain from monthly remittances, for 18 months, 5.55% of direct costs incurred for the initial purchase of eligible equipment;
- it allows licensees to retain an amount equal to 1.5% of the total amount of the tax due on sales of untaxed cigarettes to Indian tribes; and
- it requires the Michigan Department of State Police to initiate inquiries or otherwise obtain data from the Treasury Department in order to support its enforcement activities.
- “Eligible equipment” means a cigarette tax stamping machine that meets all of the following conditions:
- it was purchased by a stamping agent who was licensed as a stamping agent as of December 31, 2011;
- it enables the stamping agent to affix digital stamps to individual packs of cigarettes as required by law;
- it was purchased for the primary purpose of permitting the stamping agent to affix digital stamps to individual packs of cigarettes to be sold in Michigan after the implementation of the use of digital stamps.