HB 3536

83(R) - 2013
Business, Industry, & Commerce

Vote Recommendation

  • Negative
  • Neutral
  • Neutral
  • Negative
  • Neutral


John Otto

Bill Caption

Relating to the imposition of a fee on the sale of cigarettes and cigarette tobacco products manufactured by certain companies.

Fiscal Notes

Given the uncertainty over units to be subject to the fee under a dual-rate structure and unclear or declining revenue in other states who have imposed a fee on non-settling manufacturers, there could be an indeterminate revenue gain to the State.

Bill Analysis

Summary: HB 3536 would impose a fee on manufacturers of cigarettes that did not sign the tobacco settlement agreement (non-settling manufacturers) following numerous state lawsuits against the tobacco industry. Settling manufacturers have had to reimburse Texas for Medicaid costs associated with smoking, while non-settling manufacturers have not.

HB 3536 would require distributors to count and report the amount of cigarettes from non-settling manufacturers they distribute and calculate the fee imposed by HB 3536 accordingly. Distributors are entitled to keep 3% of the face value of all stamps purchased for the service of affixing stamps to cigarette packages. The comptroller is required to keep a website that publishes all non-settling and settling manufacturers to help distributors.

HB 3536 requires all non-settling manufacturers whose cigarettes were not sold in Texas prior to September 1, 2013, to register with the attorney general before selling cigarettes. Registration information must include address, any cigarette brand names the manufacturer will sell, the date they plan to begin selling, and a statement from a company official that this information is accurate and that they will comply with this subchapter.

If non-settling manufacturers do not pay this fee, they are liable to the penalties assessed for not paying taxes under chapter 154 dealing with the cigarette tax and 155 dealing with the cigar tax, and HB 3536 gives power to the Attorney General and Comptroller to audit non-settling manufacturers to ensure compliance.

Revenue derived from this fee would be deposited in General Revenue, and all fees paid by a non-settling manufacturer will be used to reduce any judgment or settlement on a released claim made against the non-settling manufacturer that made the payment. In other words, the state will use fee money to cover the costs of settling for non-settling manufacturers.

HB 3536 also imposes a tax on chewing tobacco.

Analysis: HB 3536 is an unjustified expansion of government in several ways.

HB 3536 imposes several new taxes and places burdensome reporting requirements on cigarette manufacturers. HB 3536's most important provisions tax non-settling manufacturers.  Non-settling manufacturers should not be burdened with fees simply because other manufacturers settled and are now at a competitive disadvantage. Vote “no,” on HB 3536.