Act No. 99-395 was passed in the Regular Legislative Session and became effective
September 1, 1999. Pursuant to this Act, Regulation 810-7-1-.11ER was promulgated.
This Act provides that if cigarettes or roll-your-own tobacco manufactured by
your company is sold in Alabama, and your company chooses not to participate
in the “Master Settlement Agreement," your company is required to do the following:
(a) Establish an escrow fund in a federally or stale chartered
financial institution by April 15, 2000. The manufacturer may choose the institution;
however, the following conditions must be met:
(1) The institution must not be affiliated with any
tobacco product manufacturer.
(2) The institution must have assets of at least one billion dollars.
(3) The escrow arrangement must require that the financial institution
hold the escrowed funds' principal for the benefit of releasing parties and
prohibit the tobacco products manufacturer placing the funds into escrow from
using, accessing, or directing the use of the funds principal inconsistent
with Act 99-395, Section 3(2).
(4) The tobacco products manufacturer may receive the interest
or other appreciation on the escrow fund.
(b) Certify to the Commissioner of the Alabama Department of Revenue,
no later than April 30, 2000 or April 30 following the year of activity, that
an escrow fund was established and provide the Commissioner with a copy of the
escrow agreement signed by the tobacco product manufacturer and financial institution.
(c) Place into a qualified escrow fund by April 15 of the year
following the year shown below, the following amounts:
- (1) 1999: $.0094241 per unit sold September 1,1999 through December
31,1999;
- (2) 2000: $.0104712 per unit sold;
- (3) 2001 and 2002: $.0136125 per unit sold;
- (4) 2003 through 2006: $.0167539 per unit sold;
- (5) 2007 and each year thereafter: $.0188482 per unit sold.
(d) Certify to the Commissioner of the Alabama Department of Revenue
by April 30 of each year the number of units sold in Alabama and the amount
deposited into the escrow fund. Verification of the deposit must be evidenced
by a statement from the financial institution.
Violations for Noncompliance
The Attorney General may bring a civil action on behalf of the state against
any tobacco product manufacturer that fails to place into escrow the funds required
under the statute. Any applicable manufacturer that fails in any year to place
into escrow the funds required shall:
1. Be required within 15 days to place the required funds into
escrow. The court, upon a finding of a violation, may impose a civil penalty
not to exceed 5 percent of the amount improperly withheld from escrow per day
of the violation and in a total amount not to exceed 100 percent of the original
amount improperly withheld from escrow.
2. For a knowing violation, be required within 15 days to place
the required funds into escrow. The court, upon a finding of a knowing violation
may impose a civil penalty not to exceed 15 percent of the amount improperly
withheld from escrow per day of the violation and in a total amount not to exceed
300 percent of the original amount improperly withheld from escrow.
3. For a second knowing violation, be prohibited from selling cigarettes
to consumers within the state (directly or indirectly) for a period not to exceed
two years.
Questions concerning this Act should be directed to:
Tobacco Tax Section
P. O. Box 327555
Montgomery, AL 36132-7555
(334) 242-9627
Enclosure: Regulation 810-7-1-.11ER
Notices to Taxpayers