Senate Bill No. 607

(By Senators Plymale, Sharpe, Kessler and Edgell)

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[Introduced February 17, 2003; referred to the Committee on Education; and then to the Committee on Finance.]

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A BILL to amend and reenact sections one, two, four, five, five-a,
seven-a, nine and ten, article nineteen, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, all relating generally to the soft drinks tax; amending and adding definitions; including bottled water in tax; expanding purpose of proceeds from soft drink tax; increasing the rate of tax on soft drink products; providing for the distribution and use of the proceeds from the soft drink tax; requiring report to the joint committee on government and finance; expanding exemptions from tax stamp or tax crown requirement; requiring indicia of tax payment to be sold at face value; eliminating provisions relating to tax refund in certain instances; amending requirements relating to report to commissioner; providing further administrative procedures for payment of tax, including penalty for failure to file a report when no tax is due; declaring certain soft drink products contraband; requiring commissioner to institute a proceeding in circuit court seeking forfeiture of seized contraband; using proceeds from sale for the costs of proceedings; authorizing a fine for altering, counterfeiting or reusing tax stamps or tax crowns; requiring a written warning for a first offense, imposing fine for a second and third offense and imposing fine and requiring suspension of a business registration certificate for selling soft drink products upon which tax has not been paid; and increasing criminal penalties for other soft drink tax-related violations.

Be it enacted by the Legislature of West Virginia:
That sections one, two, four, five, five-a, seven-a, nine and ten, article nineteen, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted, all to read as follows:
ARTICLE 19. SOFT DRINKS TAX.

§11-19-1. Definitions.

As used in this article:
(1) "Bottled soft drinks" shall include means any and all nonalcoholic beverages, whether carbonated or not, such as soda water, ginger ale, coca cola, lime cola, pepsi cola, doctor pepper, root beer, carbonated water, orangeade, lemonade, tea and coffee when canned, bottled or packaged as a ready to consume beverage, sports drinks, fruit juice when any plain or carbonated water, flavoring or syrup is added, carbonated and noncarbonated spring, mineral or drinking water or any and all preparations commonly referred to as "soft drinks" of whatever kind, which are closed and sealed in glass, paper, or any other type of container, envelope, package or bottle, whether manufactured with or without the use of any syrup. The term "bottled soft drinks" shall not include unflavored fluid milk or unflavored milk products, to which no flavoring has been added or natural undiluted fruit juice or vegetable juice, nonintoxicating beer as defined in section three, article sixteen of this chapter and alcoholic liquor as defined in section five, article one, chapter sixty of this code.
(11) (2) "Commissioner" means the state tax commissioner and where the meaning of the context requires, all deputies and employees duly authorized by him or any officer or employee of the state tax department duly authorized by the commissioner directly or indirectly, by one or more redelegations of authority, to perform the functions mentioned or described in this article.
(3) "Consumer" means a person who purchases, receives or in any way comes into possession of soft drink products for the purpose of consuming, those soft drink products, giving them away or disposing of them in any way other than by sale.
(10) (4) "Distributor" shall mean means any person who manufactures, bottles, produces or purchases for sale to retail dealers any soft drink product. bottled soft drink or soft drink syrup
(5) "Meal replacement product" means a liquid or powdered drink or drink mix that is sold as a replacement for one or more of the daily meals and includes formulated meal replacements such as ensure and glucerna. The term "meal replacement product" does not include formulated nutritional supplement drinks or powdered formulated nutritional supplement drink mixes designed as a supplement to a normal diet.
(2) (6) "Natural undiluted fruit juice" shall mean means the liquid resulting from the pressing of fruit with or without sweetener being added, or the liquid resulting from the reconstitution of natural fruit juice concentrate by the restoration of water to dehydrated natural fruit juice with or without sweetener being added. This term does not include any fruit juice or reconstituted natural fruit juice to which plain or carbonated water, flavoring or syrup is added, other than plain water in the proportion necessary to restore the fruit juice or reconstituted natural fruit juice to its natural state.
(3) (7) "Natural undiluted vegetable juice" shall mean means the liquid resulting from the pressing of vegetables with or without sweetener being added or the liquid resulting from the reconstitution of natural vegetable juice concentrate by the restoration of water to dehydrated natural vegetable juice with or without sweetener being added. This term does not include any vegetable juice or reconstituted natural vegetable juice to which plain or carbonated water, flavoring or syrup is added, other than plain water in the proportion necessary to restore the vegetable juice to its natural state.
(7) (8) "Person" shall mean means and include an individual, firm, partnership, association, or corporation or limited liability company.
(9) "Retail dealer" includes every person other than a wholesale dealer mixing, making, compounding or manufacturing who mixes, makes, compounds or manufactures any drink from a soft drink syrup or powder base and sells the finished and ready to consume soft drink to a consumer, or a person selling who sells such the syrup or powder to a consumer for the purpose of making a finished and ready to consume soft drink.
(10) "Sale," "sell" or "selling" means the vending, exchange, transfer of title, barter, gift, distribution or disposition of tangible personal property for a consideration, and includes any transfer of the possession or ownership of tangible personal property for a consideration.
(6) (11) "Simple syrup" shall mean means the substance created by the making, mixing, compounding or manufacturing, by dissolving sugar and water or any other mixtures that will create simple syrup to which concentrates or extracts may or may not be added. concentrates or extracts
(12) "Soft drink products" means bottled soft drinks, soft drink syrups and soft drink powders. The term "soft drinks products" does not include unflavored fluid milk, powdered milk, unflavored milk products, meal replacement products, fluid baby formulas or powdered baby formula mixes.
(5) (13) "Soft drink syrups and powders" shall include means the compound mixture or the basic ingredients, whether dry or liquid, whether concentrated or not concentrated practically and commercially or domestically usable in making, mixing or compounding soft drinks by the mixing thereof of the compound mixture or the basic ingredients with carbonated or plain water, ice, fruit, milk or any other product suitable to make a soft drink. among such syrups being such "Soft drink syrups and powders" includes products such as bar mixes, coca cola syrup, chero cola syrup, pepsi cola syrup, doctor pepper syrup, root beer syrup, nu-grape syrup, lemon syrup, vanilla syrup, chocolate syrup, cherry smash syrup, rock candy syrup, simple syrup, chocolate drink powder, malt drink powder kool-aid and other similar products or any other prepared syrups or powders sold or used for the purpose of mixing soft drinks domestically or commercially at soda fountains, restaurants or similar places. as well as those powder bases prepared for the purpose of domestically mixing soft drinks such as kool aid, oh boy drink, tip top, miracle aid and all other similar products The term "soft drink syrups and powders" shall not include syrups or powders usable for the making of meal replacement products or baby formulas.
(4) (14) "Sweetener" shall mean means artificial or natural sugar only artificial or natural, and sugar substitutes which are used in place of sugar which singularly flavors add flavor to the taste of a natural undiluted fruit juice or natural undiluted vegetable juice or other beverage. The term "sweetener" includes, but is not limited to, dextrose, corn syrup, aspartame, sucralose, sucrose, fructose, maltodextrin, invert sugar, glucose, sorbitol, mannitol, xylitol, maltitol, acesulfame potassium, saccharin and cyclamate.
(15) "Unflavored fluid or powdered milk or unflavored milk product" means and includes the normal lacteal secretion, practically free from colostrum, obtained by the complete milking of one or more healthy cows or goats either prior to or subsequent to pasteurization or ultrapasteurization in normal fluid form or reduced to a dry powdered form. The term includes the components of milk, including cream, acidified milk, cultured milk, lactaid milk, lactose free milk, acidophilous milk concentrated milk, sweetened or unsweetened condensed milk, sweetened or unsweetened condensed skim milk, lowfat milk, powdered milk, dry milk, nonfat dry milk, nonfat dry milk fortified with vitamins A and D, sweetened or unsweetened evaporated milk, sweetened or unsweetened evaporated skim milk, one percent or two percent fat lowfat milk, acidified lowfat milk, cultured lowfat milk, skim milk, acidified skim milk, cultured skim milk, dry whole milk, cream, dry cream, heavy cream, light cream, light whipping cream, half-and-half, sour half-and- half, acidified sour half-and-half, and such other products established by rule as an unflavored fluid or powdered milk or unflavored milk product. For purposes of this article, soy milk that is neither flavored nor sweetened shall be treated as unflavored fluid or powdered milk. Soy milk to which any flavoring agent or sweetener has been added shall not be treated as unflavored fluid or powdered milk, and shall be taxable as a soft drink under this article. The term "unflavored fluid or powdered milk or unflavored milk product" does not mean or include chocolate milk, chocolate flavored milk, strawberry flavored milk, flavored cream, eggnog, boiled custard or any fluid or dry milk or milk product to which a flavoring agent or sweetener has been added except those specifically defined in this subsection as a unflavored fluid or powdered milk or unflavored milk product.
(8) (16) "Wholesale dealer" includes only means those persons who sell any bottled soft drink or soft drink syrup to retail dealers for the purpose of resale.
§11-19-2. Excise tax on bottled soft drinks, syrups and dry mixtures; disposition thereof.

(a) For the purpose of providing revenue for the construction, maintenance and operation of a four-year school of medicine, dentistry and nursing of West Virginia University, An excise tax is hereby levied and imposed on and after midnight of the last day of June, one thousand nine hundred fifty-one upon the sale, use, handling or distribution in this state of all bottled soft drinks and all soft drink syrups soft drink products, whether manufactured within or without this state, as follows:
(1) On each bottled soft drink, a tax of one cent five cents on each sixteen and nine-tenths fluid ounces, or fraction thereof of sixteen and nine-tenths fluid ounces, or on each one-half liter, or fraction thereof of one-half liter; contained therein.
(2) On each gallon of soft drink syrup, a tax of eighty cents four dollars, and in like ratio on each part fraction of a gallon, thereof, or on each four liters of soft drink syrup a tax of eighty-four cents four dollars and twenty cents, and in like ratio on each part fraction of four liters; and thereof.
(3) On each ounce by weight of dry mixture or fraction thereof of an ounce used for making soft drinks, a tax of one cent five cents or on each 28.35 twenty-eight and thirty-five-one-hundredths grams, or fraction thereof of twenty-eight and thirty-five one-hundredths grams, a tax of one cent five cents.
(b) Any person manufacturing or producing within this state any bottled soft drink or soft drink syrup soft drink product for sale within this state and any distributor, wholesale dealer or retail dealer or any other person who is the original consignee of any bottled soft drink or soft drink syrup soft drink product manufactured or produced outside this state, or who brings such drinks or syrups any soft drink product into this state, shall be liable for the excise tax hereby imposed by this article. The excise tax hereby imposed by this article shall not be collected more than once in respect to any bottled soft drink or soft drink syrup soft drink product manufactured, sold, used or distributed in this state.
(c) All revenue collected by the commissioner under the provisions of this article, less such costs of administration as are hereinafter provided for, shall be paid by him or her into a special medical school fund, which is hereby created in the state treasury. to be used solely for the construction, maintenance and operation of a four-year school of medicine, dentistry and nursing as otherwise provided by law. The revenue in this fund shall be distributed pursuant to the following:
(1) Forty percent shall be used for the construction, maintenance and operation of the health sciences schools of West Virginia University;
(2) Twenty percent shall be used for the construction, maintenance and operation of the health sciences schools of Marshall University;
(3) Twelve percent shall be used for the construction, maintenance and operation of the West Virginia School of Osteopathic Medicine; and
(4) Twenty-eight percent shall be used for such other purposes as the Legislature may designate.
(d) The medical schools for which the revenues are dedicated by subdivisions (1), (2) and (3), subsection (c) of this section should use the revenues for purposes that include, but are not limited to, providing indigent care. The medical schools shall report on the use of the revenues to the joint committee on government and finance prior to the thirtieth day of September of each year.
(e) Of the revenues dedicated by subdivision (4), subsection (c) of this section for such other purposes as the Legislature may designate, the first three million dollars shall be appropriated for use by the safety net hospitals.
(f) The amendments to this article enacted in the year two thousand-three are effective on and after the later of the first day of June, two thousand-three or the first day of the next month after the effective date of the act of the Legislature containing the amendments.
§11-19-4. Affixing of tax stamps or tax crowns.

(a) The payment of the taxes herein provided imposed by this article shall be evidenced by the affixing of soft drink tax stamps or tax crowns to the original containers or bottles in which any bottled soft drink or syrup soft drink product is placed, received, stored or handled, except as otherwise provided in this article. Such The stamps or crowns, of the appropriate denomination, shall be affixed to each container of syrup or powder and to each bottled soft drink by the person who under the provisions of this article is first required to pay the tax thereon on the soft drink product, within twenty-four hours after such the person has such bottled soft drink or syrup the soft drink product in his or her possession for the first time. The provisions of this paragraph subsection shall not apply to syrup used by bottlers in the manufacture of bottled soft drinks, or to bottled soft drinks or syrups soft drink products which are transported through this state and which are not sold, delivered, used or stored herein in this state, if transported in accordance with such rules and regulations as may be promulgated by the commissioner, or to any bottled drink or syrup soft drink product which is manufactured in this state and sold outside this state to a purchaser outside this state for use or consumption or any other purpose outside this state, or to any natural person who is not a manufacturer or wholesaler or retailer of soft drink products in this state, who purchases or otherwise obtains soft drink products outside this state for use or consumption in this state.
(b) Except as otherwise provided in this section, it shall be unlawful for any person to sell, use, handle or distribute any bottled soft drink or soft drink syrup soft drink product to which the tax stamps or tax crowns required by this section are not affixed, and any person who shall violate this provision shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not less than one hundred dollars nor more than five hundred dollars, or by imprisonment for not more than six months, or by both such fine and imprisonment.
(c) The commissioner in his or her discretion and upon such terms and conditions as he or she may require, may permit payment of the tax imposed by this article on soft drink products without the affixing or attachment of soft drink tax stamps or tax crowns to the original containers or bottles in which the soft drink products are placed, received, stored or handled in this state.
§11-19-5. Purchase of tax stamps or tax crowns; discounts and commissions; refunds and statute of limitations.

(a) The commissioner is hereby authorized to may promulgate rules and regulations governing the design, purchase, sale and distribution of tax stamps and tax crowns required by this article.
(b) Manufacturers or distributors of crowns may be required to furnish bond to ensure faithful compliance with such the regulations rules. Any person desiring to purchase such crowns shall obtain from the commissioner an authorization to do so, which shall specify the number of crowns to be purchased, and upon shipment thereof of the crowns, the manufacturer shall transmit to the commissioner a copy of the invoice of such the shipment. The commissioner shall not authorize the purchase of crowns by any person who is in default in the payment of any tax required by this article.
(c) The commissioner shall sell the stamps required by this article, or may authorize any sheriff, or any bank or trust company in this state, to sell such the stamps as his or her deputy, and may allow as a commission a fee of one half of one percent of the face value of all stamps sold by such the deputy. In the sale of such stamps the commissioner shall allow the following discounts: On a sale of less than twenty-five dollars, no discount; on a sale of twenty-five dollars or over and less than fifty dollars, a discount of five percent; and on a sale of fifty dollars or more, a discount of ten percent.
(d) In the case of stamps, the tax imposed by this article shall be paid in advance at the time the stamps are purchased. In the case of tax crowns, the tax shall be paid in advance at the time the tax commissioner authorizes the purchase of such the tax crowns, unless the purchaser applies for and obtains credit as provided in the following paragraph subsection.
(e) Whenever any person applies for an authorization to purchase tax crowns, he or she may apply for an extension of credit on the tax due with respect to such the crowns, and if he or she files a bond in the form prescribed by the commissioner, with satisfactory corporate surety, in an amount not less than twenty-five percent more than the tax due with respect to the tax crowns to be purchased, the commissioner shall issue the necessary authorization. Any On or before the fifteenth day of each month, any person who obtains such the credit shall on or before the fifteenth day of each month file with the commissioner on forms prescribed by him or her a return stating the number of tax crowns used by such the person during the preceding month, and he or she shall at the same time pay to the commissioner the tax due on the crowns so used.
The commissioner shall allow to each purchaser of tax crowns, whether for cash or credit, a discount of twelve and one half percent of the tax value of such crowns. Such discount, and the discount allowed on the sale of tax stamps, shall be in lieu of the allowance of any claim for refund by reason of the breakage or destruction of containers stamped or crowned as provided in this article, the spoilation of the soft drinks or syrups, or the loss or destruction of tax stamps or tax crowns: Provided, That when the tax stamps or crowns or soft drinks, soft drink powders or soft drink syrups upon which tax has been paid are destroyed by fire, lightning or flood and when soft drinks, syrups or powders upon which tax has been paid are exported from this state or are required to be destroyed pursuant to federal or state order, the taxpayer may file a claim for refund for an amount equal to the amount of tax actually paid for such stamps or crowns. The commissioner shall cause a refund to be made under this section only when a claim for refund is filed within one hundred and eighty days from the date the tax stamps or crowns were destroyed or the soft drink product upon which tax was paid were destroyed or exported from this state. Any claim for refund not timely filed shall not be construed to be or to constitute a moral obligation of this state for payment. Such claim for refund shall also be subject to the provisions of section fourteen, article ten of this chapter. At the election of the taxpayer, the amount of any refund may be established as a credit. The amount refunded or credited under this section shall not be subject to the interest provisions of subsection (d), section seventeen, article ten of this chapter.
Effective date. - The provisions of this section as hereby amended shall apply to soft drinks tax stamps or crowns destroyed on or after the first day of July, one thousand nine hundred eighty, and to soft drinks, powders and syrups exported or destroyed on or after the first day of said July. The provisions of this section in effect prior to the said first day of July shall apply to tax stamps, crowns and soft drinks, powders and syrups destroyed or exported prior to said date.
§11-19-5a. Due date of reports; additional reports; extension of time.

(a) Every person subject to the tax imposed by this article who is a wholesaler or retail dealer shall on or before the fifteenth day of each month make and file with the commissioner a report of or return for such the person's operations for the preceding month to verify liability for tax under this article. This report or return shall be in a form prescribed by the tax commissioner. The amount of tax, if any, shown on this report or return to be due shall be remitted with it on or before the due date.
(b) The With fifteen days' written notice, the commissioner may by fifteen days' written notice require the filing of such additional reports as he or she deems considers necessary to verify a person's liability under this article.
(c) Upon written application setting forth good cause, the commissioner may extend the time for filing such the reports or additional reports on such terms and conditions as he or she may require.
(d) Any retailer, wholesaler or distributor that purchases any soft drink product outside this state for resale in West Virginia upon which the tax imposed by this article has not been paid, shall be liable for the tax imposed by this article, and shall pay on or before the fifteenth day of the month next succeeding the month of purchase the tax imposed by this article upon the soft drink products so purchased. The tax shall be paid in such manner and accompanied by such returns as the tax commissioner shall prescribe. The retailer, wholesaler or distributor may claim as a credit against the tax liability otherwise due under this subsection, the amount of a similar excise tax directly and lawfully paid to another state on the soft drink products so purchased. Upon request and a proper showing of the necessity for an extension of time, the commissioner may grant an extension of time, not to exceed thirty days, for making any return, payment or both pursuant to this subsection.
(e) Reports and returns shall be signed by the person subject to the tax imposed by this article or his or her duly authorized agent, and must be certified by the signor to be correct.
(f) In the case of any failure to make or file a report when no tax is due, as required by this section on the date prescribed for filing, unless it be shown that the failure was due to reasonable cause and not due to willful neglect, there shall be collected a penalty of twenty-five dollars for each month of the failure or fraction of a month.
§11-19-7a. Seizure and sale of soft drink syrups by commissioner; forfeiture; collection of tax.

(a) Any soft drink product found in this state upon which the tax made applicable to it by the provisions of this article has not been paid is contraband. Whenever the commissioner or any of his or her duly authorized agents shall discover any soft drink syrups products, subject to the tax as provided imposed by this article and upon which the tax has not been paid, as herein required, the commissioner or his or her duly authorized agent is hereby authorized and empowered forthwith to may immediately seize and take possession of such the soft drink syrups products, which shall thereupon be deemed to be forfeited be subject to forfeiture to the state.
(b) The commissioner shall, after any seizure made pursuant to the provisions of subsection (a) of this section, institute, as soon as practical, a proceeding in the circuit court of the county in which the seizure is made seeking forfeiture of any soft drink products seized pursuant to the provisions of this section. The court may proceed in a summary manner.
and The (c) Within a reasonable time after the seizure and order of forfeiture, the commissioner shall within a reasonable time thereafter sell such the forfeited soft drink syrups products; and from the proceeds of such the sale, shall collect the tax and interest due thereon on the soft drink products, together with a penalty of equal to fifty percent of the tax due and the cost incurred in such the proceedings, and pay the balance, if any, to the person in whose possession such the soft drink syrups products were found: Provided, That such seizure and sale shall not be deemed to relieve any person from fine or imprisonment provided herein for violation of any provision of this article. the actions and procedures authorized by the provisions of this section are administrative in nature rather than penal and designed to allow disposal of contraband rather than to punish violators. Such The sale shall be made in the county where most convenient and economical. Notice of such the sale shall be published as a Class I legal advertisement in compliance with the provisions of article three, chapter fifty-nine of this code, and the publication area for such the publication shall be in the county wherein such where the seizure was made and in the county wherein where the sale is to take place. Notice shall be published at least five days prior to the sale. All moneys collected under the provisions of this section shall be paid into the state treasury and treated as other taxes collected under this article, except that the amount of costs collected shall be deposited in the accounts of the state tax department from which the costs are paid.
(d) The Legislature finds and declares that the seizure and sale of items pursuant to the provisions of this section is not contemplated to be a forfeiture as the term is used in article twelve, section five of the West Virginia constitution and to the extent that the seizure and sale may be found to be a forfeiture, the Legislature finds and declares that the proceeds from a seizure and sale pursuant to the provisions of this section is not part of net proceeds as the term is contemplated by the provisions of article twelve, section five of the West Virginia constitution.
§11-19-9. Altering, counterfeiting or reusing tax stamps or tax crowns; penalty.

Any person who falsely or fraudulently makes, forges, alters, or counterfeits any tax stamp or tax crown prescribed by the commissioner under the provisions of this article, or who knowingly or willfully utters, passes or tenders as true any such false, altered, forged or counterfeited stamp or crown, or who uses more than once any stamp or crown for the purpose of evading the tax imposed by this article, shall be guilty of a felony and, upon conviction, thereof, shall be punished by imprisonment in the penitentiary a state correctional facility for not less than one year nor more than five years or fined not less than one thousand dollars nor more than ten thousand dollars, or both.
§11-19-10. Penalties; crimes.

(a) Any retail dealer, or the manager of a retail business location, who knowingly offers for sale or knowingly allows for sale to consumers soft drink products upon which tax has not been paid as required by the provisions of this article shall be issued a written warning by the commissioner. For the second offense, the person is guilty of a misdemeanor and, upon conviction, shall be fined not less than fifty dollars nor more than five hundred dollars. For a third offense, the person shall be guilty of a misdemeanor and, upon conviction, shall be fined not less than five hundred dollars nor more than one thousand dollars. For a fourth offense, the person shall be guilty of a misdemeanor and, upon conviction, shall be fined not less than one thousand dollars nor more than two thousand dollars.
(b) The commissioner shall suspend, for a period of one year, the business registration certificate of any person or entity convicted of a fourth violation of the provisions of subsection (a) of this section or convicted of a violation of the provisions of section nine of this article.
(c) Except as provided by the provisions of section nine of this article and subsection (a) of this section, any person who willfully violates any of the provisions of this article or any lawful rule or regulation promulgated by the tax commissioner for this article under the authority of article ten of this chapter, for the violation of which no other penalty is provided by law, shall be is guilty of a misdemeanor and, upon conviction, thereof, shall be punished by a fine of not less than twenty-five dollars nor more than one hundred dollars confined in the county or regional jail for not less than thirty days nor more than six months, or fined not less than one hundred dollars nor more than one thousand dollars, or both.




NOTE: The purpose of this bill is to increase the soft drinks tax from one cent to five cents on each sixteen and nine-tenths fluid ounce, or fraction thereof of bottled soft drinks and bottled drinking water. The tax on soft drink syrups and powders is similarly increased. Net revenues from this tax would be dedicated to support health education in this state and maintenance and rehabilitation of state health sciences education facilities.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.