File No. 396

Senate, April 8, 2010

The Committee on Planning and Development reported through SEN. COLEMAN of the 2nd Dist., Chairperson of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT AUTHORIZING MUNICIPALITIES TO COLLECT THE MARIJUANA AND CONTROLLED SUBSTANCES TAX.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 12-651 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2010):

(a) A tax is imposed on any marijuana or controlled substances purchased, acquired, transported or imported into the state. Payment thereof shall be evidenced by the permanent affixing of stamps on the marijuana or controlled substance immediately after receipt. Each stamp or other official indicia may be used only once.

(b) The tax imposed pursuant to this section shall be at the following rates: (1) On each gram of marijuana or portion of a gram, three dollars and fifty cents, and (2) on each gram of a controlled substance, or portion of a gram, two hundred dollars or on each fifty dosage units of a controlled substance that is not sold by weight, or portion thereof, two thousand dollars. For the purpose of calculating the tax due under this section, an ounce of marijuana or other controlled substance is measured by the weight of the substance in the dealer's possession.

(c) Any tax imposed pursuant to this section is due and payable immediately upon acquisition or possession in this state by a dealer.

(d) Notwithstanding the provisions of this chapter, any municipality having a population of less than twenty-five thousand may collect the tax imposed pursuant to this section on any marijuana or controlled substance that is seized in such municipality by a law enforcement officer as a result of a lawful arrest of a dealer or a lawful search of the real or personal property of a dealer, provided (1) such tax is due and payable, (2) the chief of police of such municipality or, if such municipality does not have an organized police department, the chief elected official of such municipality, notifies the commissioner of such municipality's intent to collect such tax, and (3) the municipality complies with the provisions of subsection (e) of this section. The full amount of any tax collected pursuant to this subsection may be retained by such municipality.

(e) Before a municipality may collect any tax imposed pursuant to this section, the chief elected official of such municipality shall appoint one or more hearing officers, other than police officers or persons who work in the police department, to hear the petitions of aggrieved taxpayers and shall establish by ordinance a hearing procedure following the timelines and requirements set forth in section 12-553. The provisions of sections 12-553 and 12-554, adapted accordingly, shall apply to hearings before and appeals from a municipality under this section.

Sec. 2. Section 12-655 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2010):

(a) Each dealer shall keep complete and accurate records of all marijuana or controlled substances on which a tax is imposed. Such records shall be a kind and in such form as the commissioner may prescribe and shall be preserved for three years in such manner as to insure permanency and accessibility for inspection by the commissioner or his authorized agents. The commissioner and his authorized agents and any municipality collecting a tax pursuant to section 12-651, as amended by this act, may examine the books, papers and records of any dealer for the purpose of determining whether the tax imposed by this chapter has been paid and may examine any marijuana or controlled substances upon any premises where such marijuana or controlled substances are possessed to determine if the provisions of this chapter are being obeyed.

(b) If, after an examination of the invoices, books and records of a dealer, or if, from any other information obtained by [him] the commissioner or [his] the commissioner's authorized agents or the tax collector for any municipality collecting a tax pursuant to section 12-651, as amended by this act, the commissioner or municipality determines that the dealer has not purchased sufficient stamps to cover his receipts and sales or other disposition of any marijuana or controlled substances, [he] the commissioner or tax collector shall thereupon assess the deficiency in tax. There shall be imposed a penalty of ten per cent of the deficiency or fifty dollars, whichever amount is greater, and interest shall accrue on the tax at the rate of one per cent per month from the due date of such tax to the date of payment. In any case where a dealer cannot produce evidence of sufficient stamp purchases to cover the receipt of any marijuana or controlled substances, it shall be presumed that such marijuana or controlled substances were sold without having the proper stamps affixed.

(c) If the commissioner determines that the deficiency or any part thereof is due to a fraudulent intent to evade the tax, there shall be imposed a penalty of twenty-five per cent of the deficiency and interest shall accrue on the tax at the rate of one per cent per month or fraction thereof from the due date of such tax to the date of payment. Subject to the provisions of section 12-3a, the commissioner may waive all or part of the penalties provided under this chapter when it is proven to his satisfaction that the failure to pay any tax on time was due to reasonable cause and was not intentional or due to neglect. The amount of any tax, penalty or interest due to the commissioner and unpaid under the provisions of this chapter may be collected under the provisions of section 12-35. The warrant therein provided for shall be signed by the commissioner or his authorized agent. The amount of any such tax, penalty and interest shall be a lien, from the last day of the month next preceding the due date of such tax until discharged by payment, against all real estate of the taxpayer within the state, and a certificate of such lien signed by the commissioner may be filed for record in the office of the clerk of any town in which such real estate is situated, provided no such lien shall be effective as against any bona fide purchaser or qualified encumbrancer of any interest in any such property. When any tax with respect to which a lien has been recorded under the provisions of this section has been satisfied, the commissioner, upon request of any interested party, shall issue a certificate discharging such lien, which certificate shall be recorded in the same office in which the lien is recorded. Any action for the foreclosure of such lien shall be brought by the Attorney General in the name of the state in the superior court for the judicial district in which the property subject to such lien is situated, or, if such property is located in two or more judicial districts, in the superior court for any one such judicial district, and the court may limit the time for redemption or order the sale of such property or make such other or further decree as it judges equitable.

(d) The amount of any tax, penalty and interest due to a municipality and unpaid under the provisions of this chapter shall constitute a lien upon any real estate owned by the dealer in the municipality collecting such tax, penalty and interest. Each such lien may be continued, recorded and released in the manner provided by the general statutes for continuing, recording and releasing property tax liens. Each such lien shall take precedence over all other liens filed after October 1, 2010, and encumbrances, except taxes, and may be enforced in the same manner as property tax liens.

[(c)] (e) Except in the case of a wilfully false or fraudulent intent to evade the tax, no assessment of additional tax with respect to any return shall be made after the expiration of more than three years from the date of the filing of such return or from the original due date of such return, whichever is later, provided, if no return has been filed as provided in this chapter, the Commissioner of Revenue Services may determine the amount of tax due from the best information available and assess such tax together with statutory penalties and interest at any time. If prior to the expiration of the period prescribed in this section for the assessment of additional tax, a taxpayer has consented in writing that such period may be extended, the amount of such additional tax due may be determined at any time within such extended period. Any such extended period may be further extended by consent in writing before the expiration of such extended period.

[(d)] (f) The provisions of sections 12-553 and 12-554 shall apply to the provisions of this chapter in the same manner and with the same force and effect as if the language of said sections had been incorporated in full into said chapter and had expressly referred to the tax imposed under said chapter, except to the extent that any such provision is inconsistent with a provision of said chapter.

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note

State Impact:

Note: GF=General Fund

Municipal Impact:

Explanation

The bill will result in a minimal revenue loss to the General Fund from the controlled substance tax and a minimal revenue gain to certain municipalities.

The revenue impact is a result of allowing a municipality of less than 25,000 people to keep 100% of the Controlled Substance Tax when it notifies the Department of Revenue Services (DRS) of a potential violation of the law following the municipality's lawful arrest of a dealer or lawful search of the dealer's real or personal property.

In FY 08 Connecticut collected approximately $60,000 from the controlled substance tax.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

OLR Bill Analysis

sSB 339

AN ACT AUTHORIZING MUNICIPALITIES TO COLLECT THE MARIJUANA AND CONTROLLED SUBSTANCES TAX.

SUMMARY:

This bill allows a municipality with a population under 25,000 to collect unpaid taxes on marijuana and controlled substances when they are seized during an arrest or found during a search. Currently, all tax in collected by the Department of Revenue Services (DRS).

The bill requires the municipality to establish, by ordinance, a hearing process for the dealer that allows for an appeal to Superior Court.

The bill extends to a municipality trying to collect the tax the authority of the DRS commissioner to examine records, marijuana, and controlled substances to determine if a dealer has paid the appropriate tax.

Under the bill, any unpaid taxes of this nature owed to a municipality constitute a lien against any property the dealer has in the municipality and are treated similarly to a property tax lien.

The bill also makes technical and conforming changes.

EFFECTIVE DATE: October 1, 2010

COLLECTING THE TAX ON MARIJUANA AND CONTROLLED SUBSTANCES

The bill allows municipalities with fewer than 25,000 people to collect a tax on any marijuana or controlled substance seized within the municipality by a law enforcement officer as a result of a lawful arrest of a dealer or a lawful search of a dealer's personal or real property, so long as the:

1. tax is due and payable;

2. municipality's chief of police, or chief elected official if a municipality does not have an organized police department, notifies the DRS commissioner of the municipality's intent to collect the tax; and

3. chief elected official of the municipality, prior to collecting this tax, establishes by ordinance a hearing process to hear petitions from dealers.

The municipality may keep the full amount of the collected tax. Currently, all tax is collected by DRS.

HEARING PROCESS

The bill requires the chief elected official to appoint one or more hearing officers, other than police officers or police department employees, to hear petitions from aggrieved dealers. The timeline and requirements are those established in statute for appealing an admissions, cabaret, or dues tax assessment from the DRS commissioner (CGS §§ 12-553 and 12-554) and must be adapted accordingly. In that process, the aggrieved party has 60 days to appeal the assessment, to the commissioner. The aggrieved can appeal the commissioner's decision to the Superior Court.

EXAMINING RECORDS AND MARIJUANA

Under current law, the commissioner and his authorized agents are allowed to:

1. examine the books, papers, and records of any dealer to determine whether the imposed tax has been paid;

2. examine any marijuana or controlled substances in any premises where they are possessed to determine if the substances bear the proper tax stamp; and

3. assess the dealer the deficiency in tax if the examination of the invoices, books, and records shows that the dealer has not purchased sufficient stamps to cover the receipts and sales or other disposition of any marijuana or controlled substance.

The bill extends this authority to the municipality collecting the tax or the municipality's tax collector.

PROPERTY TAX LIENS

The bill specifies that the amount of any tax, penalty, and interest due a municipality and left unpaid constitutes a lien against any real estate owned by the dealer in the municipality collecting the tax. It allows each lien to be continued, recorded, and released in the usual manner for continuing, recording, and releasing property tax liens. Under the bill, each such lien takes precedence over all other liens filed after October 1, 2010 and encumbrances, except taxes, and may be enforced in the same manner as property tax liens.

COMMITTEE ACTION

Planning and Development Committee

Joint Favorable Substitute