(a) Definitions. The following words and terms, when used in this section shall have the following meanings, unless the context clearly indicates otherwise.
  (1) Cigar--A roll of fermented tobacco that is wrapped in tobacco and the main stream of smoke from which produces an alkaline reaction to litmus paper.
  (2) Cigarette--A roll for smoking:
    (A) that is made of tobacco or tobacco mixed with another ingredient and wrapped or covered with a material other than tobacco; and
    (B) that is not a cigar.
  (3) E-cigarette--An electronic cigarette or any other device that simulates smoking by using a mechanical heating element, battery, or electronic circuit to deliver nicotine or other substances to the individual inhaling from the device; or a consumable liquid solution or other material aerosolized or vaporized during the use of an electronic cigarette or other device described by this paragraph.
    (A) The term "e-cigarette" includes:
      (i) a device described by this paragraph regardless of whether the device is manufactured, distributed, or sold as an e-cigarette, e-cigar, or e-pipe or under another product name or description; and
      (ii) a component, part, or accessory for the device, regardless of whether the component, part, or accessory is sold separately from the device.
    (B) The term "e-cigarette" does not include a prescription medical device unrelated to the cessation of smoking.
  (4) Interstate warehouse--A person in this state who receives untaxed cigarettes, e-cigarettes, tobacco products from a manufacturer, bonded agent, distributor, or importer and stores the tobacco products exclusively for an interstate warehouse transaction.
  (5) Interstate warehouse transaction--The sale or delivery of cigarettes, e-cigarettes and tobacco products from an interstate warehouse to a person located in another state who is licensed or permitted by the other state to pay the state's excise tax on tobacco products as required.
  (6) Permit holder--A bonded agent, interstate warehouse, distributor, wholesaler, manufacturer, importer, export warehouse, or retailer who obtains a permit under Health & Safety Code, Chapter 147, Subchapter B (Permits), or Tax Code, §154.101 (Permits) or §155.041 (Permits).
  (7) Place of business--
    (A) a commercial business location where cigarettes, e-cigarettes or tobacco products are sold;
    (B) a commercial business location where cigarettes, e-cigarettes or tobacco products are kept for sale or consumption or otherwise stored;
    (C) a vehicle from which cigarettes, e-cigarettes or tobacco products are sold; or
    (D) a vending machine from which cigarettes or tobacco products are sold.
  (8) Retailer--A person who engages in the practice of selling cigarettes, e-cigarettes, or tobacco products to consumers and includes a person who sells e-cigarettes through a marketplace and the owner of a cigarette or tobacco product vending machine.
  (9) Tobacco product--A tobacco product is:
    (A) a cigar;
    (B) smoking tobacco, including granulated, plug-cut, crimp-cut, ready-rubbed, and any form of tobacco substitute for smoking in a pipe or as a cigarette;
    (C) chewing tobacco, including Cavendish, Twist, plug, scrap, and any kind of tobacco suitable for chewing;
    (D) snuff or other preparations of pulverized tobacco; or
    (E) an article or product that is made of tobacco or a tobacco substitute and that is not a cigarette or an e-cigarette.
(b) Violations. Violations of Health and Safety Code, Chapter 161, Subchapter H (Distribution of Cigarettes, E-Cigarettes, or Tobacco Products) include, but are not limited to:
  (1) the sale of cigarettes, e-cigarettes or tobacco products to persons younger than 21 years of age, as provided in Health and Safety Code, §161.082;
  (2) failure to display a warning sign as prescribed by Health and Safety Code, §161.084;
  (3) failure to notify employees of state law as required by Health and Safety Code §161.085;
  (4) offering cigarettes, e-cigarettes, or tobacco products for sale in a manner that permits a customer direct access to the cigarettes, e-cigarettes, or tobacco products in violation of Health and Safety Code, §161.086;
  (5) installing or maintaining a vending machine containing cigarettes, e-cigarettes, or tobacco products in violation of Health and Safety Code, §161.086;
  (6) distributing a free sample of a cigarette, e-cigarette, or tobacco product, or a coupon or other item that the recipient may use to receive a free cigarette, e-cigarette, or tobacco product, in violation of Health and Safety Code, §161.087;
  (7) distributing to a person younger than 21 years of age a coupon or other item that the recipient may use to receive a discounted cigarette, e-cigarette, or tobacco product in violation of Health and Safety Code, §161.087; and
  (8) markets, advertises, sells, or causes to be sold a prohibited e-cigarette product in violation of Health and Safety Code, §161.0876 and §3.1208 of this title (concerning Prohibited E-Cigarette Products).
(c) Report of violation. The comptroller may receive a report of a violation of Health and Safety Code, Chapter 161, Subchapter H from any person, including:
  (1) the Enforcement or Criminal Investigations Divisions of the comptroller's office;
  (2) local law enforcement;
  (3) a municipal court or a justice of the peace court; or
  (4) a complaint reported by a caller on the tobacco hotline.
(d) Disciplinary actions.
  (1) A retailer is subject to disciplinary action as provided by this section if an agent or employee of the retailer commits an offense under this subchapter.
  (2) The penalties for a violation of Health and Safety Code, Subchapter H are:
    (A) for the first violation at a place of business during the 24-month period preceding the violation, a fine in an amount not to exceed $1,000;
    (B) for the second violation at a place of business during the 24-month period preceding the most recent violation, a fine in an amount not to exceed $2,000;
    (C) for the third violation at a place of business during the 24-month period preceding the most recent violation:
      (i) a fine in an amount not to exceed $3,000; and
      (ii) suspension, for not more than five days, of the permit for that place of business issued under Health and Safety Code, Chapter 147, or Tax Code, Chapters 154 or 155, as applicable; and
    (D) except as provided by paragraph (4) of this subsection, for the fourth or subsequent violation at a place of business during the 24-month period preceding the most recent violation, revocation of the permit issued under Health and Safety Code, Chapter 147, or Tax Code, Chapters 154 or 155, as applicable. If the permit holder does not hold a permit for that place of business under Health and Safety Code, Chapter 147, or Tax Code, Chapters 154 or 155, the revocation of the sales and use tax permit issued under Tax Code §151.201 (Sales Tax Permits).
  (3) A permit holder whose permit has been revoked under paragraph (2)(D) of this subsection may not apply for a permit for the same place of business before the expiration of six months after the effective date of the revocation.
  (4) The comptroller may suspend a permit, but may not revoke the permit, under paragraph (2)(D) of this subsection if the comptroller finds:
    (A) the permit holder has not violated this subchapter more than seven times at the place of business for which the permit is issued in the 48-month period preceding the violation in question;
    (B) the permit holder requires its employees to attend a comptroller-approved seller training program;
    (C) the employees have actually attended a comptroller-approved seller training program; and
    (D) the permit holder has not directly or indirectly encouraged the employees to violate the law.
(e) Written notice of violation. When the comptroller receives a report of a violation by a permit holder, the comptroller may send a written notice of violation to the permit holder informing the permit holder that a violation has been reported and that the comptroller proposes taking disciplinary action against the permit holder.
  (1) The written notice of violation will identify the disciplinary action that the comptroller proposes to take.
Cont'd...