(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
  (1) Bonded agent--A person in Texas who is a third-party agent of a manufacturer located outside of Texas and who receives tobacco products in interstate commerce and stores the tobacco products for distribution or delivery to distributors under orders from the manufacturer.
  (2) Cigar--A roll of fermented tobacco that is wrapped in tobacco and that the main stream of smoke from which produces an alkaline reaction to litmus paper.
  (3) Commercial business location--The entire premises occupied by a permit applicant or a person required to hold a permit under Tax Code, Chapter 155 (Cigar and Tobacco Product Tax). A commercial business location does not include a residence or a unit in a public storage facility.
  (4) Common carrier--A motor carrier registered under Transportation Code, Chapter 643 (Motor Carrier Registration), or a motor carrier operating under a certificate issued by the Interstate Commerce Commission or its successor agency.
  (5) Distributor--A person who:
    (A) receives untaxed tobacco products from a manufacturer for the purpose of making a first sale in Texas;
    (B) brings or causes to be brought into Texas untaxed tobacco products for sale, use, or consumption;
    (C) manufacturers or produces tobacco products; or
    (D) is an importer.
  (6) Engage in business--A person engaging either directly or through a representative, in any of the following activities:
    (A) selling tobacco products in or into this state;
    (B) using a warehouse or another location to store tobacco products; or
    (C) otherwise conducting through a physical presence tobacco product-related business in this state.
  (7) Export warehouse--A person in this state who receives untaxed tobacco products from manufacturers and stores the tobacco products for the purpose of making sales to authorized persons for resale, use, or consumption outside the United States.
  (8) Factory list price--The published manufacturer gross cost to the distributor. The term is synonymous with manufacturer's list price.
  (9) First sale--Except as otherwise provided by this section, the term means the first transfer of possession in connection with a purchase, sale, or any exchange for value of tobacco products in or into this state, which includes:
    (A) the sale of tobacco products by a distributor in or outside this state to a distributor, wholesaler, or retailer in this state; and a manufacturer in this state who transfers the tobacco products in this state; and does not include:
      (i) the sale of tobacco products by a manufacturer outside this state to a distributor in this state; or
      (ii) the transfer of tobacco products from a manufacturer outside this state to a bonded agent in this state;
    (B) the first use or consumption of tobacco products in this state; or
    (C) the loss of tobacco products in this state whether through negligence, theft, or other loss.
  (10) Importer--A person who ships, transports, or imports into Texas tobacco products manufactured or produced outside the United States for the purpose of making a first sale in this state.
  (11) Manufacturer--A person who manufactures, fabricates, or assembles tobacco products, or causes or arranges for the manufacture, fabrication, or assembly of tobacco products, for sale or distribution.
  (12) Manufacturer's representative--A person who is employed by a manufacturer to sell or distribute the manufacturer's tobacco products.
  (13) Manufacturer's listed net weight--For the purposes of calculating and reporting the state excise tax due on tobacco products other than cigars, the taxable net weight for a tobacco product is the weight of the finished product as shown or listed by the product manufacturer on the product can, package, shipping container, or the report required by Tax Code, §155.103(b) (Manufacturer's Records and Reports).
  (14) Permit holder--A bonded agent, distributor, importer, export warehouse, manufacturer, wholesaler, or retailer who obtains a permit under Tax Code, §155.041 (Permits).
  (15) Place of business--
    (A) a commercial business location where tobacco products are sold;
    (B) a commercial business location where tobacco products are kept for sale or consumption or otherwise stored and may not be a residence or a unit in a public storage facility;
    (C) a vehicle from which tobacco products are sold; or
    (D) a vending machine from which tobacco products are sold.
  (16) Raw tobacco--Any part of the tobacco plant, including the tobacco leaf or stem, that is harvested from the ground and is not a tobacco product as the term is defined in this section.
  (17) Retailer--A person who engages in the business of selling tobacco products to consumers and includes the owner of a vending machine.
  (18) 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 as defined by Health and Safety Code, §161.081 (Definitions).
  (19) Trade discount, special discount, or deals--Includes promotional incentive discounts, quantity purchase incentive discounts, and timely payment or prepayment discounts.
  (20) Weight of a cigar--The combined weight of tobacco and nontobacco ingredients that make up the total product in the form available for sale to the consumer, excluding any carton, box, label, or other packaging materials.
  (21) Wholesaler--A person, including a manufacturer's representative, who sells or distributes tobacco products in this state for resale but who is not a distributor.
(b) Imposition of tax. A tax is imposed and becomes due and payable when a permit holder receives cigars or tobacco products for the purpose of making a first sale in this state.
  (1) Tax Rates.
    (A) the tax on cigars is calculated at:
      (i) $.01 per 10 or fraction of 10 on cigars that weigh three pounds or less per thousand;
      (ii) $7.50 per thousand on cigars that weigh more than three pounds per thousand and that are sold at factory list price, exclusive of any trade discount, special discount, or deal, for 3.3 cents or less each;
      (iii) $11 per thousand on cigars that weigh more than three pounds per thousand and that are sold at factory list price, exclusive of any trade discount, special discount, or deal, for more than 3.3 cents each, and that contain no substantial amount of nontobacco ingredients; and
      (iv) $15 per thousand on cigars that weigh more than three pounds per thousand and that are sold at factory list price, exclusive of any trade discount, special discount, or deal, for more than 3.3 cents each, and that contain a substantial amount of nontobacco ingredients.
    (B) The tax for tobacco products, other than cigars, is based on the manufacturer's listed net weight for an individual product's can or package and a rate for each ounce and proportionate rate on all fractional parts of an ounce of weight for that product. The tax imposed on a can or package of a tobacco product that weighs less than 1.2 ounces is equal to the amount of the tax imposed on a can or package that weighs 1.2 ounces. The rates imposed for state fiscal years 2010, 2011, 2012, 2013, 2014, and thereafter are set forth in this subparagraph. An expanded chart showing rates for cans or packages greater than 1.2 ounces is available at comptroller.texas.gov.
      (i) The rate for the state Fiscal Year 2010 (September 1, 2009 through August 31, 2010), is $1.10 per ounce plus the proportionate rate on all fractional parts of an ounce.
      (ii) The rate for the state Fiscal Year 2011 (September 1, 2010 through August 31, 2011), is $1.13 per ounce plus the proportionate rate on all fractional parts of an ounce.
      (iii) The rate for the state Fiscal Year 2012 (September 1, 2011 through August 31, 2012), is $1.16 per ounce plus the proportionate rate on all fractional parts of an ounce.
Cont'd...