(a) Any tobacco product manufacturer selling cigarettes to consumers within the state, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, after June 9, 1999, shall do one of the following:

Terms Used In Alabama Code 6-12-3

  • ADJUSTED FOR INFLATION: Increased in accordance with the formula for inflation adjustment set forth in Exhibit C to the Master Settlement Agreement. See Alabama Code 6-12-2
  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • following: means next after. See Alabama Code 1-1-1
  • importer: Any person in the United States to whom non-tax paid tobacco products or cigarette papers or tubes, or any processed tobacco, manufactured in a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States are shipped or consigned; any person who removes cigars or cigarettes for sale or consumption in the United States from a customs bonded manufacturing warehouse; and any person who smuggles or otherwise unlawfully brings tobacco products or cigarette papers or tubes, or any processed tobacco, into the United States. See Alabama Code 6-12-2
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • state: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Alabama Code 1-1-1
  • TOBACCO PRODUCT MANUFACTURER: An entity that, after June 9, 1999, directly, and not exclusively through any affiliate:

    a. See Alabama Code 6-12-2

  • United States: includes the territories thereof and the District of Columbia. See Alabama Code 1-1-1
  • UNITS SOLD: The number of individual cigarettes sold in the state by the applicable tobacco product manufacturer, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, during the year in question, as measured by excise taxes collected by the state on packs, or roll-your-own tobacco containers, bearing the excise tax stamp of the state. See Alabama Code 6-12-2
  • year: means a calendar year; but, whenever the word "year" is used in reference to any appropriations for the payment of money out of the treasury, it shall mean fiscal year. See Alabama Code 1-1-1

(1) Become a participating manufacturer, as that term is defined in Section II(jj) of the Master Settlement Agreement, and generally perform its financial obligations under the Master Settlement Agreement.

(2) a. Place into a qualified escrow fund, by April 15 of the year following the year in question, the following amounts, as such amounts are adjusted for inflation:

1999: $.0094241 per unit sold after June 9, 1999;

2000: $.0104712 per unit sold;

For each of 2001 and 2002: $.0136125 per unit sold;

For each of 2003 through 2006: $.0167539 per unit sold;

For each of 2007 and each year thereafter: $.0188482 per unit sold.

b. A tobacco product manufacturer that places funds into escrow pursuant to paragraph a. shall receive the interest or other appreciation on such funds as earned. Such funds themselves shall be released from escrow only under one of the following circumstances:

1. To pay a judgment or settlement on any released claim brought against such tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this subparagraph (i) in the order in which they were placed into escrow and (ii) only to the extent and at the time necessary to make payments required under such judgment or settlement;

2. To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the Master Settlement Agreement payments, as determined pursuant to Section IX(i) of that agreement, including, after final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or

3. To the extent not released from escrow under subparagraphs 1. or 2., funds shall be released from escrow and revert back to such tobacco product manufacturer 25 years after the date on which they were placed into escrow.

c. Each tobacco product manufacturer that elects to place funds into escrow pursuant to this section shall annually certify to the Commissioner of the Department of Revenue that it is in compliance with this section. 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 this section. Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this section shall:

1. Be required within 15 days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a violation of this section, may impose a civil penalty to be paid to the General Fund of the state in an amount 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. In the case of a knowing violation, be required within 15 days to place such funds into escrow as shall bring it into compliance with this section. The court, upon a finding of a knowing violation of this section, may impose a civil penalty to be paid to the General Fund of the state in an amount 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; and

3. In the case of a second knowing violation, be prohibited from selling cigarettes to consumers within the state, whether directly or through a distributor, retailer, or similar intermediary, for a period not to exceed 2 years.

Each failure to make an annual deposit required under this section shall constitute a separate violation.

(b) In the case of units sold which are cigarettes manufactured outside the United States and imported into the United States by an importer:

(1) Importers of the cigarettes shall be jointly and severally liable with the tobacco product manufacturer of the cigarettes for the escrow deposits required under subsection (a)(2);

(2) Importers of the cigarettes may be sued under subsection (a)(2)c. to the same extent as the tobacco product manufacturer, and shall be subject to all of the same civil penalties, remedies, or other relief that may be awarded against the tobacco product manufacturer of the cigarettes as provided in that subsection; and

(3) If the importer of the cigarettes fails or refuses within 15 days of the Alabama Revenue Commissioner’s or the Attorney General’s written demand to deposit the funds into escrow for which it is jointly and severally liable under subsection (b)(1), all cigarettes imported into the United States by the importer shall constitute contraband in the State of Alabama as provided in Section 6-12A-6(b), and shall be subject to seizure and forfeiture as provided under that section.

(Act 99-395, p. 652, §3; Act 2000-591, p. 1087, §1; Act 2001-344, p. 446, §1; Act 2003-371, p. 1047, §1; Act 2014-341, p. 1266, §1.)