Amendment ASA2-AB250

Penalties for evading excise taxes and unlawful possession of cigarettes

The bill increases the penalties for evading the excise taxes imposed on cigarettes, tobacco products, and electronic vaping devices.

Under current law, a person who attempts to evade these taxes, or who aids in or abets the evasion or attempted evasion of these taxes, may be fined not more than $10,000 or imprisoned for not more than nine months, or both.

Under the bill, a person who evades or attempts to evade these taxes, or who aids in or abets the evasion or attempted evasion of these taxes, is guilty of the following:

1. A Class A misdemeanor if the amount of the tax is no more than $2,500.

2. A Class I felony if the amount of the tax is more than $2,500, but no more than $5,000.

3. A Class H felony if the amount of the tax is more than $5,000, but no more than $10,000.

4. A Class G felony if the amount of the tax is more than $10,000, but no more than $100,000.

5. A Class F felony if the amount of tax is more than $100,000.

The bill also increases the penalties for the unlawful possession of cigarettes.

Under current law, a person who unlawfully possesses up to 6,000 cigarettes is subject to a fine of not more than $200 or imprisonment for not more than six months, or both. A person who unlawfully possesses more than 6,000 cigarettes but no more than 36,000 cigarettes is subject to a fine of not more than $1,000 or imprisonment for not more than one year in county jail, or both. A person who unlawfully possesses more than 36,000 cigarettes is guilty of a Class I felony.

Under the bill, the penalties are increased as follows:

1. A person who unlawfully possesses no more than 200 cigarettes may be fined not more than $200 or imprisoned for not more than six months, or both.

2. A person who unlawfully possesses more than 200 cigarettes but no more than 3,000 cigarettes may be fined not more than $1,000 or imprisoned for not more than one year, or both.

3. A person who unlawfully possesses more than 3,000 cigarettes but no more than 5,000 cigarettes is guilty of a Class I felony.

4. A person who unlawfully possesses more than 5,000 cigarettes but no more than 10,000 cigarettes is guilty of a Class H felony.

5. A person who unlawfully possesses more than 10,000 cigarettes is guilty of a Class F felony.

The bill also amends the definition of “racketeering activity" for purposes of the Wisconsin Organized Crime Control Act to include the attempt, conspiracy to commit, or commission of the felonies created under the bill related to evading excise taxes and unlawful possession of cigarettes.

Alcohol beverage permit reapplication

The bill provides that, if DOR refuses to issue, refuses to renew, or revokes an alcohol beverages permit, the applicant or permit holder may not reapply to DOR for the permit for a period of six months.

Notice of change filed by alcohol beverage licensee or permittee

Under current law, within ten days of any change in a fact set out in an application for a license or permit to sell alcohol beverages, the licensee or permittee must file with the issuing municipality or DOR, as applicable, a written description of the changed fact. This bill extends the deadline for this filing from ten days to 30 days.

Sales suppression devices and phantomware

Under the bill, any person who creates, designs, manufactures, sells, purchases, leases, installs, updates, repairs, services, transfers, uses, or possesses in this state phantomware or an automated sales suppression device, unless for a legitimate purpose, is guilty of a Class D felony. The bill also authorizes DOR to revoke any permit, license, or certificate issued by DOR for up to 10 years for violating this prohibition.

Under the bill, an “automated sales suppression device” is a software program that falsifies the electronic records of electronic cash registers and other point-of-sale systems. The bill defines “phantomware” as a programming option embedded in the operating system of an electronic cash register, or hardwired into an electronic cash register, that can be used to create a virtual second electronic cash register or eliminate or manipulate transaction records. Automated sales suppression devices and phantomware are typically used to evade the payment of taxes.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB250-ASA2,1 Section 1. 40.02 (48) (am) 19. of the statutes is amended to read:

AB250-ASA2,6,3 40.02 (48) (am) 19. An excise tax investigator A special agent employed by the department of revenue who is authorized to act under s. 73.031.

AB250-ASA2,2 Section 2. 40.02 (48) (c) of the statutes is amended to read:

AB250-ASA2,7,4 40.02 (48) (c) In s. 40.65, “protective occupation participant" means a participating employee who is a police officer, fire fighter, an individual determined by a participating employer under par. (a) or (bm) to be a protective occupation participant, county undersheriff, deputy sheriff, state probation and parole officer, county traffic police officer, conservation warden, state forest ranger, field conservation employee of the department of natural resources who is subject to call for forest fire control or warden duty, member of the state traffic patrol, state motor vehicle inspector, University of Wisconsin System full-time police officer, guard or any other employee whose principal duties are supervision and discipline of inmates at a state penal institution, excise tax investigator special agent employed by the department of revenue who is authorized to act under s. 73.031, person employed under s. 60.553 (1), 61.66 (1), or 62.13 (2e) (a), or special criminal investigation agent employed by the department of justice.

AB250-ASA2,3 Section 3. 71.78 (1) of the statutes is amended to read:

AB250-ASA2,7,23 71.78 (1) Divulging information. Except as provided in subs. (1g), (4), (4m) and (10), no person may divulge or circulate or offer to obtain, divulge, or circulate any information derived from an income, franchise, withholding, fiduciary, partnership, or limited liability company tax return or tax credit claim, including information which may be furnished by the department as provided in this section. This subsection does not prohibit publication by any newspaper of information lawfully derived from such returns or claims for purposes of argument or prohibit any public speaker from referring to such information in any address. This subsection does not prohibit the department from publishing statistics classified so as not to disclose the identity of particular returns, or claims or reports and the items thereof. This subsection does not prohibit employees or agents of the department of revenue from offering or submitting any return, including joint returns of a spouse or former spouse, separate returns of a spouse, individual returns of a spouse or former spouse, and combined individual income tax returns, or from offering or submitting any claim, schedule, exhibit, writing, or audit report or a copy of, and any information derived from, any of those documents as evidence into the record of any contested matter involving the department in proceedings or litigation on state tax matters if, in the department's judgment, that evidence has reasonable probative value.

AB250-ASA2,4 Section 4. 71.78 (1g) of the statutes is created to read:

AB250-ASA2,8,7 71.78 (1g) Permissible disclosure by department employees. An employee of the department may, in connection with the employee's official duties, disclose information derived from a return or claim specified in sub. (1) to the extent that the disclosure is necessary to obtain information for the enforcement of the tax laws of this state. The information that may be disclosed under this subsection shall be strictly limited to, and used solely for the purposes of, obtaining information necessary for an audit, collection, inspection, or investigation by the employee.

AB250-ASA2,5 Section 5. 71.78 (4) (b) of the statutes is amended to read:

AB250-ASA2,8,15 71.78 (4) (b) The attorney general and department of justice employees. A department of justice employee may, in connection with the employee's official duties, disclose information obtained from the department under this paragraph to a law enforcement investigator participating in a department of justice investigation of suspected criminal conduct. The information that may be disclosed under this paragraph shall be strictly limited to, and used solely for the purposes of, obtaining information necessary for a department of justice investigation.

AB250-ASA2,6 Section 6. 71.78 (4) (v) of the statutes is created to read:

AB250-ASA2,8,18 71.78 (4) (v) A federal grand jury or grand jury of this state, upon receipt by the department of a grand jury subpoena.

AB250-ASA2,7 Section 7. 71.78 (5) of the statutes is amended to read:

AB250-ASA2,8,24 71.78 (5) Agreement with department. Copies of returns and claims specified in sub. (1) and related schedules, exhibits, writings or audit reports shall not be furnished to the persons listed under sub. (4), except persons under sub. (4) (e), (k), (n), (o) and, (q), and (v) or under an agreement between the department of revenue and another agency of government.

AB250-ASA2,8 Section 8. 71.78 (6) of the statutes is amended to read:

AB250-ASA2,9,5 71.78 (6) Restriction on use of information. The use of information obtained under sub. (4) or (5) is restricted to the discharge of duties imposed upon the persons by law or by the duties of their office or by order of a court as provided under sub. (4) (f) or (v).

AB250-ASA2,9 Section 9. 71.83 (6) of the statutes is created to read:

AB250-ASA2,9,8 71.83 (6) Automated sales suppression devices and phantomware. (a) Definitions. In this subsection:

AB250-ASA2,9,11 1. “Automated sales suppression device" means a software program that falsifies the electronic records, including transaction data and transaction reports, of electronic cash registers and other point-of-sale systems.

AB250-ASA2,9,15 2. “Electronic cash register" means a device that keeps a register or supporting documents by means of an electronic device or computer system designed to record transaction data for the purpose of computing, compiling, or processing retail sales transaction data or transaction reports.

AB250-ASA2,9,21 3. “Phantomware" means a programming option embedded in the operating system of an electronic cash register, or hardwired into an electronic cash register, that can be used to create a virtual second electronic cash register or eliminate or manipulate transaction records that may or may not be preserved in digital formats to represent the true or manipulated record of transactions in the electronic cash register.

AB250-ASA2,9,25 4. “Transaction data" includes items purchased by a customer, the price for each item, a taxability determination for each item, a segregated tax amount for each of the taxed items, the amount of cash or credit tendered, the net amount returned to the customer in change, the date and time of the purchase, the name, address, and identification number of the vendor, and the receipt or invoice number of the transaction.

AB250-ASA2,10,6 5. “Transaction report" means a report that includes the sales, taxes collected, media totals, and discount voids at an electronic cash register that is printed on cash register tape at the end of a day or shift or a report documenting every action at an electronic cash register that is stored electronically.

AB250-ASA2,10,10 (b) Automated sales suppression devices and phantomware. Any person who creates, designs, manufactures, sells, purchases, leases, installs, updates, repairs, services, transfers, uses, or possesses in this state phantomware or an automated sales suppression device, unless for a legitimate purpose, is guilty of a Class D felony.

AB250-ASA2,10 Section 10. 72.06 of the statutes is amended to read:

AB250-ASA2,10,15 72.06 Sections 71.78 (1), (1g), (1m), and (4) to (9) and 71.83 (2) (a) 3. and 3m. apply to any information obtained from any person by the department on a death tax return, report, schedule, exhibit or other document or from an audit report pertaining to the tax return.

AB250-ASA2,11 Section 11. 73.03 (51b) of the statutes is created to read:

AB250-ASA2,10,18 73.03 (51b) To revoke all permits, licenses, and certificates that the department has issued to a person for up to 10 years for violating s. 71.83 (6) (b).

AB250-ASA2,12 Section 12. 73.031 of the statutes is amended to read:

AB250-ASA2,11,10 73.031 Arrest powers; authority. A special agent of the department of revenue who has been certified as a law enforcement officer by the law enforcement standards board and who is on duty may arrest a person if the special agent believes, on reasonable grounds, that a warrant for the person's arrest has been issued in this state, that a felony warrant has been issued in another state, that the person is violating or has violated under the conditions set forth in s. 968.07. Pursuant to s. 175.38, special agents may investigate violations of s. 945.03 (2m) or, 945.04 (2m), or that the person is violating or has violated s. 945.05 (1m) in a case in which the department determines that the video gambling machine involved is likely to be used in connection with a violation of s. 945.03 (2m) or 945.04 (2m) or if a crime has been committed in the presence of the special agent. The special agent shall cause the person arrested and the documents and reports pertaining to the arrest to be delivered to the chief of police or sheriff in the jurisdiction where the arrest is made. The special agent shall be available as a witness for the state. A special agent acting under this section is an employee of the department and is subject to its direction, benefits and legal protection.

AB250-ASA2,13 Section 13. 77.61 (5) (am) of the statutes is created to read:

AB250-ASA2,11,17 77.61 (5) (am) Notwithstanding par. (a), an employee of the department may, in connection with the employee's official duties, disclose information derived from a return specified in par. (a) to the extent that the disclosure is necessary for the enforcement of the tax laws of this state. The disclosure shall be limited to the information relevant to a particular matter in connection with an audit, collection, inspection, or investigation.

AB250-ASA2,14 Section 14. 77.61 (5) (b) 2. of the statutes is amended to read:

AB250-ASA2,11,24 77.61 (5) (b) 2. The attorney general and department of justice employees. A department of justice employee may, in connection with the employee's official duties, disclose information derived under this subdivision to a law enforcement investigator participating in a department of justice investigation. The disclosure shall be limited to the information relevant to a particular matter in connection with the department of justice investigation.

AB250-ASA2,15 Section 15. 77.61 (5) (b) 15. of the statutes is created to read:

AB250-ASA2,12,2 77.61 (5) (b) 15. A federal grand jury or grand jury of this state, upon receipt by the department of a grand jury subpoena.

AB250-ASA2,16 Section 16. 77.61 (5) (c) of the statutes is amended to read:

AB250-ASA2,12,7 77.61 (5) (c) Copies of sales tax or use tax returns, schedules, exhibits, writings or audit reports shall not be furnished to the persons listed under par. (b), except persons under par. (b) 5. or 15. or under an agreement between the department and another agency of government.

AB250-ASA2,17 Section 17. 77.61 (5) (d) of the statutes is amended to read:

AB250-ASA2,12,11 77.61 (5) (d) The use of information obtained under par. (b) or (c) is restricted to the discharge of duties imposed upon the persons by law or by the duties of their office or by order of a court as specified under par. (b) 6. or 15.

AB250-ASA2,18 Section 18. 78.80 (3) of the statutes is amended to read:

AB250-ASA2,12,17 78.80 (3) Sections 71.78 (1), (1g), and (4) to (9) and 71.83 (2) (a) 3., relating to confidentiality of income and franchise tax returns, apply to any information obtained from any person on a motor vehicle fuel, general aviation fuel or alternate fuels tax return, report, schedule, exhibit, or other document or from an audit report pertaining to the same.

AB250-ASA2,19 Section 19. 125.02 (1c) of the statutes is created to read:

AB250-ASA2,12,21 125.02 (1c) “Alcohol vapor device" means any device that provides for the use of air or oxygen bubbled through an alcohol beverage to produce a vapor or mist that allows the user to inhale this alcoholic vapor through the mouth or nose.

AB250-ASA2,20 Section 20. 125.02 (6) of the statutes is renumbered 125.02 (6) (intro.) and amended to read:

AB250-ASA2,12,24 125.02 (6) (intro.) “Fermented malt beverages" means any of the following:

AB250-ASA2,13,3 (a) Any beverage made by the alcohol fermentation of an infusion in potable water of barley malt and hops, with or without unmalted grains or decorticated and degerminated grains or sugar containing 0.5 percent or more of alcohol by volume.

AB250-ASA2,21 Section 21. 125.02 (6) (b) of the statutes is created to read:

AB250-ASA2,13,6 125.02 (6) (b) Any beverage recognized by the federal department of the treasury as beer under 27 CFR 25.11, except sake or similar products.

AB250-ASA2,22 Section 22. 125.04 (3) (h) of the statutes is amended to read:

AB250-ASA2,13,11 125.04 (3) (h) Subsequent changes. Within 10 30 days of any change in any fact set out in an application for a license or permit to sell alcohol beverages, the licensee or permittee shall file with the issuing authority a written description of the changed fact.

AB250-ASA2,23 Section 23. 125.04 (4) of the statutes is amended to read:

AB250-ASA2,13,19 125.04 (4) List of licensees. By July 15 annually, the clerk of a municipality issuing licenses shall mail to the department a list containing the name, address, and trade name of each person holding a license issued by that municipality, other than a manager's or operator's license or a license issued under s. 125.26 (6), the type of license held, and, if the person holding the license is a corporation or limited liability company, the name of the agent appointed under sub. (6). The department shall annually publish this list on the department's Internet site.

AB250-ASA2,24 Section 24. 125.04 (8m) of the statutes is created to read:

AB250-ASA2,13,24 125.04 (8m) Payment of criminal history fees. Any fees incurred by the department under s. 165.82 (1) (am) for purposes of verifying a permit applicant's eligibility under sub. (5) (a) 1. and (b) shall be paid by the applicant to the department upon application for the permit.

AB250-ASA2,25 Section 25. 125.09 (8) of the statutes is created to read:

AB250-ASA2,14,2 125.09 (8) Alcohol vapor devices. No person may use or offer for use, possess, or sell or offer for sale in this state an alcohol vapor device.

AB250-ASA2,26 Section 26. 125.12 (7) of the statutes is created to read:

AB250-ASA2,14,8 125.12 (7) Reapplication for permit after revocation or refusal to issue or renew. If the department refuses to issue, refuses to renew, or revokes any permit issued under this chapter, the applicant or permit holder may not reapply for the permit for a period of 6 months after the date of the refusal to issue, refusal to renew, or revocation.

AB250-ASA2,27 Section 27 . 134.65 (title) of the statutes is amended to read:

AB250-ASA2,14,11 134.65 (title) Cigarette, electronic vaping devices, and tobacco products retailer license.