SECTION 3.1201. Fee for Outdoor Advertising of Cigarettes or Tobacco Products

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Cigarettes--A roll for smoking that is:

(A) not a cigar; and

(B) that is made of tobacco or tobacco mixed with another ingredient and wrapped or covered with a material other than tobacco.

(2) Gross sales price--The sum of:

(A) production costs, including the cost of layout, paper, materials, printing, distribution, and sign installation, but not the cost of design and artwork;

(B) media costs, including the cost for leasing billboards, or any other outdoor space where a message or sign is displayed; and

(C) cost of sales or commissions paid to an agency or broker.

(3) Outdoor advertising--A medium, including a structure, display, light device, figure, painting, drawing, message, plaque, poster, sign, or billboard, that:

(A) is used to advertise or to inform;

(B) is visible from the main-traveled way of a street or highway; and

(C) does not include:

(i) a medium displayed inside a building, even if the medium is visible from outside the building; or

(ii) a medium that displays the name of the business, unless that medium also contains a cigarette or tobacco product trademark, brand or trade name, or logo type.

(4) Purchase--A transaction, including:

(A) an installment and credit purchase;

(B) an exchange of service for service or money;

(C) a signed contract between a purchaser and a seller; and

(D) any other transaction that is the functional equivalent of a purchase.

(5) Tobacco product--

(A) A cigar;

(B) smoking tobacco, including granulated, plug-cut, crimp-cut, ready-rubbed, and any form of tobacco suitable 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).

(b) Fee imposed. A fee is imposed on each purchaser of outdoor advertising in an amount that is equal to 10% of the gross sales price of any outdoor advertising of cigarettes or tobacco products in this state.

(c) Due date and reporting period. A purchaser of outdoor advertising for cigarettes or tobacco products shall file a report on or before the 20th day of the month following the end of the calendar quarter in which the advertising was purchased. The due dates and corresponding reporting periods are:

(1) April 20 for the period covering January 1 through March 31;

(2) July 20 for the period covering April 1 through June 30;

(3) October 20 for the period covering July 1 through September 30; and

(4) January 20 for the period covering the previous October 1 through December 31.

(d) Report forms. Each purchaser must report the outdoor advertising fee on the Texas cigarettes or tobacco products outdoor advertising fee report as prescribed by the comptroller. The fact that a purchaser does not receive the form or does not receive the correct form from the comptroller for the filing of the report does not relieve the purchaser of the responsibility of filing a report and paying the required fee.

(e) Payment of the fee. On or before the 20th day of the month following each reporting period, every purchaser shall remit the total fee amount due.

(f) Records required.

(1) Invoices, purchase contracts, installment or credit agreements, or any other records relating to the outdoor advertising purchase must be kept by the purchaser for at least four years after the date each report is filed with the comptroller.

(2) Any records or equipment of any person liable for the fee must be made available to the comptroller or the comptroller's representative for examination to verify the accuracy of any report made or to determine the fee liability in the event no report is filed.

(3) Each purchaser must maintain records showing:

(A) the location at which outdoor advertising is displayed in this state;

(B) the date on which the advertising was purchased;

(C) the gross sales price paid for outdoor advertising displayed in this state; and

(D) if outdoor advertising is purchased for display in more than one state, information to support an allocation to Texas of the appropriate portion of the total amount paid.

(g) Penalty and interest.

(1) Penalty. A purchaser who does not timely remit the fee due as provided by subsection (e) of this section, shall pay a penalty of 5.0% of the amount of the fee due and payable. If the purchaser does not pay the fee before the 30th day after the date on which the fee is due, the person shall pay a penalty of an additional 5.0% of the amount of the fee due and payable.

(2) Interest. Interest accrues on the unpaid tax due beginning 60 days after the due date and ends the day on which the tax is paid.

(h) Administrative remedies.

(1) A purchaser of outdoor advertising who violates any part of Health and Safety Code, §161.123, or a rule adopted under that section, will be subject to an administrative penalty and will be notified by certified mail of the reasons for the penalty. The recourse for a purchaser who does not agree with the imposed administrative penalty will be governed by the provisions of Tax Code, Chapter 111, Government Code, Chapter 2001, and §§1.1-1.42 of this title (relating to Practice and Procedure).

(2) The administrative penalty for a violation may be in an amount not to exceed $5,000. Each day a violation continues or occurs is a separate violation for the purpose of imposing a penalty.

(3) The following factors shall be taken into consideration when an administrative penalty is imposed:

(A) the amount of fees due and owing;

(B) the attempted concealment of misconduct by the person who committed the violation;

(C) premeditated misconduct by the person who committed the violation;

(D) intentional misconduct by the person who committed the violation;

(E) the motive of the person who committed the violation;

(F) prior misconduct of a similar or related nature by the person who committed the violation;

(G) prior written warnings from any government agency or official regarding statutes or regulations pertaining to the misconduct;

(H) violation by the person who committed the violation of an order of the comptroller;

(I) lack of rehabilitative potential or likelihood for future misconduct of a similar nature;

(J) relevant circumstances increasing the seriousness of the misconduct; and

(K) any other matter justice may require.

(4) If the comptroller finds that a violation has occurred and imposes an administrative penalty, the comptroller shall give notice of the violation by certified mail to the permit holder within 15 days of the finding of a violation. The notice must include a statement of the rights of the permit holder to judicial review.

(5) If the permit holder does not respond to the written notice of violation within 15 calendar days, an order finding that a violation has occurred may be entered and the maximum penalty may be imposed. If the permit holder requests an administrative hearing, a hearing will be set. The notice of the setting of the hearing shall be governed by §§1.1-1.42 of this title. The permit holder will have 15 days in which to respond to the setting of the hearing.

(6) If the comptroller finds that a purchaser of outdoor advertising violates this section or Health and Safety Code, Subchapter K, §161.123, or a rule made pursuant to these sections, the comptroller may impose an administrative fine and/or suspend or revoke a permit pursuant to Tax Code, §154.1142.

(7) An administrative hearing will be held at the office of the Comptroller of Public Accounts in Austin, Texas. The recourse for a permit holder who does not agree with the administrative decision will be governed by the provisions of Tax Code, Chapter 111; Government Code, Chapter 2001; and §§1.1-1.42 of this title.

(8) The burden of proof in an administrative hearing pursuant to this rule is by a preponderance of the evidence unless otherwise provided by statute.

(9) A penalty collected under this section shall be deposited in the general revenue fund.

(i) If the purchaser of outdoor advertising does not pay the amount of the administrative penalty, the comptroller may refer the matter to the attorney general for collection of the amount of the penalty.

Source Note: The provisions of this §3.1201 adopted to be effective January 5, 1998, 22 TexReg 12786; amended to be effective March 14, 2000, 25 TexReg 2156; amended to be effective January 29, 2020, 45 TexReg 589