AMENDMENT OF CHAPTER 52 OF THE INTERNAL REVENUE CODE OF 1954.

SEC. 202. AMENDMENT OF CHAPTER 52 OF THE INTERNAL REVENUE CODE OF 1954. Chapter 52 of the Internal Revenue Code of 1954 is amended to read as follows: “CHAPTER 52— TOBACCO, CIGARS, CIGARETTES, AND CIGARETTE PAPERS AND TUBES “Subchapter A. Definitions; rate and payment of tax; exemption from tax; and refund and drawback of tax. “Subchapter B. Qualification requirements for manufacturers of tobacco products and cigarette papers and tubes, export warehouse proprietors, and dealers in tobacco materials. “Subchapter C. Operations by manufacturers and importers of tobacco products and cigarette papers and tubes and export warehouse proprietors. “Subchapter D. Operations by dealers in tobacco materials. “Subchapter E. Records of manufacturers of tobacco products and cigarette papers and tubes, export warehouse proprietors, and dealers in tobacco materials. “Subchapter F. General provisions. “Subchapter G. Penalties and forfeitures. “Subchapter A— Definitions; Rate and Payment of Tax; Exemption From Tax; and Refund and Drawback of Tax “Sec. 5701. Rate of tax. “Sec. 5702. Definitions. “Sec. 5703. Liability for tax and method of payment. “Sec. 5704. Exemption from tax. “Sec. 5705. Refund or allowance of tax. “Sec. 5706. Drawback of tax. “Sec. 5707. Floor stocks refund on cigarettes. “Sec. 5708. Losses caused by disaster. “SEC. 5701. RATE OF TAX. “(a) Tobacco.—On tobacco, manufactured in or imported into the United States, there shall be imposed a tax of 10 cents per pound. “(b) Cigars.—On cigars, manufactured in or imported into the United States, there shall be imposed the following taxes: “(1) Small cigars.—On cigars, weighing not more than 3 pounds per thousand, 75 cents per thousand; “(2) Large cigars.— On cigars, weighing more than 3 pounds per thousand; “(A) If removed to retail at not more than 2 1/2 cents each, $2.50 per thousand; “(B) If removed to retail at more than 2 1/2 cents each and not more than 4 cents each, $3 per thousand; “(C) If removed to retail at more than 4 cents each and not more than 6 cents each, $4 per thousand; “(D) If removed to retail at more than 6 cents each and not more than 8 cents each, $7 per thousand; “(E) If removed to retail at more than 8 cents each and not more than 15 cents each, $10 per thousand; “(F) If removed to retail at more than 15 cents each and not more than 20 cents each, $15 per thousand; “(G) If removed to retail at more than 20 cents each, $20 per thousand. In determining the retail price, for tax purposes, regard shall be had to the ordinary retail price of a single cigar in its principal market, exclusive of any State or local taxes imposed on the retail sale of cigars. 72 Stat. 1415 Cigars not exempt from tax under this chapter which are removed but not intended for sale shall be taxed at the same rate as similar cigars removed for sale. “(c) Cigarettes.— On cigarettes, manufactured in or imported into the United States, there shall be imposed the following taxes: “(1) Small cigarettes.—On cigarettes, weighing not more than 3 pounds per thousand, $4 per thousand until July 1, 1959, and $3.50 per thousand on and after July 1, 1959; “(2) Large cigarettes.—On cigarettes, weighing more than 3 pounds per thousand, $8.40 per thousand; except that, if more than inches in length, they shall be taxable at the rate prescribed for cigarettes weighing not more than 3 pounds per thousand, counting each 2% inches, or fraction thereof, of the length of each as one cigarette. “(d) Cigarette Papers.—On each book or set of cigarette papers containing more than 25 papers, manufactured in or imported into the United States, there shall be imposed a tax of cent for each 50 papers or fractional part thereof; except that, if cigarette papers measure more than 6 1/2 inches in length, they shall be taxable at the rate prescribed, counting each 2 3/4 inches, or fraction thereof, of the length of each as one cigarette paper. “(e) Cigarette Tubes.—On cigarette tubes, manufactured in or imported into the United States, there shall be imposed a tax of 1 cent for each 50 tubes or fractional part thereof, except that if cigarette tubes measure more than 6 inches in length, they shall be taxable at the rate prescribed, counting each 2% inches, or fraction thereof, of the length of each as one cigarette tube. “(f) Imported Tobacco Products and Cigarette Papers and Tubes.—The taxes imposed by this section on tobacco products and cigarette papers and tubes imported into the United States shall be in addition to any import duties imposed on such articles. “SEC. 5702. DEFINITIONS.“When used in this chapter— “(a) Manufactured Tobacco.—‘Manufactured tobacco’ means tobacco (other than cigars and cigarettes) prepared, processed, manipulated, or packaged, for removal, or merely removed, for consumption by smoking or for use in the mouth or nose, and any tobacco (other than cigars and cigarettes), not exempt from tax under this chapter, sold or delivered to any person contrary to this chapter or regulations prescribed thereunder. “(b) Cigar.— ‘Cigar’ means any roll of tobacco wrapped in tobacco. “(c) Cigarette.—‘Cigarette’ means any roll of tobacco, wrapped in paper or any substance other than tobacco. “(d) Tobacco Products.—‘Tobacco products’ means manufactured tobacco, cigars, and cigarettes. “(e) Manufacturer of Tobacco Products.—‘Manufacturer of tobacco products’ means any person who manufactures cigars or cigarettes, or who prepares, processes, manipulates, or packages, for removal, or merely removes, tobacco (other than cigars and cigarettes) for consumption by smoking or for use in the mouth or nose, or who sells or delivers any tobacco (other than cigars and cigarettes) contrary to this chapter or regulations prescribed thereunder. The term ‘manufacturer of tobacco products’ shall not include— “(1) a person who in any manner prepares tobacco, or produces cigars or cigarettes, solely for his own personal consumption or use: or “(2) a proprietor of a customs bonded manufacturing warehouse with respect to the operation of such warehouse; or 72 Stat. 1416 “(3) a farmer or grower of tobacco with respect to the sale of leaf tobacco of his own growth or raising, if it is in the condition as cured on the farm; or “(4) a bona fide association of farmers or growers of tobacco with respect to sales of leaf tobacco grown by farmer or grower members, if the tobacco so sold is in the condition as cured on the farm, and if the association maintains records of all leaf tobacco, acquired or received and sold or otherwise disposed of, in such manner as the Secretary or his delegate shall by regulations prescribe. “(f) Cigarette Paper.—‘Cigarette paper’ means paper, or any other material except tobacco, prepared for use as a cigarette wrapper. “(g) Cigarette Papers.—‘Cigarette papers’ means taxable books or sets of cigarette papers. “(h) Cigarette Tube.—‘Cigarette tube’ means cigarette paper made into a hollow cylinder for use in making cigarettes. “(i) Manufacturer of Cigarette Papers and Tubes.—‘Manufacturer of cigarette papers and tubes’ means any person who makes up cigarette paper into books or sets containing more than 25 papers each, or into tubes, except for his own personal use or consumption. “(j) Export Warehouse.—‘Export warehouse’ means a bonded internal revenue warehouse for the storage of tobacco products and cigarette papers and tubes, upon which the internal revenue tax has not been paid, for subsequent shipment to a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States, or for consumption beyond the jurisdiction of the internal revenue laws of the United States. “(k) Export Warehouse Proprietor.—‘Export warehouse proprietor’ means any person who operates an export warehouse. “(l) Tobacco Materials.—‘Tobacco materials’ means tobacco other than manufactured tobacco, cigars, and cigarettes. “(m) Dealer in Tobacco Materials.—‘Dealer in tobacco materials’ means any person who receives and handles tobacco materials for sale, shipment, or delivery to another dealer in such materials, to a manufacturer of tobacco products, or to a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States, or who receives tobacco materials, other than stems and waste, for use by him in the production of fertilizer, insecticide, or nicotine. The term ‘dealer in tobacco materials’ shall not include— “(1) an operator of a warehouse who stores tobacco materials solely for a qualified dealer in tobacco materials, for a qualified manufacturer of tobacco products, for a farmer or grower of tobacco, or for a bona fide association of farmers or growers of tobacco; or “(2) a farmer or grower of tobacco with respect to the sale of leaf tobacco of his own growth or raising, or a bona fide association of farmers or growers of tobacco with respect to sales of leaf tobacco grown by farmer or grower members, if the tobacco so sold is in the condition as cured on the farm: Provided, That such association maintains records of all leaf tobacco acquired or received and sold or otherwise disposed of by the association, in such manner as the Secretary or his delegate shall by regulation prescribe; or “(3) a person who buys leaf tobacco on the floor of an auction warehouse, or who buys leaf tobacco from a farmer or grower, and places the tobacco on the floor of such a warehouse, or who purchases and sells warehouse receipts without taking physical possession of the tobacco covered thereby; or 72 Stat. 1417 “(4) a qualified manufacturer of tobacco products with respect to tobacco materials received by him under his bond as such a manufacturer. “(n) Removal or Remove.—‘Removal’ or ‘remove’ means the removal of tobacco products or cigarette papers or tubes from the factory or from internal revenue bond, as the Secretary or his delegate shall by regulation prescribe, or release from customs custody, and shall also include the smuggling or other unlawful importation of such articles into the United States. “(o) Importer.—‘Importer’ means any person in the United States to whom nontaxpaid tobacco products or cigarette papers or tubes 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 into the United States. “SEC. 5703. LIABILITY FOR TAX AND METHOD OF PAYMENT. “(a) Liability for Tax.— “(1) Original mability.—The manufacturer or importer of tobacco products and cigarette papers and tubes shall be liable for the taxes imposed thereon by section 5701. “(2) Transfer of liability.—When tobacco products and cigarette papers and tubes are transferred, without payment of tax, pursuant to section 5704, the liability for tax shall be transferred in accordance with the provisions of this paragraph. When tobacco products and cigarette papers and tubes are transferred between the bonded premises of manufacturers and export warehouse proprietors, the transferee shall become liable for the tax upon receipt by him of such articles, and the transferor shall thereupon be relieved of his liability for such tax. When tobacco products and cigarette papers and tubes are released in bond from customs custody for transfer to the bonded premises of a manufacturer of tobacco products or cigarette papers and tubes, the transferee shall become liable for the tax on such articles upon release from customs custody, and the importer shall thereupon be relieved of his liability for such tax. “(b) Method of Payment of Tax.—The taxes imposed by section 5701 shall be determined at the time of removal of the tobacco products and cigarette papers and tubes. Such taxes shall be paid on the basis of a return, except that the taxes shall continue to be paid by stamp until the Secretary or his delegate provides, by regulations, for the payment of the taxes on the basis of a return. The Secretary or his delegate shall, by regulations, prescribe the period or event for which such return shall be made, the information to be furnished on such return, the time for making such return, and the time for payment of such taxes. Any postponement under this subsection of the payment of taxes determined at the time of removal shall be conditioned upon the filing of such additional bonds, and upon compliance with such requirements, as the Secretary or his delegate may. by regulations, prescribe for the protection of the revenue. The Secretary or his delegate may, by regulations, require payment of tax on the basis of a return prior to removal of the tobacco products and cigarette papers and tubes where a person defaults in the postponed payment of tax on the basis of a return under this subsection or regulations prescribed thereunder. All administrative and penal provisions of this title, insofar as applicable, shall apply to any tax imposed by section 5701. 72 Stat. 1418 “(c) Stamps To Evidence the Tax.—If the Secretary or his delegate shall by regulation provide for the payment of tax by return and require the use of stamps to evidence the tax imposed by this chapter or to indicate compliance therewith, the Secretary or his delegate shall cause to be prepared suitable stamps to be issued to manufacturers and importers of tobacco products, to be used and accounted for. in accordance with such regulations as the Secretary or his delegate shall prescribe. “(d) Use of Government Depositaries.—The Secretary or his delegate may authorize Federal Reserve banks, and incorporated banks or trust companies which are depositaries or financial agents of the United States, to receive any tax imposed by this chapter, in such manner, at such times, and under such conditions as he may prescribe; and he shall prescribe the manner, time, and condition under which the receipt of such tax by such banks and trust companies is to be treated as payment for tax purposes. “(e) Assessment.—Whenever any tax required to be paid by this chapter is not paid in full at the time required for such payment, it shall be the duty of the Secretary or his delegate, subject to the limitations prescribed in section 6501. on proof satisfactory to him, to determine the amount of tax which has been omitted to be paid, and to make an assessment therefor against the person liable for the tax. The tax so assessed shall be in addition to the penalties imposed by law for failure to pay such tax when required. Except in cases where delay may jeopardize collection of the tax, or where the amount is nominal or the result of an evident mathematical error, no such assessment shall lie made until and after the person liable for the tax has been afforded reasonable notice and opportunity to show cause, in writing, against such assessment. “SEC. 5704. EXEMPTION FROM TAX. “(a) Tobacco Products Furnished for Employee Use or Experimental Purposes.—Tobacco products may be furnished by a manufacturer of such products, without payment of tax, for use or consumption by employees or for experimental purposes, in such quantities, and in such manner as the Secretary or his delegate shall by Regulation prescribe. “(b) Tobacco Products and Cigarette Papers and Tubes Transferred or Removed in Bond From Domestic Factories and Export Warehouses.—A manufacturer or export warehouse proprietor may transfer tobacco products and cigarette papers and tubes, without payment of tax, to the bonded premises of another manufacturer or export warehouse proprietor, or remove such articles, without payment of tax, for shipment to a foreign country. Puerto Rico, the Virgin Islands, or a possession of the United States, or for consumption beyond the jurisdiction of the internal revenue laws of the United States; and manufacturers may similarly remove such articles for use of the United States: in accordance with such regulations and under such bonds as the Secretary or his delegate shall prescribe. “(c) Tobacco Materials Shipped or Delivered in Bond.—A dealer in tobacco materials or a manufacturer of tobacco products may ship or deliver tobacco materials, without payment of tax, to another such dealer or manufacturer, or to a foreign country, Puerto Rico, the Virgin Islands, or a possession of the Ignited States; or, in the case of tobacco stems and waste only, to any person for use by him as fertilizer or insecticide or in the production of fertilizer, insecticide, or nicotine; in accordance with such regulations and under such bonds as the Secretary or his delegate shall prescribe. 72 Stat. 1419 “(d) Tobacco Products, Cigarette Papers and Tubes, and Tobacco Materials Released in Bond From Customs Custody.—Tobacco products, cigarette papers and tubes, and tobacco materials, imported or brought into the United States, may be released from customs custody, without payment of tax, for delivery to a manufacturer of tobacco products or cigarette papers and tubes and such tobacco materials may be similarly released for delivery to a dealer in tobacco materials, in accordance with such regulations and under such bond as the Secretary or his delegate shall prescribe. “SEC. 5705. REFUND OR ALLOWANCE OF TAX. “(a) Refund.—Refund of any tax imposed by this chapter shall be made (without interest) to the manufacturer, importer, or export warehouse proprietor, on proof satisfactory to the Secretary or his delegate that the claimant manufacturer, importer, or export warehouse proprietor has paid the tax on tobacco products and cigarette papers and tubes withdrawn by him from the market; or on such articles lost (otherwise than by theft) or destroyed, by fire, casualty, or act of God, while in the possession or ownership of the claimant. “(b) Allowance.—If the tax has not yet been paid on tobacco products and cigarette papers and tubes proved to have been withdrawn from the market or lost or destroyed as aforesaid, relief from the tax on such articles may be extended upon the filing of a claim for allowance therefor in accordance with such regulations as the Secretary or his delegate shall prescribe. “(c) Limitation.—Any claim for refund of tax under this section shall be filed within 6 months after the date of the withdrawal from the market, loss, or destruction of the articles to which the claim relates, and shall be in such form and contain such information as the Secretary or his delegate shall by regulations prescribe. “SEC. 5706. DRAWBACK OF TAX.“There shall be an allowance of drawback of tax paid on tobacco products and cigarette papers and tubes, when shipped from the United States, in accordance with such regulations and upon the filing of such bond as the Secretary or his delegate shall prescribe. “SEC. 5707. FLOOR STOCKS REFUND ON CIGARETTES. “(a) In General.—With respect to cigarettes, weighing not more than 3 pounds per thousand, upon which the tax imposed by subsection (c) (1) of section 5701 has been paid, and which, on July 1, 1959, are held by any person and intended for sale, or are in transit from foreign countries or insular possessions of the United States to any person in the United States for sale, there shall be credited or refunded to such person (without interest), subject to such regulations as shall be prescribed by the Secretary or his delegate, an amount equal to the difference between the tax paid on such cigarettes and the tax made applicable to such articles on July 1, 1959, if claim for such credit or refund is filed with the Secretary or his delegate before October 1, 1959. “(b) Limitations on Eligibility for Credit or Refund.—No person shall be entitled to credit or refund under subsection (a) unless such person, for such period or periods both before and after July 1, 1959 (but not extending beyond 1 year thereafter), as the Secretary 72 Stat. 1420or his delegate shall by regulation prescribe, makes and keeps, and files with the Secretary or his delegate, such records of inventories, sales, and purchases as may be prescribed in such regulations. “(c) Penalty and Administrative Procedures.—All provisions of law, including penalties, applicable in respect of internal revenue taxes on cigarettes shall, insofar as applicable and not inconsistent with this section, be applicable in respect of the credits and refunds provided for in this section to the same extent as if such credits or refunds constituted credits or refunds of such taxes. “SEC. 5708. LOSSES CAUSED BY DISASTER. “(a) Authorization.—Where the President has determined under the Act of September 30, 1950 (42 U. S. C., sec. 1855), that a ‘major disaster’ as defined in such Act has occurred in any part of the United States, the Secretary or his delegate shall pay (without interest) an amount equal to the amount of the internal revenue taxes paid or determined and customs duties paid on tobacco products and cigarette papers and tubes removed, which were lost, rendered unmarketable, or condemned by a duly authorized official by reason of such disaster occurring in such part of the United States on and after the effective date of this section, if such tobacco products or cigarette papers or tubes were held and intended for sale at the time of such disaster. The payments authorized by this section shall be made to the person holding such tobacco products or cigarette papers or tubes for sale at the time of such disaster. “(b) Claims.— No claim shall be allowed under this section unless— “(1) filed within 6 months after the date on which the President makes the determination that the disaster referred to in subsection (a) has occurred; and “(2) the claimant furnishes proof to the satisfaction of the Secretary or his delegate that— “(A) he was not indemnified by any valid claim of insurance or otherwise in respect of the tax, or tax and duty, on the tobacco products or cigarette papers or tubes covered by the claim, and “(B) he is entitled to payment under this section. Claims under this section shall be filed under such regulations as the Secretary or his delegate shall prescribe. “(c) Destruction of Tobacco Products or Cigarette Papers or Tubes.—Before the Secretary or his delegate makes payment under this section in respect of the tax, or tax and duty, on the tobacco products or cigarette papers or tubes condemned by a duly authorized official or rendered unmarketable, such tobacco products or cigarette papers or tubes shall be destroyed under such supervision as the Secretary or his delegate may prescribe, unless such tobacco products or cigarette papers or tubes were previously destroyed under supervision satisfactory to the Secretary or his delegate. “(d) Other Laws Applicable.—All provisions of law, including penalties, applicable in respect of internal revenue taxes on tobacco products and cigarette papers and tubes shall, insofar as applicable and not inconsistent with this section, be applied in respect of the payments provided for in this section to the same extent as if such payments constituted refunds of such taxes. 72 Stat. 1421 “Subchapter B— Qualification Requirements for Manufacturers of Tobacco Products and Cigarette Papers and Tubes, Export Warehouse Proprietors, and Dealers in Tobacco Materials “Sec. 5711. Bond. “Sec. 5712. Application for permit. “Sec. 5713. Permit. “SEC. 5711. BOND. “(a) When Required.—Every person, before commencing business as a manufacturer of tobacco products or cigarette papers and tubes, as an export warehouse proprietor, or as a dealer in tobacco materials, shall file such bond, conditioned upon compliance with this chapter and regulations issued thereunder, in such form, amount, and manner as the Secretary or his delegate shall by regulation prescribe. A new or additional bond may be required whenever the Secretary or his delegate considers such action necessary for the protection of the revenue. “(b) Approval or Disapproval.—No person shall engage in such business until he receives notice of approval of such bond. A bond may be disapproved, upon notice to the principal on the bond, if the Secretary or his delegate determines that the bond is not adequate to protect the revenue. “(c) Cancellation.—Any bond filed hereunder may be canceled, upon notice to the principal on the bond, whenever the Secretary or his delegate determines that the bond no longer adequately protects the revenue. “SEC. 5712. APPLICATION FOR PERMIT.“Every person, before commencing business as a manufacturer of tobacco products or as an export warehouse proprietor, and at such other time as the Secretary or his delegate shall by regulation prescribe, shall make application for the permit provided for in section 5713. The application shall be in such form as the Secretary or his delegate shall prescribe and shall set forth, truthfully and accurately, the information called for on the form. Such application may be rejected and the permit denied if the Secretary or his delegate, after notice and opportunity for hearing, finds that— “(1) the premises on which it is proposed to conduct the business are not adequate to protect the revenue; or “(2) such person (including, in the case of a corporation, any officer, director, or principal stockholder and, in the case of a partnership, a partner) is, by reason of his business experience, financial standing, or trade connections, not likely to maintain operations in compliance with this chapter, or has failed to disclose any material information required or made any material false statement in the application therefor. No person subject to this section, who is lawfully engaged in business on the date of the enactment of the Excise Tax Technical Changes Act of 1958, shall be denied the right to carry on such business pending reasonable opportunity to make application for permit and final action thereon. “SEC. 5713. PERMIT. “(a) Issuance.—A person shall not engage in business as a manufacturer of tobacco products or as an export warehouse proprietor without a permit to engage in such business. Such permit, conditioned upon compliance with this chapter and regulations issued thereunder, shall be issued in such form and in such manner as the Secretary 72 Stat. 1422 or his delegate shall by regulation prescribe, to every person properly qualified under sections 5711 and 5712. A new permit may be required at such other time as the Secretary or his delegate shall by regulation prescribe. “(b) Revocation.—If the Secretary or his delegate has reason to believe that any person holding a permit has not in good faith complied with this chapter, or with any other provision of this title involving intent to defraud, or has violated the conditions of such permit, or has failed to disclose any material information required or made any material false statement in the application for such permit, or has failed to maintain his premises in such manner as to protect the revenue, the Secretary or his delegate shall issue an order, stating the facts charged, citing such person to show cause why his permit should not be suspended or revoked. If, after hearing, the Secretary or his delegate finds that such person has not in good faith complied with this chapter or with any other provision of this title involving intent to defraud, has violated the conditions of such permit, has failed to disclose any material information required or made any material false statement in the application therefor, or has failed to maintain his premises in such manner as to protect the revenue, such permit shall be suspended for such period as the Secretary or his delegate deems proper or shall be revoked. “Subchapter C— Operations by Manufacturers and Importers of Tobacco Products and Cigarette Papers and Tubes and Export Warehouse Proprietors “Sec. 5721. Inventories. “Sec. 5722. Reports. “Sec. 5723. Packages, marks, labels, notices, and stamps. “SEC. 5721. INVENTORIES.“Every manufacturer of tobacco products or cigarette papers and tubes, and every export warehouse proprietor, shall make a true and accurate inventory at the time of commencing business, at the time of concluding business, and at such other times, in such manner and form, and to include such items, as the Secretary or his delegate shall by regulation prescribe. Such inventories shall be subject to verification by any internal revenue officer. “SEC. 5722. REPORTS.“Every manufacturer of tobacco products or cigarette papers and tubes, and every export warehouse proprietor, shall make reports containing such information, in such form, at such times, and for such periods as the Secretary or his delegate shall by regulation prescribe. “SEC. 5723. PACKAGES, MARKS. LABELS, NOTICES, AND STAMPS. “(a) Packages.—All tobacco products and cigarette papers and tubes shall, before removal, be put up in such packages as the Secretary or his delegate shall by regulation prescribe. “(b) Marks, Labels, Notices, and Stamps.—Every package of tobacco products or cigarette papers or tubes shall, before removal, bear the marks, labels, notices, and stamps, if any, that the Secretary or his delegate by regulation prescribes. “(c) Lottery Features.—No certificate, coupon, or other device purporting to be or to represent a ticket, chance, share, or an interest in, or dependent on, the event of a lottery shall be contained in, attached to, or stamped, marked, written, or printed on any package of tobacco products or cigarette papers or tubes. 72 Stat. 1423 “(d) Indecent or Immoral Material Prohibited.—No indecent or immoral picture, print, or representation shall be contained in, attached to, or stamped, marked, written, or printed on any package of tobacco products or cigarette papers or tubes. “(e) Exceptions.—Tobacco products furnished by manufacturers of such products for use or consumption by their employees, or for experimental purposes, and tobacco products and cigarette papers and tubes transferred to the bonded premises of another manufacturer or export warehouse proprietor or released in bond from customs custody for delivery to a manufacturer of tobacco products or cigarette papers and tubes, may be exempted from subsections (a) and (b) in accordance with such regulations as the Secretary or his delegate shall prescribe. “Subchapter D— Operations by Dealers in Tobacco Materials “Sec. 5731. Shipments and deliveries restricted. “Sec. 5732. Inventory, and statement of shipments and deliveries. “SEC. 5731. SHIPMENTS AND DELIVERIES RESTRICTED.“Every dealer in tobacco materials shall make all shipments or deliveries of tobacco materials in accordance with such regulations as the Secretary or his delegate shall prescribe. Tobacco materials shipped or delivered in violation of such regulations shall be subject to tax as manufactured tobacco and the dealer shipping or delivering the same shall be subject as a manufacturer of tobacco to the provisions of this chapter. “SEC. 5732. INVENTORY, AND STATEMENT OF SHIPMENTS AND DELIVERIES.“A dealer in tobacco materials shall make, upon demand of any internal revenue officer, a true and accurate inventory of all such materials held by the dealer, and shall, upon similar demand, furnish a true and complete statement of the quantity of such materials shipped or delivered to any person named in such demand. “Subchapter E— Records of Manufacturers of Tobacco Products and Cigarette Papers and Tubes, Export Warehouse Proprietors, and Dealers in Tobacco Materials “Sec. 5741. Records to be maintained. “SEC. 5741. RECORDS TO BE MAINTAINED.“Every manufacturer of tobacco products or cigarette papers and tubes, every export warehouse proprietor, and every dealer in tobacco materials shall keep such records in such manner as the Secretary or his delegate shall by regulation prescribe. “Subchapter F— General Provisions “Sec. 5751. Purchase, receipt, possession, or sale of tobacco products and cigarette papers and tubes, after removal. “Sec. 5752. Restrictions relating to marks, labels, notices, stamps, and packages. “Sec. 5753. Disposal of forfeited, condemned, and abandoned tobacco products, cigarette papers and tubes, and tobacco materials. 72 Stat. 1424 “SEC. 5751. PURCHASE, RECEIPT, POSSESSION, OR SALE OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES, AFTER REMOVAL “(a) Restriction.—No person shall— “(1) with intent, to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, after removal, any tobacco products or cigarette papers or tubes— “(A) upon which the tax has not been paid or determined in the manner and at the time prescribed by this chapter or regulations thereunder; or “(B) which, after removal without payment of tax pursuant to section 5704, have been diverted from the applicable purpose or use specified in that section; or “(2) with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, after removal, any tobacco products or cigarette papers or tubes, which are not put up in packages as required under section 5723 or which are put up in packages not bearing the marks, labels, notices, and stamps, as required under such section; or “(3) otherwise than with intent to defraud the United States, purchase, receive, possess, offer for sale, or sell or otherwise dispose of, after removal, any tobacco products or cigarette papers or tubes, which are not put up in packages as required under section 5723 or which are put up in packages not bearing the marks, labels, notices, and stamps, as required under such section. This paragraph shall not prevent the sale or delivery of tobacco products or cigarette papers or tubes directly to consumers from proper packages, nor apply to such articles when so sold or delivered. “(b) Liability to Tax.—Any person who possesses tobacco products or cigarette papers or tubes in violation of subsection (a) (1) or (a) (2) shall be liable for a tax equal to the tax on such articles. “SEC. 5752. RESTRICTIONS RELATING TO MARKS, LABELS, NOTICES, STAMPS, AND PACKAGES.“No person shall, with intent to defraud the United States— “(a) destroy, obliterate, or detach any mark, label, notice, or stamp prescribed or authorized, by this chapter or regulations thereunder, to appear on, or be affixed to, any package of tobacco products or cigarette papers or tubes, before such package is emptied; or “(b) empty any package of tobacco products or cigarette papers or tubes without destroying any stamp thereon to evidence the tax or indicate compliance with this chapter, prescribed by this chapter or regulations thereunder to be affixed to such package; or “(c) detach, or cause to be detached, from any package of tobacco products or cigarette papers or tubes any stamp, prescribed by this chapter or regulations thereunder, to evidence the tax or indicate compliance with this chapter, or purchase, receive, possess, sell, or dispose of, by gift or otherwise, any such stamp which has been so detached; or “(d) purchase, receive, possess, sell, or dispose of, by gift or otherwise, any package which previously contained tobacco products or cigarette papers or tubes which has been emptied, and upon which any stamp prescribed by this chapter or regulations thereunder, to evidence the tax or indicate compliance with this chapter, has not been destroyed. 72 Stat. 1425 “SEC. 5753. DISPOSAL OF FORFEITED, CONDEMNED, AND ABANDONED TOBACCO PRODUCTS, CIGARETTE PAPERS AND TUBES AND TOBACCO MATERIALS.“If it appears that any forfeited, condemned, or abandoned tobacco products, cigarette papers and tubes, or tobacco materials, when offered for sale, will not bring a price equal to the tax due and payable thereon, and the expenses incident to the sale thereof, such articles and tobacco materials shall not be sold for consumption in the United States but shall be disposed of in accordance with such regulations as the Secretary or his delegate shall prescribe. “Subchapter G— Penalties and Forfeitures “Sec. 5761. Civil penalties. “Sec. 5762. Criminal penalties. “Sec. 5763. Forfeitures. “SEC. 5761. CIVIL PENALTIES. “(a) Omitting Things Required or Doing Things Forbidden.—Whoever willfully omits, neglects, or refuses to comply with any duty imposed upon him by this chapter, or to do, or cause to be done, any of the things required by this chapter, or does anything prohibited by this chapter, shall, in addition to any other penalty provided in this title, be liable to a penalty of $1,000, to be recovered, with costs of suit, in a civil action, except where a penalty under subsection (b) or under section 6651 or 6653 may be collected from such person by assessment. “(b) Failure To Pay Tax.—Whoever fails to pay any tax imposed by this chapter at the time prescribed by law or regulations, shall, in addition to any other penalty provided in this title, be liable to a penalty of 5 percent of the tax due but unpaid. “(c) Failure To Make Deposit of Taxes.—Section 6656 relating to failure to make deposit of taxes shall apply to the failure to make any deposit of taxes imposed under subchapter A on the date prescribed therefor, except that the penalty for such failure shall be 5 percent of the amount of the underpayment in lieu of the penalty provided by such section. “(d) Applicability of Section 6659.—The penalties imposed by subsections (b) and (c) shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6659 (a). “SEC. 5762. CRIMINAL PENALTIES. “(a) Fraudulent Offenses.—Whoever, with intent to defraud the United States— “(1) Engaging in business unlawfully.—Engages in business as a manufacturer of tobacco products or cigarette papers and tubes, as an export warehouse proprietor, or as a dealer in tobacco materials without filing the bond and obtaining the permit where required by this chapter or regulations thereunder; or “(2) Failing to furnish information or furnishing false information.—Fails to keep or make any record, return, report, inventory, or statement, or keeps or makes any false or fraudulent record, return, report, inventory, or statement, required by this chapter or regulations thereunder; or “(3) Refusing to pay or evading tax.—Refuses to pay any tax imposed by this chapter, or attempts in any manner to evade or defeat the tax or the payment thereof; or “(4) Removing tobacco products or cigarette papers or tubes unlawfully.—Removes, contrary to this chapter or regulations thereunder, any tobacco products or cigarette papers or tubes subject to tax under this chapter; or 72 Stat. 1426 “(5) Purchasing, receiving, possessing, or selling tobacco products or cigarette papers or tubes unlawfully.— Violates any provision of section 5751 (a) (1) or (a) (2); or “(6) Affixing improper stamps.—Affixes to any package containing tobacco products or cigarette papers or tubes any improper or counterfeit stamp, or a stamp prescribed by this chapter or regulations thereunder which has been previously used on a package of such articles; or “(7) Destroying, obliterating, or detaching marks, labels, notices, or stamps before packages are emptied.—Violates any provision of section 5752 (a); or “(8) Emptying packages without destroying stamps.—Violates any provision of section 5752 (b); or “(9) Possessing emptied packages bearing stamps.—Violates any provision of section 5752 (d); or “(10) Refilling packages bearing stamps.—Puts tobacco products or cigarette papers or tubes into any package which previously contained such articles and which bears a stamp prescribed by this chapter or regulations thereunder without destroying such stamp; or “(11) Detaching stamps or possessing used stamps.—Violates any provision of section 5752 (c); shall, for each such offense, be fined not more than $10,000, or imprisoned not more than 5 years, or both. “(b) Other Offenses.—Whoever, otherwise than as provided in subsection (a), violates any provision of this chapter, or of regulations prescribed thereunder, shall, for each such offense, be fined not more than $1,000, or imprisoned not more than 1 year, or both. “SEC. 5763. FORFEITURES. “(a) Tobacco Products and Cigarette Papers and Tubes Unlawfully Possessed.— (1) Tobacco products and cigarette papers and tubes possessed with intent to defraud.—All tobacco products and cigarette papers and tubes which, after removal, are possessed with intent to defraud the United States shall be forfeited to the United States. (2) Tobacco products and cigarette papers and tubes not properly packaged.—All tobacco products and cigarette papers and tubes not in packages as required under section 5723 or which are in packages not bearing the marks, labels, notices, and stamps, as required under such section, which, after removal, are possessed otherwise than with intent to defraud the United States, shall lie forfeited to the United States. This paragraph shall not apply to tobacco products or cigarette papers or tubes sold or delivered directly to consumers from proper packages. “(b) Personal Property of Qualified Manufacturers, Export Warehouse Proprietors, and Dealers Acting With Intent To Defraud.—All tobacco products and cigarette papers and tubes, tobacco materials, packages, internal revenue stamps, machinery, fixtures, equipment, and all other materials and personal property on the premises of any qualified manufacturer of tobacco products or cigarette papers and tubes, export warehouse proprietor, or dealer in tobacco materials who, with intent to defraud the United States, fails to keep or make any record, return, report, inventory, or statement, or keeps or makes any false or fraudulent record, return, report, inventory, or statement, required by this chapter: or refuses to pay any tax imposed by this chapter, or attempts in any manner to evade or defeat the tax or the payment thereof: or removes, contrary to any provision of this chapter, any article subject to tax under this chapter, shall be forfeited to the United States. 72 Stat. 1427 “(c) Real and Personal Property of Illicit Operators.—All tobacco products, cigarette papers and tubes, tobacco materials, machinery, fixtures, equipment, and other materials and personal property on the premises of any person engaged in business as a manufacturer of tobacco products or cigarette papers and tubes, export warehouse proprietor, or dealer in tobacco materials, without filing the bond or obtaining the permit, as required by this chapter, together with all his right, title, and interest in the building in which such business is conducted, and the lot or tract of ground on which the building is located, shall be forfeited to the United States. “(d) General.—All property intended for use in violating the provisions of this chapter, or regulations thereunder, or which has been so used, shall be forfeited to the United States as provided in section 7302.”