Enforcing Tobacco Laws
On November 23, 1998, Tennessee and 51 other states and jurisdictions entered an historic multistate settlement with the major tobacco companies, the Master Settlement Agreement (MSA). Since its creation, more than 50 tobacco companies have joined the MSA.
Tennessee is projected to receive up to $4.8 billion in payments through the year 2025 and additional payments in perpetuity. The MSA also places significant restrictions on tobacco advertising and marketing as well as providing funding for a foundation that addresses youth tobacco use.
To date, Tennessee's general fund has received nearly $3.16 billion in MSA payments from the tobacco companies.
In 1999, the Tennessee General Assembly passed The Tennessee Tobacco Manufacturers’ Escrow Fund Act, Tenn. Code Ann. §§ 47-31-101, et seq.
In general, the Escrow Fund Act requires tobacco manufacturers who did not join the MSA (Non-Participating Manufacturers or NPMs) and whose cigarettes (including "roll-your-own" tobacco) are sold to consumers in Tennessee to make yearly escrow deposits based on the number of cigarettes that the NPM sold to consumers within the State of Tennessee.
The Tennessee Department of Revenue enacted regulations requiring all NPMs to make quarterly escrow deposits. See Tenn. Comp. R. & Regs. Chapters 1320-9-1 and 1320-9-2. After two years, an NPM can petition to make annual escrow deposits. The escrow account must be at a financial institution that satisfies the criteria set forth in the Escrow Fund Act, and the escrow agreement must also comply with the statutory requirements. Funds placed into an escrow account may only be removed under certain conditions set out in the statute.
Each NPM must also certify to the Attorney General that the proper payment has been made. Failure to comply with the regulations may result in the NPM being removed from the State’s directory and other actions being taken against the company.
On June 6, 2003, Tennessee enacted the “Directory Statute,” Tenn. Code Ann. §§ 67-4-2601, et seq., which affects the sale of cigarettes (including roll-your-own tobacco) in Tennessee.
All tobacco product manufacturers that intend to begin or continue selling cigarettes to consumers in Tennessee, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, must submit a Certification form and comply with the Tennessee Tobacco Manufacturers’ Escrow Fund Act of 1999. Licensed tobacco distributors are required to submit monthly reports listing sales of cigarettes (including roll-your-own and little cigars) made by non-participating manufacturers. These reports are due not later than 20 calendar days after the end of each calendar month.
The Department of Revenue maintains a Directory of all tobacco product manufacturers, along with their brand families, that are in compliance with the Directory Statute and allowed to sell cigarettes in Tennessee. This Directory is updated as necessary to add or remove tobacco product manufacturers and/or brand families.
It is unlawful for any person to: (1) affix a stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not included in the Directory; or (2) to sell, offer, or possess for sale in Tennessee, or import for personal consumption in Tennessee, cigarettes of a tobacco product manufacturer or brand family not included in the Directory. Any cigarettes that have been sold, offered for sale, possessed for sale, in Tennessee, or imported for personal consumption in Tennessee, in violation of Tenn. Code Ann. § 67-4-2605 are contraband subject to seizure and forfeiture.
The MSA prohibits many kinds of advertising, particularly advertising targeting youth:
- Outdoor advertising including billboards, signs, and placards in arenas, stadiums, shopping malls, and video game arcades
- Transit advertising of tobacco products
- Distribution and sale of apparel and merchandise with brand name logos, such as caps and T-shirts
- Payments to promote tobacco products in movies, television shows, theater productions or live performances, live or recorded music performances, videos and video games
- Use of cartoons in the advertising, promotion, packaging, or labeling of tobacco products
- Brand name sponsorship of events with a significant youth audience or where the paid participants or contestants are underage
- Distribution of free samples except in a facility or enclosed area where the operator ensures no underage person is present
The MSA also requires the major tobacco companies to pay approximately $25 million annually for ten years to fund a charitable foundation, the American Legacy Foundation. The Foundation is carrying out a nationwide program of advertising and education to address youth tobacco use and to educate consumers about the cause and prevention of diseases associated with tobacco use. The tobacco companies will also establish a $1.45 billion fund for youth and consumer education.
Anyone having information or comments pertaining to any tobacco product manufacturer or other entity that may not be complying with the Escrow Fund Act, Tenn. Code Ann. §§ 67-4-2601, et seq. and/or other tobacco laws, regulations or rules is encouraged to call the Tobacco Enforcement hotline at (615) 532-9480 (for local calls) or (800) 890-8366.
The hotline is set up to receive information and comments by voicemail. Messages are checked daily, and callers are not required to identify themselves when leaving a message.