KRS 138.132: Contraband products -- Property used in substantial connection with

knowing violation of KRS 138.130 to 138.205 -- Seizure -- Sale -- Remission of

forfeiture -- Appeal.

(1) It is the declared legislative intent of KRS 138.130 to 138.205 that any untax-paid

tobacco products or vapor products held, owned, possessed, or in control of any

person other than as provided in KRS 138.130 to 138.205 are contraband and

subject to seizure and forfeiture as set out in this section.

(2) (a) If a retai ler, who is not a licensed retail distributor, purchases tobacco

products or vapor products from a licensed distributor and the purchase

invoice does not contain the separate identification and display of the tobacco

products tax or vapor products tax, the retailer shall, within twenty -four (24)

hours, notify the department in writing.

(b) The notification shall include the name and address of the person from whom

the tobacco products or vapor products were purchased and a copy of the

purchase invoice.

(c) The tobacco products or vapor products for which the required information

was not included on the invoice shall be retained by the retailer, and not sold,

for a period of fifteen (15) days after giving the proper notice as required by

this subsection.

(d) After the fifteen (15) day period, the retailer may pay the tax due on the

tobacco products or vapor products described in paragraph (c) of this

subsection according to administrative regulations promulgated by the

department, and after which may proceed to sell the tobacco products or vapor

products.

(3) If a retailer, who is not a licensed retail distributor, purchases tobacco products or

vapor products for resale from a person not licensed under KRS 138.195(7), which

is prohibited by KRS 138.140(2), the retailer may not sell those tobacco products or

vapor products until the retailer applies for and is granted a retail distributor's

license under KRS 138.195(7)(b).

(4) If, upon examination, the department determines that the retailer has failed to

comply with the provisions of subsection (3) of this section, the retailer shall pay all

tax and interest and applicable penalties due and the following shall apply:

(a) For the first offense, an additional penalty shall be assessed equal to ten

percent (10%) of the tax due;

(b) For a second offense within three (3) years or less of the first offense, an

additional penalty shall be assessed equal to twenty -five percent (25%) of the

tax due; and

(c) For a third offense or subsequent offense within three (3) years o r less of the

first offense, the tobacco products or vapor products shall be contraband and

subject to seizure and forfeiture as provided in subsection (5) of this section.

(5) (a) Whenever a representative of the department finds contraband tobacco

products or contraband vapor products within the borders of this state, the

tobacco products or vapor products shall be immediately seized and stored in

a depository to be determined by the representative.

(b) At the time of seizure, the representative shall del iver to the person in whose

custody the tobacco products or vapor products are found a receipt for the

seized products. The receipt shall state on its face that any inquiry concerning

any tobacco products or vapor products seized shall be directed to the

commissioner of the Department of Revenue, Frankfort, Kentucky.

(c) Immediately upon seizure, the representative shall notify the commissioner of

the nature and quantity of the tobacco products or vapor products seized. Any

seized tobacco products or vapor products shall be held for a period of twenty

(20) days, and if aft er that period no person has claimed the tobacco products

or vapor products as his or her property, the commissioner shall cause the

tobacco products or vapor products to be destroyed.

(6) All fixtures, equipment, materials, and personal property used in s ubstantial

connection with the sale or possession of tobacco products or vapor products

involved in a knowing and intentional violation of KRS 138.130 to 138.205 shall be

contraband and subject to seizure and forfeiture as follows:

(a) The department's representative shall seize the property and store the property

in a safe place selected by the representative; and

(b) The representative shall proceed as provided in KRS 138.165(2). The

commissioner shall cause the property to be sold after notice published

pursuant to KRS Chapter 424. The proceeds from the sale shall be applied as

provided in KRS 138.165(2).

(7) The owner or any person having an interest in the fixtures, materials, or personal

property that has been seized as provided by subsection (6) of th is section may

apply to the commissioner for remission of the forfeiture for good cause shown. If it

is shown to the satisfaction of the commissioner that the owner or person having an

interest in the property was without fault, the department shall remit the forfeiture.

(8) Any party aggrieved by an order entered under this section may appeal to the Board

of Tax Appeals pursuant to KRS 49.220.