SECTION 1. Chapter 44-20 of the General Laws entitled "Cigarette Tax" is hereby amended by adding thereto the following section:

44-20-28.1. Noncompliance with tobacco manufacturer's escrow fund -- Penalties. -- (a) A distributor may not affix, or cause to be affixed, stamps to individual packages of cigarettes to be sold or distributed in this state by a distributor licensed in this state if the Attorney General has notified the distributor that the tobacco product manufacturer of those cigarettes has:

(1) Failed to become a participating manufacturer as defined in section 23-71-3(1) of the Rhode Island General Laws; and

(2) Failed to create a qualified escrow fund and make the required deposits in said escrow fund pursuant to section 23-71-3(2)(i) of the Rhode Island General Laws for any cigarettes the distributor sold or distributed for that tobacco product manufacturer in this state.

As used in this section, "tobacco product manufacturer" has the same meaning as that term is defined in section 23-71-2 of the Rhode Island General Laws.

(b) A distributor who violates this section is subject to suspension or revocation of its license pursuant to section 44-20-8.

SECTION 2. This act shall take effect upon passage.