S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 3896--A

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                              April 3, 2009
                               ___________

Introduced  by Sens. STACHOWSKI, C. JOHNSON, KLEIN, VOLKER -- read twice
  and ordered printed, and when printed to be committed to the Committee
  on Investigations and Government  Operations  --  recommitted  to  the
  Committee  on  Investigations  and Government Operations in accordance
  with Senate Rule 6, sec. 8 -- reported favorably from  said  committee
  and  committed  to  the  Committee on Finance -- committee discharged,
  bill amended, ordered reprinted as amended  and  recommitted  to  said
  committee

AN  ACT to amend the tax law, in relation to requiring the exclusive use
  of encrypted counterfeit-resistant cigarette tax stamps to  provide  a
  commission  to  agents  for  the purpose of leasing or the purchase of
  machinery and a sell-through provision for retailers

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  The  tax  law is amended by adding a new section 472-a to
read as follows:
  S 472-A. TOBACCO TAX SECURITY. 1. PURSUANT TO THE POWERS VESTED IN THE
COMMISSIONER UNDER SECTION FOUR HUNDRED SEVENTY-TWO OF THIS ARTICLE, THE
COMMISSIONER SHALL INCORPORATE A SYSTEM FOR SECURING TOBACCO  TAXES  DUE
TO  THE  STATE.  SUCH  A SYSTEM SHALL BE COMPRISED, AT A MINIMUM, OF THE
FOLLOWING:
  (A) THE USE OF ENCRYPTED TAX STAMPS BY STAMPING AGENTS LICENSED PURSU-
ANT TO SECTION FOUR HUNDRED SEVENTY-TWO OF  THIS  ARTICLE.  SUCH  STAMPS
SHALL BE ENCRYPTED TO IDENTIFY, AT A MINIMUM:
  (I)  THE  NAME AND ADDRESS OF THE LICENSED STAMPING AGENT AFFIXING THE
STAMP;
  (II) THE DATE THE STAMP WAS AFFIXED TO THE PRODUCT; AND
  (III) THE DENOMINATED VALUE OF THE STAMP OR METER IMPRESSION.
  (B) THE SECURE MANAGEMENT OF ANY DATA REQUIRED UNDER PARAGRAPH (A)  OF
THIS SUBDIVISION AND OTHER DATA AS MAY BE REQUIRED BY THE COMMISSIONER;

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10719-04-0

              

S. 3896--A                          2

  (C)  THE ENFORCEMENT OF SECTION FOUR HUNDRED SEVENTY-TWO OF THIS ARTI-
CLE, INCLUDING SUCH DEVICES AS MAY BE USED BY THE DEPARTMENT  AND  OTHER
STATE EMPLOYEES AUTHORIZED BY THE COMMISSIONER.
  2. SUCH ENCRYPTED TAX STAMPS SHALL:
  (A)  BE  PRODUCED  IN A PROVEN SECURE FACILITY CERTIFIED IN ACCORDANCE
WITH THE SECURITY ASSISTANCE STANDARDS ESTABLISHED IN TWO THOUSAND  FIVE
BY  THE  AMERICAN  NATIONAL  STANDARDS  INSTITUTE AND THE NORTH AMERICAN
SECURITY PRODUCTS ORGANIZATION;
  (B) INCORPORATE A MINIMUM OF FOUR LAYERS  OF  OVERT,  SEMI-COVERT  AND
COVERT DATA;
  (C)  BE  APPLIED  BY  MACHINES  WHEREUPON  THE ENCRYPTED DATA SHALL BE
INSTANTANEOUSLY CAPTURED AND STORED BY AND FOR THE DEPARTMENT;
  (D) BE READABLE AND TRACEABLE FROM THE POINT OF  STAMP  PRODUCTION  TO
SUCH POINT AS DEEMED APPROPRIATE BY THE COMMISSIONER; AND
  (E)  BE CAPABLE OF BEING READ BY A SCANNING OR SIMILAR DEVICE THAT CAN
BE UTILIZED BY ENFORCEMENT AGENTS OF THE STATE AND OTHERS DEEMED  APPRO-
PRIATE BY THE COMMISSIONER.
  S 2.  The department of taxation and finance shall issue a request for
proposal  for  the  purpose of providing the system described in section
472-a of the tax law, as added by section one of  this  act,  within  90
days  of  the  effective  date of this act.  Bids from qualified vendors
shall be received by the department of taxation  and  finance  no  later
than  60  days  following  the issuance of the request for proposal. Any
contract issued pursuant to this section shall be issued within 90  days
following  receipt  of bids and installation of such system completed by
the successful bidder within 180 days of the issuance of such contract.
  S 3. Subdivision 1 of section 472 of the tax law, as amended by  chap-
ter 629 of the laws of 1996, is amended to read as follows:
  1.  The  commissioner  shall  prescribe, prepare and furnish stamps of
such denominations and quantities as may be necessary for the payment of
the tax on cigarettes imposed by this article, and may from time to time
and as often as he deems advisable provide for the issuance  and  exclu-
sive  use  of stamps of a new design and forbid the use of stamps of any
other design, in the manner and with the effect provided in section  two
hundred  seventy-four  of  this  chapter.  The  commissioner  shall make
provisions for the sale of such stamps at such places and at such  times
as  he  may  deem necessary and may license agents for such purpose. The
commissioner may license dealers in cigarettes,  who  maintain  separate
warehousing  facilities  for  the  purpose of receiving and distributing
cigarettes and conducting their business, who have received  commitments
from at least two [cigarette] manufacturers whose aggregate market share
is  at least forty percent of the New York state [cigarette] market, and
importers, exporters and manufacturers of cigarettes, and other  persons
within  or without the state as agents to buy or affix stamps to be used
in paying the tax herein imposed, but an agent shall at all  times  have
the right to appoint the person in his employ who is to affix the stamps
to  any  cigarettes  under  the agent's control. The fee for filing such
application for an agent's license shall be one  thousand  five  hundred
dollars,  unless  such  fee  has  been  paid during the preceding twelve
months, in which case, the fee for a new license shall be  one  thousand
dollars.  All  of  the provisions of section four hundred eighty OF THIS
ARTICLE relating to wholesale dealers' licenses, including the procedure
for suspension, revocation, refusal to license and for hearings,  except
for  paragraphs (c) and (g) of subdivision one of such section, shall be
applicable to agents' licenses applied for or granted pursuant  to  this
section, as if such provisions had been set forth in full in this subdi-

S. 3896--A                          3

vision  and  had  expressly referred to the applicant for, or the holder
of, an agent's license. Whenever the commissioner shall sell and deliver
to any such agent any such stamps,  such  agent  shall  be  entitled  to
receive  as  compensation for his services and expenses as such agent in
selling or affixing such stamps, and to retain out of the moneys  to  be
paid  by him for such stamps, a commission on the par value thereof. The
commissioner is hereby authorized to prescribe  a  schedule  of  commis-
sions, not exceeding five per centum, allowable to such agent for buying
and affixing such stamps. Such schedule shall be uniform with respect to
the different types of stamps used, and may be on a graduated scale with
respect to the number of stamps purchased, PROVIDED HOWEVER, SUCH AGENTS
SHALL  BE  ENTITLED  TO  AN  ADDED  COMMISSION IN EXCESS OF THE FIVE PER
CENTUM TO BE DETERMINED BY THE COMMISSIONER TO  MITIGATE  THE  COSTS  TO
SUCH AGENTS IN RELATION TO THE LEASE OR PURCHASE OF THE MACHINERY AND/OR
EQUIPMENT NECESSARY TO APPLY OR AFFIX SUCH STAMPS AS REQUIRED IN SECTION
FOUR HUNDRED SEVENTY-TWO-A OF THIS ARTICLE. The commissioner may, in his
discretion,  permit  an  agent to pay for such stamps within thirty days
after the date of purchase and may require any such agent to  file  with
the  department  [of  taxation  and  finance]  a bond issued by a surety
company approved by the superintendent of insurance as to  solvency  and
responsibility and authorized to transact business in the state or other
security  acceptable  to the commissioner, in such amount as the commis-
sioner may fix, to secure the payment of any sums due  from  such  agent
pursuant  to this article. If securities are deposited as security under
this subdivision, such securities shall be kept in the  custody  of  the
commissioner and may be sold by the commissioner if it becomes necessary
so  to  do  in order to recover any sums due from such agent pursuant to
this article, but no such sale shall be had until after such agent shall
have had opportunity to litigate the validity of any tax if it elects so
to do. Upon any such sale, the surplus, if any, above the sums due under
this article shall be returned to such agent.
  S 4. The department of  taxation  and  finance  shall,  following  the
implementation period and annually thereafter, report to the legislature
and to the governor on the effectiveness of the provisions of this act.
  S  5.  This act shall take effect immediately, provided, however, that
section two of this act shall take effect on the one  hundred  eightieth
day  following  the  awarding  of  such  contract  pursuant to this act;
provided further that any product  in  the  possession  of  a  cigarette
retail  dealer  on  the  effective  date  of this act and stamped to the
commissioner of taxation and finance's satisfaction may continue  to  be
offered for sale and sold to cigarette purchasers.