Senate Bill S582

2011-2012 Legislative Session

Requires the use of encrypted counterfeit-resistant tobacco product tax stamps and markers

download bill text pdf

Archive: Last Bill Status - In Senate Committee Investigations And Government Operations Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 04, 2012	referred to investigations and government operations
Jan 05, 2011	referred to investigations and government operations

co-Sponsors

2011-S582 (ACTIVE) - Details

Current Committee:: Senate Investigations And Government Operations
Law Section:: Tax Law
Laws Affected:: Add §472-a, Tax L

2011-S582 (ACTIVE) - Summary

Requires the use of encrypted counterfeit-resistant tobacco product tax stamps and markets.

2011-S582 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S582

TITLE OF BILL:
An act
to amend the tax law, in relation to
requiring the use of
encrypted counterfeit-resistant cigarette tax stamps or markers

PURPOSE OR GENERAL IDEA OF BILL:
Requires the use of encrypted counterfeit-resistant cigarette tax
stamps or markers.

SUMMARY OF SPECIFIC PROVISIONS:
Section 1: Adds a new Tax Law section 472-a to require the Department
of Taxation and Finance to incorporate a new encrypted
counterfeit-resistant tax stamp or other means of identification for
the collection of taxes on cigarettes. This provision establishes
standards for creating such an enhanced cigarette tax collection
system. The cost of establishing this enhanced tax collection system
shall be borne by wholesale cigarette dealers that are also licensed
agents that are authorized to buy and affix tax stamps.

Section 2: This free standing section of the law outlines the
procedure for conducting a Request for proposal and time periods in
which the department is to select a vendor to operate such a system.

Section 3: Effective date

JUSTIFICATION:
The high tax rate on cigarettes in New York has resulted in an
increasing amount of tax avoidance with regard to the purchase and
delivery of cigarettes. For example, over the past 7 years, the
number of cartons of cigarettes legally sold and taxed has decreased
from approximately 95 million cartons to only 45 million cartons
annually. While national studies have indicated that the demand for
cigarettes is gradually declining, that decline does not account for
all of the observed drop in sales. Contributing to the observed
reduction in reported sales has been an increasing black market for
the distribution of untaxed cigarettes. This bill establishes a
modernized system of tax collection to help minimize the evasion of
the payment of cigarette taxes and reduce the amount of cigarettes
that are sold on the black market.

In 2006, The Department of Health estimated that New York state is
losing as much as $550 million in taxes through the illegal sales of
untaxed cigarettes. Other estimates maintain that up to 35% of all
cigarettes sold in this State are not stamped legally for proper tax
collection. Further, these untaxed sales severely undermine the
financial viability of the legitimate merchants who collect and remit
all lawful taxes and endanger thousands of
jobs in communities throughout the state. In contrast, participants in
the illegal black market include organized crime and terrorist
organizations who use the profits generated from this activity to
subsidize their other nefarious activities.


Last year the U.S. House Committee on Homeland security completed an
investigation on cigarette smuggling in New York, and they confirmed
that terrorist organizations, such as Hamas and Hezbollah, were
benefiting from untaxed cigarette sales. Further, they determined
that this activity was causing losses in State revenue in the
hundreds of millions of dollars.

California was one of the first states in the nation to implement this
new encrypted tax collection system and to phase out its old heat
applied decal stamp tax collection system. Further, a California
Auditor's report indicated that this new system has helped to
significantly reduce tax avoidance in that State. There is every
reason to expect that New York State would experience similar
benefits from modernizing its collections system.

Another benefit of the new encrypted system is that law enforcement
agents will be able to utilize hand held scanning devices to monitor
cigarette shipments and detect false or illegally stamped cigarettes.

PRIOR LEGISLATIVE HISTORY:
This bill has been previously introduced as S.3896-A of 2009. Similar
provisions were also incorporated into S.1891-E of 2010.

FISCAL IMPLICATIONS:
The establishment of a new and secure encrypted cigarette tax
collection system will significantly reduce the incidence of
cigarette tax stamp counterfeiting, which is estimated to cost the
state tens of millions of dollars annually.

EFFECTIVE DATE:
This act shall take effect immediately, provided, however, that
section two of this act shall take effect on the one hundred
eightieth day after it shall have become a law; 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.

2011-S582 (ACTIVE) - Bill Text download pdf

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

                                   582

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 5, 2011
                               ___________

Introduced  by  Sens.  KLEIN,  DILAN,  GOLDEN, HASSELL-THOMPSON, KRUGER,
  SAVINO -- read twice and ordered  printed,  and  when  printed  to  be
  committed to the Committee on Investigations and Government Operations

AN  ACT  to  amend  the  tax  law,  in  relation to requiring the use of
  encrypted counterfeit-resistant cigarette tax stamps or markers

  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.    PROVISION  FOR  ENHANCED  CIGARETTE   AND   TOBACCO   TAX
COLLECTIONS.  1. PURSUANT TO THE POWERS VESTED IN THE COMMISSIONER UNDER
THIS  ARTICLE  TO  COLLECT TAXES ON CIGARETTES AND TOBACCO PRODUCTS, THE
COMMISSIONER  SHALL  INCORPORATE  AN  ENHANCED  SYSTEM  TO  SECURE   THE
COLLECTION  OF  SUCH  TAXES  DUE TO THE STATE.   SUCH AN ENHANCED SYSTEM
SHALL USE AN ENCRYPTED COUNTERFEIT-RESISTANT TAX STAMP OR OTHER  MARKING
SYSTEM TO INDICATE THAT THE TAXES ON SUCH CIGARETTE AND TOBACCO PRODUCTS
HAVE BEEN PAID. SUCH SYSTEM SHALL BE COMPRISED OF AT LEAST THE FOLLOWING
ITEMS:
  (A)  THE  USE  OF  ENCRYPTED  TAX STAMPS OR OTHER MARKINGS BY STAMPING
AGENTS LICENSED PURSUANT TO SECTION FOUR  HUNDRED  SEVENTY-TWO  OF  THIS
ARTICLE  AND OTHER TAX COLLECTION SYSTEMS OR MARKERS USED BY THE COMMIS-
SIONER TO COLLECT CIGARETTE AND TOBACCO PRODUCT TAXES.  SUCH  STAMPS  OR
MARKERS SHALL BE ENCRYPTED TO IDENTIFY, AT A MINIMUM:
  (I)  THE  NAME AND ADDRESS OF THE LICENSED STAMPING AGENT AFFIXING THE
STAMP OR OTHER MARKER;
  (II) THE DATE SUCH STAMP OR OTHER MARKER 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.

                                                           LBD04442-02-1

S. 582                              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 OR OTHER MARKERS SHALL:
  (A)  BE  PRODUCED  IN  A  PROVEN  SECURE  FACILITY AS CERTIFIED BY THE
COMMISSIONER;
  (B) INCORPORATE A MINIMUM OF FOUR LAYERS  OF  OVERT,  SEMI-COVERT  AND
COVERT DATA;
  (C) BE APPLIED BY MACHINES OR OTHER MEANS WHEREUPON THE ENCRYPTED DATA
SHALL  BE INSTANTANEOUSLY CAPTURED AND STORED BY AND FOR THE COMMISSION-
ER;
  (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.
  3.  SUCH  SYSTEM SHALL BE PERIODICALLY UPDATED TO FURTHER MINIMIZE THE
EVASION OF THE COLLECTION OF CIGARETTE AND  TOBACCO  TAXES  DUE  TO  THE
STATE.
  4.  EVERY  WHOLESALE  DEALER THAT IS A LICENSED AGENT TO BUY AND AFFIX
STAMPS TO BE USED IN PAYING THE TAX IMPOSED UNDER THIS ARTICLE SHALL  BE
REQUIRED  TO  BEAR  THE  INITIAL  COST AND MAINTENANCE NECESSARY FOR THE
DEPARTMENT TO IMPLEMENT SUCH ENHANCED TAX COLLECTION SYSTEM.
  S 2. The department of taxation and finance shall issue a request  for
proposals  for  the purpose of providing the system described in section
472-a of the tax law, as added by section one 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.  This act shall take effect immediately, provided, however, that
section two of this act shall take effect on the one  hundred  eightieth
day  after it shall have become a law; 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.

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Senate Bill S582

Sponsored By

Archive: Last Bill Status - In Senate Committee Investigations And Government Operations Committee

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co-Sponsors

2011-S582 (ACTIVE) - Details

2011-S582 (ACTIVE) - Summary

2011-S582 (ACTIVE) - Sponsor Memo

2011-S582 (ACTIVE) - Bill Text download pdf

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Sponsored By

Jeffrey D. Klein

Archive: Last Bill Status - In Senate Committee Investigations And Government Operations Committee

Actions

co-Sponsors

Martin Malavé Dilan

Martin J. Golden

Ruth Hassell-Thompson

Diane J. Savino

2011-S582 (ACTIVE) - Details

2011-S582 (ACTIVE) - Summary

2011-S582 (ACTIVE) - Sponsor Memo

2011-S582 (ACTIVE) - Bill Text download pdf

Comments