BILL ANALYSIS Ó
AB 1901
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Date of Hearing: April 27, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
1901 (Quirk) - As Amended March 14, 2016
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|Policy |Governmental Organization |Vote:|18 - 0 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| |Revenue and Taxation | |9 - 0 |
| | | | |
| | | | |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill makes it a misdemeanor to buy, sell, or possess
unaffixed cigarette stamps. Specifically, this bill:
1)Defines "unaffixed stamps" as cigarette stamps for which the
tax has previously been paid by a licensed distributor and
previously affixed to a package. The term does not include any
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unused or unapplied rolls of stamps or loose stamps acquired
from the State Board of Equalization (BOE) or its authorized
agent and in the possession of a licensed distributor.
2)Provides that any person who possesses, sells, or offers to
sell, or who buys or offers to buy, unaffixed stamps is guilty
of a misdemeanor, punishable by a fine or imprisonment in
county jail for up to a year, or both.
3)Requires that BOE destroy unaffixed stamps.
FISCAL EFFECT:
1)Minor and absorbable costs related to inspections and
enforcements. This bill would not lead to any additional
inspections on top of which are already being done.
2)Likely minor cost savings because of deterred tax evasion.
COMMENTS:
1)Purpose. This bill is intended to combat the "used stamp
scheme," which is a tax evasion scheme that involves reused
cigarette tax stamps.
2)Background. Existing law requires the cigarette tax to be
paid through the use of stamps or meter impressions, which
must be affixed to each package of cigarettes distributed.
Cigarette stamps resemble stickers and are encrypted with the
date, distributor information, and the cigarette brand. BOE
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inspection teams authenticate tax stamps with scanning
devices, and under existing law it is a misdemeanor to sell,
by, or possess fraudulent or false stamps.
3)Used stamp scheme. According to BOE, the sponsor of AB 1901,
inspection teams have identified a tax evasion scheme that
involves reusing legitimate cigarette tax stamps. In these
cases, the stamp is removed but reaffixed to another cigarette
pack. By applying used stamps to an untaxed cigarette pack,
taxpayers can avoid paying the tax and also disguise duty
free, counterfeit, stolen, or smuggled cigarettes.
4)Examples. The BOE notes that in one enforcement operation
alone, BOE staff found a storage unit containing nearly
206,000 unaffixed used stamps with a tax value of about
$179,000 placed on transfer sheets and prepared for affixation
to cigarette packs. In total, the BOE hopes that by making
possessing, selling, or buying unaffixed stamps a misdemeanor
can help prevent tax evasion in the range of $400,000
annually.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
AB 1901
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