BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1901 (Quirk) - Taxation: cigarettes: unaffixed stamps ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: August 1, 2016 |Policy Vote: GOV. & F. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill does not meet the criteria for referral to the Suspense File. Bill Summary: AB 1901 would (1) make it a misdemeanor to buy, sell, or possess unaffixed cigarette stamps, and (2) authorize the Board of Equalization (BOE) to seize and destroy these stamps aggregated for reuse purposes. Fiscal Impact: BOE estimates that based on current trends, enactment of this bill could deter tax evasion of about $400,000 annually (special funds). BOE would incur absorbable administrative costs to notify affected retailers, amend appropriate publications, and answer inquiries. Background: Current law imposes a tax on cigarette distributors at the rate of $0.87 per package of 20 cigarettes. The cigarette tax must be AB 1901 (Quirk) Page 1 of ? paid through the use of stamps or meter impressions. Specifically, these stamps or meter impressions must be affixed to each package of cigarettes distributed. State law (1) imposes a fine of up to $50,000, or imprisonment not to exceed one year in county jail, or both, for possessing, selling, or buying false or fraudulent cigarette tax stamps or meter impressions, and (2) requires BOE to destroy any stamps seized. Any fines assessed are deposited in the Cigarette and Tobacco Products Compliance Fund. Proposed Law: This bill would provide 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. The bill would require BOE to destroy any unaffixed stamps. The bill 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 unused and unapplied rolls of stamps or loose stamps acquired from BOE or its authorized agent and in the possession of a licensed distributor. Staff Comments: BOE notes that in one enforcement operation alone, 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. Any local government costs resulting from the mandate in this measure are not state-reimbursable because the mandate only involves the definition of a crime or the penalty for conviction of a crime. -- END -- AB 1901 (Quirk) Page 2 of ?