Relates to the destruction of seized and forfeited cigarettes and tobacco products

BILL NUMBER:S3649A

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to the destruction of seized and forfeited cigarettes and tobacco products

Purpose

This bill would discontinue the practice of the government re-selling counterfeit or seized cigarettes.

Summary of provisions

Section 1 amends section 1846 of the tax law by continuing to allow for the resale of cigarette vending machines with the money being used for the state general fund but discontinuing the practice of selling seized or counterfeit cigarettes to inmates or secondary retailers. It would also grant the holders of the trademark of the seized product to examine the seized goods in order to identify fraud techniques and other information. In addition to this, it would also allow the state to retain small amounts of the seized goods that do not violate any federal counterfeit laws to be used by law enforcement in sting operations that fight the illegal distribution of cigarettes.

Section 2 amends section 1846-a of the tax law would remove the right of the municipality to resell counterfeit cigarettes and require that they be destroyed.

Section 3 amends section 11-4021 of the administrative code of the city of New York by continuing to allow for the resale of cigarette vending machines with the money being used for the state general fund but discontinuing the practice of selling seized or counterfeit cigarettes to inmates or secondary retailers. It would also grant the holders of the trademark of the seized product to examine the seized goods in order to identify fraud techniques and other information.

Section 4 sets the effective date.

Justification

Currently, when counterfeit cigarettes are seized by law or tax enforcement, notice is published in the newspaper where the seizure occurs and the products are available for sale to the public, secondary retailers, and the prison system. Funds generated from the sale of cigarettes and other seized products are earmarked for the general fund, meaning they can be used for any legitimate government purpose. Though precedents exist for the government to sell seized items (i.e. homes, cars, etc) cigarettes are a common consumer product and in many cases the products being sold are substandard and in some cases dangerous to the public.

This bill would take the state of New York out of the business of selling counterfeit and seized cigarettes and put it in the business of removing these products from circulation. Furthermore, by allowing the manufacturers of the products to inspect the seized goods, it will allow the state to work with the manufacturers in identifying

ways in which these frauds are being perpetrated and thereby allowing these products to be sold in a legitimate manner. if people choose to purchase these products, it should be done legitimately with the appropriate taxes being levied after the appropriate inspection of the product has been concluded.

Legislative history

2009-10: A.11460 - Referred to Ways and Means/S.8255 - Passed Senate

Fiscal implications

The last state auction of seized cigarettes, held in 2008, four years after the previous sale, brought the state $74,334 in revenue. Whether the staff time in organizing the sale, the price of publishing notices, and other indirect costs outweigh the revenue is unclear.

Effective date

This act shall take effect immediately.