Increases the presumed "cost of the agent" for purposes of cigarette marketing

BILL NUMBER:S4736A

Title of bill

An act to amend the tax law, in relation to increasing the presumed "cost of the agent" relating to cigarette marketing standards

Purpose

Increases the presumed "cost to the agent" for purposes of cigarette marketing.

Summary of specific provisions

Section 1: Amends subparagraph (B) of paragraph 1 of subdivision (b) of section 483 of the tax law, as amended by chapter 1 of the laws of 1999, to provide that the presumed cost of doing business by the agent selling to a wholesale dealer shall increase from seven-eighths of one percent of the basic cost of cigarettes plus two cents to seven-eighths of one percent of the basic cost of cigarettes plus fourteen cents for a standard pack of 20 cigarettes. For sales to chain stores, the presumed cost of doing business shall increase from one and one-half percent of the basic cost of cigarettes plus two cents to one and one-half percent of the basic cost of cigarettes plus fourteen cents for a standard pack of 20 cigarettes. For sales to retail dealers, the presumed cost of doing business shall increase from three and seven-eighths percent of the basic cost of cigarettes plus two cents to three and seven-eighths percent of the basic cost of cigarettes plus fourteen cents for a standard pack of 20 cigarettes.

Section 2: Effective date.

Justification

Increased cigarette and tobacco excise taxes and the burden of pre-payment of cigarette sales taxes, which have increased eight-fold since the inception in addition to a variety of other factors, have caused the "presumed cost of doing business" of the tax agents to require an adjustment of 12 cents to the 15 year old handling fee of 2 cents per pack of 20 cigarettes. This will enable the remaining tax agents to remain in business and help secure tax collection.

Note: In each instance where a pack contains 20 cigarettes, the increase is from two cents to fourteen cents. Where a pack contains 25 cigarettes, the handling fee is increased from two cents to seventeen cents. Where a pack contains 10 cigarettes, the handling fee is increased from one cent to seven cents.

Prior legislative history

New bill.

Fiscal implications

The increase in handling fees will preserve the almost Two Billion Dollars in revenue that the Cigarette Tax Agents collect for the State of New York every year and will ensure viability of the excise tax collection process which has been severely damaged by the increased costs of doing business and the loss of volume due to sales by illegal untaxed sources. By not increasing the handling fees, the State of New York may risk losing even more of its

Cigarette Tax Agents and thereby further deteriorate the tax collection methodology expressed in Article 483 of the Tax Code. A further deterioration of the tax collection process will lead to less revenue collected and more cartons sold through illegal untaxed Sources. Furthermore, this slight increase of 12 cents per pack of 20 cigarettes will have no effect on the amount of taxed cartons sold within the State of New York.

Effective date

This act shall take effect July 1, 2012; provided, however, that if this act shall not have become a law on or before July 1, 2012, then this act shall take effect immediately and shall be deemed to have been in full force and effect on and after July 1, 2012.