Increases the presumed "cost of the agent" relating to cigarette marketing standards and establishes the cigarette tax enforcement account; appropriation

Summary of provisions

Section 1 amends subparagraph (B) of paragraph 1 of subdivision (b) of section 483 of the Tax Law to provide that the presumed cost of doing business by the agent selling to a wholesale dealer shell 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 nine cents regardless of the number of cigarettes contained in the package. 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 nine cents regardless of the number of cigarettes contained in the package. 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 nine cents regardless of the number of cigarettes in a package.

Section 2 amends subdivision 1 of section 472 of the tax law to allow the commissioner to prescribe, prepare and furnish stamps for the payment by the agent of a concurrent expense allowance for the cigarette enforcement account of four cents per stamp which shall be deposited pursuant to subdivision (c) of section four hundred eighty-two of this article.

Section 3 amends section 482 of the tax law through the addition of a subparagraph (c) which provides that the commissioner shall deposit all taxes, fees, interest and penalties collected ore received from the amount received pursuant to subdivision one of section four hundred seventy-two of this article, the commissioner shall deposit the cigarette tax enforcement account established Pursuant to section ninety-seven-oooo of the state finance law to the concurrent expense allowance for the cigarette tax enforcement fund of four cents per stamp.

Section 4 amends the State Finance law by adding a new section 97-oooo to establish the Cigarette tax enforcement account which shall be in joint custody under the purview of the State Comptroller and the Commissioner of taxation and finance. The State Comptroller is authorized and directed to receive for deposit to the credit of the cigarette tax enforcement account monies received from the commissioner of taxation and finance from the concurrent expense allowance and other monies appropriated, credited or transferred thereto from any other fund or source. The proceeds of the cigarette

tax enforcement account shall be used just to enforce the collection of the cigarette tax.

Section 5 appropriates to the division of the state police six million dollars from the cigarette tax enforcement account to support cigarette tax enforcement activities and proscribes other methods in which the appropriation may be used in efforts to enforce the cigarette tax.

Section 6 provides that this act shall take effect September 1, 2014 and shall apply in accordance with the applicable transitional provisions of sections 1106 and 1217 of the tax law.

Existing law

Currently, for a standard pack of twenty cigarettes, the cost of agent for sales from an agent to a wholesaler, chain store, or retailer is a percentage of the basic cost of cigarettes plus two cents.

Justification

The "presumed cost of doing business" for cigarette stamping agents, which was enacted to help defer the cost of acting as the State's agent for .the collection of the cigarette excise tax, has not increased 1999. Since 1999, the cigarette excise tax has increased almost three hundred percent, which stamping agents are required to prepay. This prepayment' burden, in addition to a variety of other factors, has caused the cost of doing business for cigarette stamping agents to well exceed the "presumed cost of doing business" provided by the Tax Law. To bring the "presumed cost of doing business" more in line with the actual cost of doing business, the "presumed cost of doing business" requires an adjustment. The "presumed cost of doing business" will be adjusted for wholesale dealers from one cent to nine cents regardless of the number of cigarettes contained in such package, for chain stores the change goes from one cent to nine cents regardless of the number of cigarettes contained in a package and for retail dealers the change goes from one cent to nine cents regardless of the number of cigarettes contained in the package. This increase will enable the stamping agents to remain in business and help secure tax collection.

Legislative history

2013: S.1958C - Passed Senate 2011-2: S.4763-A - Passed Senate both years

Fiscal implications

By increasing the minimum price of cigarettes sold in New York, the State will collect increased sales tax revenues.

Effective date

This act shall take effect September 1, 2014 and shall apply in accordance with the applicable transitional provisions of sections 1106 and 1217 of the tax law.