Resolution Supporting Enhanced Tobacco Tax Collections Exposed

The Resolution Supporting Enhanced Tobacco Collections was considered by ALEC's Public Safety and Elections Task Force at the 2012 Spring Task Force Summit on May 11, 2012. This bill was part of the ALEC task force agenda between 2010 and 2012, but due to incomplete information, it is not known if the bill passed in a vote by legislators and lobbyists at ALEC task force meetings, if ALEC sought to distance itself from the bill as the public increased scrutiny of its pay-to-play activities, or if key operative language from the bill has been introduced by an ALEC legislator in a state legislature in the ensuing period or became binding law.

ALEC Draft Bill Text

Summary

This Resolution calls for state tax departments to improve tobacco supply chain security and state excise tax collection by implementing advanced technologies that decrease tax evasion, reduce smuggling between states, decrease the ability to counterfeit excise tax stamps and increase use of data or information technology.

Model Resolution

WHEREAS, cigarette and tobacco product tax increases have historically been subject to tax evasion increases and consumption declines; and

WHEREAS, a recent U.S. Government Accountability Office (GAO) study depicts how illegal trafficking operations can take advantage of weaknesses in the supply chain at multiple points to evade customs duties, federal and state/local excise taxes, and even tobacco settlement payments[1]; and

WHEREAS, counterfeiting is estimated to constitute 7% to 21% of total cigarette volume, and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) reports that an ; and estimated $5 billion in tobacco tax revenue is lost on the black market[2]

WHEREAS, tobacco smuggling is a growing problem in U.S. that has turned into a lucrative business for criminals who trade cigarettes and other tobacco products on the black market; and

WHEREAS, taxes from tobacco products support smoking cessation programs, hospital services, health education, breast cancer research and prevention, and childhood development programs; and

WHEREAS, new anti-counterfeiting capabilities now exist to make it easier to see and distinguish and harder to counterfeit than cigarette tax stamps that do not utilize advanced technologies; and

WHEREAS, supply chain data and information tools provide greater visibility in cigarette and tobacco distribution, support required cigarette and tobacco tax reporting and tax payment, and support audit outcomes desired by state tax departments; and

WHEREAS, high-tech tax stamps, in particular, include encrypted codes and information that enforcement officials and others can read with portable scanners, making stamps nearly impossible to counterfeit; and

WHEREAS, high-tech tax stamps have helped state and federal governments reduce tobacco tax evasion, for example, the State of California recovers over $150 million in annual state tobacco taxes since 2005.

THEREFORE BE IT RESOLVED, that the American Legislative Exchange Council (ALEC) supports policies that improve tobacco supply chain security and state excise tax collection by:

(A)Implementing a secure tax collection system that utilizes advanced technologies, such as stamps that utilize multiple layers of security and information technology;

(B) Collecting supply chain information about excise tax eligible products;

(C) Providing data on product flow to states’ then-current tax management system enabling correlation of this data with other tax types to promote increased efficiency of audit and inspection triggers; and

(D) Increasing tax compliance enforcement and auditing capabilities.

THEREFORE, BE IT FURHTER RESOLVED, that ALEC supports a distribution of funds to be made available to the state tax departments for enforcement and administration of this Act.

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[1]United States Government Accountability Office. (March 2011). Illicit Tobacco: Various Schemes Are Used to Evade Taxes and Fees (GAO-11-313). Washington, DC: U.S. Government Printing Office.

[2]Bureau of Alcohol, Tobacco, Firearms, and Explosives. (April 23, 2010). Tobacco: The new commodity for criminals [Press release].