N.C. Lawmakers May Bring Back Cigarette Tax Stamp

Another attempt at reinstating the state’s cigarette tax stamp has been introduced in the General Assembly, reported The Winston-Salem Journal. This time, however, the chances of passing appear better since R.J. Reynolds Tobacco Co. and Philip Morris USA have added their support, it added.

House Bill 319 is being sponsored by State Representative Bill McGee (R), while Senate Bill 249 is being sponsored by State Senator Fletcher Hartsell Jr. (R).

“My guess is that the bill will receive more of a hearing this time, but whether it will pass, I don’t know,” McGee told the newspaper. “Having the manufacturers on board, as well as the potential revenue boost, could rally more support. But I’m not sure having a General Assembly controlled by Republicans makes it more likely to pass.”

Analysts say $1 million in annual excise-tax revenue could be gained by reviving the stamp, which has not been used in the state in 18 years, said the report.

The goals, according to the Journal, remain the same as the 2010 attempt that never got out of committee–trying to target cigarette smuggling in the state, as well as cutting down on the number of cartons bought in North Carolina and sold for sizable profit in other states.

The stamps serve as visual proof on the bottom of cigarette packs that the excise tax was collected at the wholesale level before the packs were distributed to retailers. Stamps make it harder for bootleggers, who then have to get rid of one state’s stamp before putting on a fraudulent stamp representing another state.

The General Assembly eliminated the stamp in 1993, when it was deemed that the revenue produced from the excise tax–at that time 5 cents a pack, but now 45 cents–was not worth the administrative, logistics and enforcement costs of the stamps. But Philip Morris USA said that based on the World Health Organization’s estimate that 5% of the North American cigarette trade is contraband, “North Carolina potentially lost $12.4 million in additional cigarette-tax revenue in 2010.”

It is likely some of the cigarette smuggling into North Carolina has diminished since South Carolina raised its cigarette tax from 7 cents to 57 cents a pack in May 2010, the report speculated.

The excise-tax difference has benefited convenience stores, manufacturers and tobacco wholesalers in North Carolina over the years by increasing sales here, with customers sometimes filling up car trunks and smaller trailers while on vacation or just road trips, said the report.

For instance, the state excise tax on a carton jumps from $3 in Virginia, $4.50 in North Carolina and $5.70 in South Carolina to $20 in Maryland, $25 in Washington and a high of $43.50 in New York. North Dakota and South Carolina are the only other states without a cigarette-tax stamp.

“Having a tax stamp on cigarettes in all of these states will help ensure that all applicable taxes are collected on each sale,” Frank Lester, the communications director for Winston-Salem, N.C.-based RAI Services Co. (Reynolds American Inc.), told the paper.

A pivotal component to reinstating the stamp is getting tobacco wholesalers and distributors on board, the report added. They now get a 2% discount–or 2 cents of the 45 cents–on the excise taxes they handle to offset the cost they incur for administration, equipment and employees, even though there is no stamp. The new bills would provide nine-tenths of a cent for every stamp they buy.

Jeff Smith, the executive director of the North Carolina & Virginia Wholesalers & Distributors Association, said wholesalers and distributors would be harmed by the new bill proposal. He said their lobbying efforts are focused on the Senate bill.

“We have a list of eight or nine problems that we’ve got with both bills and will address them at the appropriate time,” he told the paper.

source: www.cspnet.com

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