HBA-AMW H.B. 2378 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 2378 By: Kuempel Ways & Means 7/26/2001 Enrolled BACKGROUND AND PURPOSE Because of federal and state taxes, the price of American manufactured cigarettes intended for export is significantly lower than American manufactured cigarettes designated for domestic consumption. Before 1999, wholesalers were legally able to buy large volumes of cigarettes manufactured in the United States but intended for export, pay all required taxes and duties for reimportation of the products, and market the export products at a significant discount from the product sold for domestic consumption. This retailing process deceived consumers who believed that the export cigarettes were of the same quality as cigarettes intended for domestic consumption. House Bill 2378 prohibits a stamp from being affixed to cigarettes that violate federal regulations, establishes a system for identifying and monitoring tax stamping, and establishes prohibitions relating to certain cigarettes. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 2378 amends the Tax Code to prohibit a person from affixing a stamp to a package of cigarettes if the package contains cigarettes with respect to which any person is not in compliance with federal regulations relating to submission of ingredient information to federal authorities, imports of certain cigarettes, or previously exported tobacco products. The bill requires the comptroller of public accounts (comptroller) to design and furnish stamps in a manner that permits identification of the person that affixed the stamp to the particular package of cigarettes by means of a number or other mark on the stamp. The bill requires the comptroller to maintain for at least four years the information identifying the person that affixed the stamp to each package of cigarettes. The bill provides that a distributor must include in the distributor's records of purchase or receipt a copy of customs certificates for all cigarettes imported into the United States to which the distributor has affixed a tax stamp. The bill adds that a person must knowingly affix stamps to prohibited cigarettes in order for the person to commit an offense (Sec. 154.5025). The bill amends the Business & Commerce Code to authorize a person who sells, distributes, or manufactures cigarettes and who sustains direct economic or commercial injury as a result of a violation of affixing stamps to prohibited cigarettes or a violation of the prohibitions relating to certain cigarettes to bring an action in good faith for appropriate injunctive relief in addition to any other remedy provided by law. H.B. 2378 amends the Penal Code to prohibit a person from acquiring, holding, owning, possessing, or transporting for sale or distribution in this state or importing or causing to be imported into this state for sale or distribution in this state certain contraband cigarettes. The bill provides that a person who commits a prohibited act involving such contraband cigarettes commits a Class A misdemeanor if the person knows or has reason to know that the person is committing a prohibited act. EFFECTIVE DATE September 1, 2001.