HBA-AMW H.B. 2378 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2378
By: Kuempel
Ways & Means
3/22/2001
Introduced



BACKGROUND AND PURPOSE 

Because of federal and state taxes, the price of American manufactured
cigarettes intended for export is significantly less 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.  The 76th Legislature prohibited the placement of a
tax stamp on cigarettes manufactured for foreign markets, but the
legislation had the  unintended consequence of prohibiting Americans from
bringing into Texas cigarettes for personal use and for duty-free sales.
House Bill 2378 removes the prohibition against bringing into Texas
cigarettes intended for personal use or for duty-free sales, establishes a
system for identifying and monitoring tax stamping, and specifies that
contraband cigarettes are to be seized and destroyed. 

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 specify that provisions regarding
tax stamps on cigarettes apply to cigarettes brought back into the customs
territory for resale within the customs territory and do not apply to
cigarettes imported or brought into the United States for personal use or
sold or intended to be sold as duty-free merchandise by a duty-free sales
enterprise. 

The bill requires each cigarette distributor (distributor), on or before
the 15th business day of each month, to file with the comptroller of public
accounts (comptroller) copies of the customs certificates for all
cigarettes imported into the United States to which the distributor has
affixed the tax stamp in the preceding month.   

The bill requires the 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 serial number or other mark
on the stamp.  The bill requires the comptroller to maintain for at least
three years the information identifying the person that affixed the stamp
to each package of cigarettes.  The bill also provides that this
information is not confidential or exempt from disclosure to the public. 

H.B. 2378 sets forth prohibitions regarding cigarettes that do not comply
with all applicable requirements imposed by or under federal law and
implementing regulations or cigarettes to which stamps are prohibited from
being affixed (contraband cigarettes).  The bill prohibits a person from: 

            _selling or distributing contraband cigarettes in this state;

             _acquiring, holding, owning, possessing, or transporting,
contraband cigarettes for sale or distribution in this state; or 

            _importing, or causing to be imported, contraband cigarettes
into this state. 

The bill provides that contraband cigarettes acquired, held, owned,
possessed, transported, imported into, or sold or distributed in this state
are subject to seizure and forfeiture without regard to whether the
violation was knowing or otherwise.  The bill requires seized and forfeited
contraband cigarettes to be destroyed. 

EFFECTIVE DATE

September 1, 2001.