S03540 Summary:

BILL NOS03540
 
SAME ASSAME AS A03104
 
SPONSORSTAVISKY
 
COSPNSR
 
MLTSPNSR
 
Amd 472, 482, 1846, 483 & 1814, Tax L; add 99-ff, St Fin L
 
Relates to the creation of the cigarette tax enforcement fund; makes an appropriation therefor.
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S03540 Actions:

BILL NOS03540
 
02/08/2019REFERRED TO FINANCE
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S03540 Committee Votes:

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S03540 Floor Votes:

There are no votes for this bill in this legislative session.
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S03540 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          3540
 
                               2019-2020 Regular Sessions
 
                    IN SENATE
 
                                    February 8, 2019
                                       ___________
 
        Introduced  by Sen. STAVISKY -- read twice and ordered printed, and when
          printed to be committed to the Committee on Finance
 
        AN ACT to amend the tax law and the state finance law,  in  relation  to
          the  creation  of  the  cigarette  tax enforcement fund; and making an
          appropriation therefor

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. Subdivision 1 of section 472 of the tax law, as amended by
     2  chapter 629 of the laws of 1996, and as further amended by  section  104
     3  of  part  A  of  chapter  62  of the laws of 2011, is amended to read as
     4  follows:
     5    1. The commissioner shall prescribe, prepare  and  furnish  stamps  of
     6  such denominations and quantities as may be necessary for the payment of
     7  the  tax  on cigarettes imposed by this article, plus the payment by the
     8  agent of a concurrent expense allowance for the cigarette  tax  enforce-
     9  ment  fund  established  pursuant to section ninety-nine-ff of the state
    10  finance law of four cents per stamp which shall be deposited pursuant to
    11  subdivision (c) of section four hundred eighty-two of this article,  and
    12  may from time to time and as often as he deems advisable provide for the
    13  issuance  and exclusive use of stamps of a new design and forbid the use
    14  of stamps of any other  design,  in  the  manner  and  with  the  effect
    15  provided  in  section  two  hundred  seventy-four  of  this chapter. The
    16  commissioner shall make provisions for the sale of such stamps  at  such
    17  places and at such times as he may deem necessary and may license agents
    18  for  such  purpose.  The commissioner may license dealers in cigarettes,
    19  who maintain separate warehousing facilities for the purpose of  receiv-
    20  ing  and distributing cigarettes and conducting their business, who have
    21  received commitments from at least  two  cigarette  manufacturers  whose
    22  aggregate  market  share is at least forty percent of the New York state
    23  cigarette market, and importers, exporters and  manufacturers  of  ciga-
    24  rettes,  and  other persons within or without the state as agents to buy
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08118-01-9

        S. 3540                             2
 
     1  or affix stamps to be used in paying the  tax  herein  imposed,  but  an
     2  agent  shall  at  all  times have the right to appoint the person in his
     3  employ who is to affix the stamps to any cigarettes  under  the  agent's
     4  control.  The  fee  for  filing  such application for an agent's license
     5  shall be one thousand five hundred dollars, unless  such  fee  has  been
     6  paid  during  the  preceding twelve months, in which case, the fee for a
     7  new license shall be one thousand dollars.  All  of  the  provisions  of
     8  section  four hundred eighty of this article relating to wholesale deal-
     9  ers' licenses,  including  the  procedure  for  suspension,  revocation,
    10  refusal  to  license and for hearings, except for paragraphs (c) and (g)
    11  of subdivision one of such  section,  shall  be  applicable  to  agents'
    12  licenses  applied  for  or  granted pursuant to this section, as if such
    13  provisions had been set forth  in  full  in  this  subdivision  and  had
    14  expressly  referred  to  the applicant for, or the holder of, an agent's
    15  license. Whenever the commissioner shall sell and deliver  to  any  such
    16  agent  any  such  stamps,  such  agent  shall  be entitled to receive as
    17  compensation for his services and expenses as such agent in  selling  or
    18  affixing  such stamps, and to retain out of the moneys to be paid by him
    19  for such stamps, a commission on the par value thereof. The commissioner
    20  is hereby authorized to prescribe a schedule of commissions, not exceed-
    21  ing five per centum, allowable to such agent  for  buying  and  affixing
    22  such  stamps. Such schedule shall be uniform with respect to the differ-
    23  ent types of stamps used, and may be on a graduated scale  with  respect
    24  to  the  number  of  stamps  purchased.  The  commissioner  may,  in his
    25  discretion, permit an agent to pay for such stamps  within  thirty  days
    26  after  the  date of purchase and may require any such agent to file with
    27  the department [of taxation and finance]  a  bond  issued  by  a  surety
    28  company  approved  by  the  superintendent  of  financial services as to
    29  solvency and responsibility and authorized to transact business  in  the
    30  state  or  other security acceptable to the commissioner, in such amount
    31  as the commissioner may fix, to secure the payment of any sums due  from
    32  such  agent  pursuant  to  this  article. If securities are deposited as
    33  security under this subdivision, such securities shall be  kept  in  the
    34  custody  of  the  commissioner and may be sold by the commissioner if it
    35  becomes necessary so to do in order to recover any sums  due  from  such
    36  agent  pursuant  to  this  article,  but no such sale shall be had until
    37  after such agent shall have had opportunity to litigate the validity  of
    38  any  tax if it elects so to do. Upon any such sale, the surplus, if any,
    39  above the sums due under this article shall be returned to such agent.
    40    § 2. Section 482 of the tax law is amended by adding a new subdivision
    41  (c) to read as follows:
    42    (c) From the amounts received pursuant to subdivision one  of  section
    43  four hundred seventy-two of this article, the commissioner shall deposit
    44  in  the  cigarette  tax enforcement fund established pursuant to section
    45  ninety-nine-ff of the state finance law the concurrent expense allowance
    46  for the cigarette tax enforcement fund of four cents per stamp.
    47    § 3. The state finance law is amended by adding a new section 99-ff to
    48  read as follows:
    49    § 99-ff. Cigarette tax enforcement fund. 1. There is hereby created in
    50  the joint custody of the state comptroller and the commissioner of taxa-
    51  tion and finance an account of the miscellaneous special revenue fund to
    52  be known as the "cigarette tax enforcement fund".
    53    2. Notwithstanding any other law, rule or regulation to the  contrary,
    54  the  state  comptroller is hereby authorized and directed to receive for
    55  deposit to the credit of  the  cigarette  tax  enforcement  fund  monies
    56  received  from the commissioner of taxation and finance from the concur-

        S. 3540                             3
 
     1  rent expense allowance paid pursuant to subdivision one of section  four
     2  hundred seventy-two of the tax law, monies received from the commission-
     3  er of taxation and finance from the sale of forfeited cigarettes author-
     4  ized  pursuant to section eighteen hundred forty-six of the tax law, and
     5  other monies appropriated, credited  or  transferred  thereto  from  any
     6  other fund or source.
     7    3.  The  proceeds  of the cigarette tax enforcement fund shall be used
     8  solely to enforce (i) the collection of the  cigarette  tax  imposed  by
     9  article  twenty of the tax law or (ii) the cigarette marketing standards
    10  act, as established by article twenty-A of the tax law.
    11    4. Monies in the cigarette tax enforcement fund shall be kept separate
    12  and apart and shall not be commingled  with  any  other  moneys  in  the
    13  custody  of the comptroller and shall only be expended as provided here-
    14  in.
    15    5. Monies of the fund shall be available to the commissioner of  taxa-
    16  tion and finance for purposes of carrying out the provisions of subdivi-
    17  sion  (j)  of section eighteen hundred fourteen of the tax law and shall
    18  be paid out of the fund on the audit and warrant of the  comptroller  on
    19  vouchers  certified  or  approved  by  the  commissioner of taxation and
    20  finance.
    21    6. In the month immediately following the month in which  the  balance
    22  of the fund exceeds six million five hundred thousand dollars, the comp-
    23  troller shall, upon receipt of a certificate of allocation issued by the
    24  director  of the division of the budget, transfer six million dollars to
    25  the division of state police to support the division's cigarette tax, as
    26  imposed by article twenty of the tax law, and  the  cigarette  marketing
    27  standards  act,  as  established  by  article  twenty-A  of the tax law,
    28  enforcement activities. These funds may be  apportioned  to  either  the
    29  patrol  activities  or criminal investigation activities programs of the
    30  division of state police, may be  transferred  or  suballocated  to  any
    31  other  state  agency or public authority for their costs associated with
    32  the enforcement of the cigarette tax or the cigarette  marketing  stand-
    33  ards  act,  and  may be used to contract with local enforcement agencies
    34  for cigarette tax and/or cigarette marketing standards  act  enforcement
    35  activities.
    36    §  4. Subdivisions (a), (b) and (c) of section 1846 of the tax law, as
    37  amended by chapter 556 of the laws of  2011,  are  amended  to  read  as
    38  follows:
    39    (a) Whenever a police officer designated in section 1.20 of the crimi-
    40  nal  procedure  law or a peace officer designated in subdivision four of
    41  section 2.10 of such law, acting pursuant to his or her special  duties,
    42  shall  discover any cigarettes subject to tax provided by article twenty
    43  of this chapter or by chapter thirteen of title eleven of  the  adminis-
    44  trative  code  of  the  city of New York, and upon which the tax has not
    45  been paid or the stamps not affixed as required by such article or  such
    46  chapter  thirteen, they are hereby authorized and empowered forthwith to
    47  seize and take possession of such cigarettes, together with any  vending
    48  machine  or receptacle in which they are held for sale. Such cigarettes,
    49  vending machine or receptacle seized by a police officer or  such  peace
    50  officer  shall  be  turned  over  to the commissioner. Such seized ciga-
    51  rettes, vending machine or receptacle, not including money contained  in
    52  such vending machine or receptacle, shall be forfeited to the state. The
    53  commissioner  may, within a reasonable time thereafter, upon publication
    54  of a notice to such effect for at least five successive days, before the
    55  day of sale, in a newspaper published or circulated in the county  where
    56  the  seizure  was made, sell such forfeited vending machines or recepta-

        S. 3540                             4
 
     1  cles at public sale and pay the proceeds into the state treasury to  the
     2  credit  of the general fund. Notwithstanding any other provision of this
     3  section, the commissioner may enter into an agreement with any  city  of
     4  this  state  which is authorized to impose a tax similar to that imposed
     5  by article twenty of this chapter to provide for the disposition between
     6  the state and any such city of the proceeds from any  such  sale.    All
     7  cigarettes  forfeited  to  the state [shall be destroyed or used for law
     8  enforcement purposes], except [that] cigarettes  that  violate,  or  are
     9  suspected of violating, federal trademark laws or import laws shall [not
    10  be used for law enforcement purposes. If the commissioner determines the
    11  cigarettes  may not be used for law enforcement purposes], upon publica-
    12  tion in the state registry, be available for inspection by the  manufac-
    13  turer who shall determine whether such cigarettes are of saleable quali-
    14  ty  and such cigarettes shall be offered for sale to such manufacturers.
    15  Any cigarettes that are either not inspected by the manufacturer  within
    16  five  days of the publication in the state registry or are not purchased
    17  by the manufacturer after being determined to  be  of  saleable  quality
    18  shall,  upon  publication  in the state registry, be offered for sale to
    19  agents, as such term is defined in subdivision eleven  of  section  four
    20  hundred  seventy  of  this  chapter, to a price equaling two dollars and
    21  twenty cents per pack of twenty cigarettes. Any such cigarettes that are
    22  either not sold within a reasonable period of time after  being  offered
    23  for  sale to agents or deemed unsaleable by the manufacturer shall, upon
    24  publication in the state registry, be destroyed or used for law enforce-
    25  ment purposes. If the commissioner determines the cigarettes may not  be
    26  offered  for  sale  to  the  manufacturers  or  agents,  or used for law
    27  enforcement purposes because such cigarettes violate, or  are  suspected
    28  of  violating,  federal  trademark laws or import laws, the commissioner
    29  must, within a reasonable time after the forfeiture of such  cigarettes,
    30  upon  publication  in  the  state registry, destroy such forfeited ciga-
    31  rettes. The commissioner may, prior to any  destruction  of  cigarettes,
    32  permit  the  true  holder  of  the trademark rights in the cigarettes to
    33  inspect such forfeited cigarettes in order to  assist  in  any  investi-
    34  gation  regarding  such cigarettes.  The revenue from all sales of ciga-
    35  rettes made pursuant to this subdivision shall be deposited in the ciga-
    36  rette tax enforcement fund, as established in section ninety-nine-ff  of
    37  the state finance law.
    38    (b)  [In  the alternative] Prior to making forfeited cigarettes avail-
    39  able for inspection or purchase by the manufacturer, offering such ciga-
    40  rettes for sale to agents, or using such cigarettes for law  enforcement
    41  purposes  in  accordance  with  subdivision (a) of this section, the tax
    42  commission, on reasonable notice by mail or otherwise,  may  permit  the
    43  person  from  whom  said cigarettes were seized to redeem the said ciga-
    44  rettes, and any vending machine or receptacle seized therewith,  by  the
    45  payment of the tax due, plus a penalty of fifty per centum thereof, plus
    46  interest  on  the  amount  of tax due for each month or fraction thereof
    47  after such tax became due (determined without regard to any extension of
    48  time for filing or paying) at the  rate  applicable  under  subparagraph
    49  (ii)  of paragraph (a) of subdivision one of section four hundred eight-
    50  y-one of this chapter and the costs incurred in such  proceeding,  which
    51  total  payment  shall  not be less than five dollars; provided, however,
    52  that such seizure and sale or redemption shall not be deemed to  relieve
    53  any  person  from  fine or imprisonment provided for in this article for
    54  violation of any provision of article twenty of this chapter.
    55    (c) [In the alternative] After making forfeited  cigarettes  available
    56  for  inspection  or purchase by the manufacturer and offering such ciga-

        S. 3540                             5
 
     1  rettes for sale to agents in accordance with  subdivision  (a)  of  this
     2  section,  the tax commission may dispose of any cigarettes seized pursu-
     3  ant to this section, except those that  violate,  or  are  suspected  of
     4  violating,  federal  trademark laws or import laws, by transferring them
     5  to the department of corrections and community supervision for  sale  to
     6  or use by inmates in such institutions.
     7    §  5.  Subdivision  (b)  of  section 483 of the tax law, as amended by
     8  chapter 860 of the laws of 1987, subparagraph (A)  of  paragraph  1  and
     9  subparagraph (B) of paragraph 3 as amended by chapter 744 of the laws of
    10  1990,  subparagraph  (B)  of  paragraph 1 as amended by chapter 1 of the
    11  laws of 1999 and subparagraph (B) of paragraph 2 as amended by chapter 4
    12  of the laws of 1988, is amended to read as follows:
    13    (b) 1. (A) The term "cost of the agent" shall mean the basic  cost  of
    14  cigarettes  plus the cost of doing business by the agent as evidenced by
    15  the accounting standards and methods regularly employed by said agent in
    16  his determination of costs for the purpose of federal income tax report-
    17  ing for the total operation of  his  establishment,  and  must  include,
    18  without  limitation,  labor,  including salaries of executives and offi-
    19  cers, rent,  depreciation,  selling  costs,  maintenance  of  equipment,
    20  delivery  costs,  interest payable, all types of licenses, taxes, insur-
    21  ance and advertising expressed as a percentage and applied to the  basic
    22  cost  of  cigarettes.  Any  fractional part of a cent in the cost to the
    23  agent per carton of cigarettes shall be rounded off to the  next  higher
    24  cent.  In  the  case  of  sales  at retail by an agent, the "cost of the
    25  agent" shall be the same as the "cost of the retail dealer". In the case
    26  of sales of cigarettes to a chain store having fifteen  or  more  retail
    27  outlets,  excluding  vending machine operators, which are delivered to a
    28  central warehouse owned and operated by such chain store and  which  are
    29  delivered  to  its  retail  outlets by the chain store, the "cost of the
    30  agent" shall be presumed to be the basic cost of cigarettes. There shall
    31  be determined a separate cost of the agent for sales to wholesale  deal-
    32  ers and for sales to retail dealers.
    33    (B) In the absence of the filing with the commissioner of satisfactory
    34  proof  of  a lesser cost of doing business of the agent making the sale,
    35  the cost of doing business by the agent shall be presumed to be  [seven-
    36  eighths  of  one] two and one-quarter percent of the basic cost of ciga-
    37  rettes for sales to wholesale dealers plus one cent per package  of  ten
    38  cigarettes,  two  cents per package of twenty cigarettes and in the case
    39  of a package containing more than twenty cigarettes, two cents and  one-
    40  half  of a cent for each five cigarettes in excess of twenty cigarettes,
    41  [one and one-half] five and three-quarter percent of the basic  cost  of
    42  cigarettes  for  sales  to chain stores plus one cent per package of ten
    43  cigarettes, two cents per package of twenty cigarettes and in  the  case
    44  of  a package containing more than twenty cigarettes, two cents and one-
    45  half of a cent for each five cigarettes in excess of  twenty  cigarettes
    46  and  [three  and  seven-eighths]  five  and three-quarter percent of the
    47  basic cost of cigarettes with respect to sales to  retail  dealers  plus
    48  one  cent per package of ten cigarettes, two cents per package of twenty
    49  cigarettes and in the case of a  package  containing  more  than  twenty
    50  cigarettes, two cents and one-half of a cent for each five cigarettes in
    51  excess  of  twenty  cigarettes and the foregoing cents per pack shall be
    52  included in the "cost of doing business by the  agent"  referred  to  in
    53  paragraphs two and three of this subdivision.
    54    2.  (A)  The  term "cost of the wholesale dealer" shall mean the basic
    55  cost of cigarettes plus the cost of  doing  business  by  the  wholesale
    56  dealer  as  evidenced  by the accounting standards and methods regularly

        S. 3540                             6
 
     1  employed by said wholesale dealer in his determination of costs for  the
     2  purpose  of  federal income tax reporting for the total operation of his
     3  establishment, and must include, without  limitation,  labor,  including
     4  salaries  of executives and officers, rent, depreciation, selling costs,
     5  maintenance of equipment, delivery costs, interest payable, all types of
     6  licenses, taxes, insurance and advertising expressed as a percentage and
     7  applied to the basic cost of cigarettes, plus the cost of doing business
     8  by the agent with respect to sales of cigarettes to  wholesale  dealers.
     9  Any  fractional  part  of a cent in the cost to the wholesale dealer per
    10  carton of cigarettes shall be rounded off to the next  higher  cent.  In
    11  the  case  of  sales  at  retail by a wholesale dealer, the "cost of the
    12  wholesale dealer" shall be the same as the "cost of the retail  dealer".
    13  There  shall  be  determined a separate cost of the wholesale dealer for
    14  sales to chain stores and for sales to retail dealers.
    15    (B) In the absence of the filing with the tax commission of  satisfac-
    16  tory  proof  of  a lesser cost of doing business of the wholesale dealer
    17  making the sale, the cost of doing business by the wholesale dealer with
    18  respect to sales to retail dealers shall be presumed  to  be  three  and
    19  one-half per centum of the basic cost of cigarettes, and with respect to
    20  sales  to chain stores, [five-eighths of one] three and one-half percent
    21  of the basic cost of cigarettes.
    22    3. (A) The term "cost of the retail dealer" shall mean the basic  cost
    23  of  cigarettes  plus  the cost of doing business by the retail dealer as
    24  evidenced by the accounting standards and methods regularly employed  by
    25  said  retail  dealer  in  his  determination of costs for the purpose of
    26  federal income tax reporting for the total operation of  his  establish-
    27  ment,  and  shall include, without limitation, labor, including salaries
    28  of executives and officers, rent, depreciation, selling  costs,  mainte-
    29  nance  of  equipment,  delivery  costs,  interest  payable, all types of
    30  licenses, taxes, insurance and advertising expressed as a percentage and
    31  applied to the basic cost of cigarettes, plus the cost of doing business
    32  by the agent with respect to sales of cigarettes to retail dealers.  Any
    33  fractional  part  of a cent in the cost to the retail dealer per package
    34  or per carton shall be rounded off to the next higher cent.
    35    (B) In the absence of the filing with the commissioner of taxation and
    36  finance of satisfactory proof of a lesser cost of doing business by  the
    37  retail  dealer making the sale, the cost of doing business by the retail
    38  dealer shall be presumed to be [seven] ten per centum of the sum of  the
    39  basic  cost  of  cigarettes plus the cost of doing business by the agent
    40  with respect to cigarettes sold to retail dealers.
    41    § 6. Section 1814 of the tax law is amended by adding a  new  subdivi-
    42  sion (j) to read as follows:
    43    (j)  (1)  Notwithstanding  any provision of law, rule or regulation to
    44  the contrary, the commissioner shall establish a program to allow  indi-
    45  viduals  to  submit  a  sworn  statement  affirming the observation of a
    46  violation of article twenty  of this chapter and, where the commissioner
    47  deems it appropriate, allow for a reward for any such  sworn  statement.
    48  Where  enforcement  action  is taken pursuant to this article or article
    49  twenty of this chapter based upon a sworn statement by one or more indi-
    50  viduals and where the commissioner determines, in the exercise of his or
    51  her discretion, that such sworn statement, either alone or  in  conjunc-
    52  tion  with  the  testimony of the person submitting such sworn statement
    53  contributes to the imposition of a civil or criminal  penalty  upon  any
    54  person  for a violation of this article, or article twenty of this chap-
    55  ter, the commissioner shall offer as a  reward  to  such  individual  or
    56  individuals  an amount that, in the aggregate, is five dollars. No peace

        S. 3540                             7
 
     1  officer, police officer or employee of the department, employee  of  any
     2  company  under  contract with the department, or employee of any govern-
     3  mental  entity  that,  in  conjunction  with  the  department,  conducts
     4  enforcement  activity relating to a violation of this article or article
     5  twenty of this chapter, shall be entitled to obtain the benefit  of  any
     6  such reward when acting in the discharge of his or her official duties.
     7    (2)  All  rewards paid pursuant to this section shall be paid from the
     8  cigarette tax enforcement fund, as established in section ninety-nine-ff
     9  of the state finance law.
    10    § 7. Beginning the month immediately following the month in which  the
    11  cigarette  tax  enforcement fund, as established in section 99-ff of the
    12  state finance law, is established, there is hereby appropriated  to  the
    13  division  of state police the amount of six million dollars ($6,000,000)
    14  from the cigarette tax enforcement fund to  support  cigarette  tax,  as
    15  imposed  by article 20 of the tax law, and cigarette marketing standards
    16  act, as established by article 20-A of the tax law,  enforcement  activ-
    17  ities. This appropriation may be apportioned to either the patrol activ-
    18  ities  or  criminal investigation activities programs of the division of
    19  state police, may be transferred or  suballocated  to  any  other  state
    20  agency  or public authority for their costs associated with the enforce-
    21  ment of the cigarette tax or the cigarette marketing standards act,  and
    22  may  be  used  to contract with local enforcement agencies for cigarette
    23  tax and/or cigarette marketing standards act enforcement activities.  No
    24  monies  shall  be available from this appropriation absent a certificate
    25  of allocation from the director of the budget.
    26    § 8. This act shall take effect on the first  day  of  the  sales  tax
    27  quarterly period, as described in subdivision (b) of section 1136 of the
    28  tax  law, next succeeding the thirtieth day after it shall have become a
    29  law and shall apply  in  accordance  with  the  applicable  transitional
    30  provisions of sections 1106 and 1217 of the tax law.
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