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.