"An Act relating to issuance and revocation of licenses for the importation, sale, distribution, or manufacture of cigarettes and tobacco products; relating to a tax refund or credit for unsaleable, returned, or destroyed tobacco products; relating to restrictions on shipping or transporting cigarettes; relating to records concerning the sale of cigarettes; amending and adding definitions relating to cigarette taxes; relating to the payment of cigarette taxes; relating to penalties applicable to cigarette taxes; relating to the definition of the wholesale price of tobacco products; relating to payment of cigarette taxes through the use of cigarette tax stamps; relating to provisions making certain cigarettes contraband and subject to seizure and forfeiture; relating to certain crimes, penalties, and interest concerning tobacco taxes and stamps; relating to cigarette sales; and providing for an effective date."
"All cigarette purchasers should be paying tax equally, whether purchasing over the counter or over the internet."
- Sen. Bunde
This bill is designed to more adequately regulate the collection of taxes on cigarettes. There is an unknown quantity of untaxed cigarettes imported into the state of Alaska every year and existing laws make it difficult to track their numbers. All cigarette purchasers should be paying tax equally, whether purchasing over the counter or over the internet.
SB 168 is being brought forward on behalf of those consumers who already pay legitimate taxes on their cigarettes. This is a fair tax issue in that the bill will enforce the payment of tax on all cigarettes that are brought into Alaska.
For this reason, this bill would require that a "tax stamp" be affixed on each package of cigarettes on which the tax has been paid. The stamp would be heat-applied so it could not easily be transferred to other untaxed packs and would be difficult to counterfeit. This colorful stamp would make it easy for law enforcement, the Dept. of Revenue and consumers to know if the tax has been paid on any pack of cigarettes and would give them the authority to seize and destroy the unstamped cigarettes. Violators of this law would be subject to civil penalties and criminal liability.
SB 168 would require that the tax be paid before the cigarettes are imported into the state by wholesalers or be stamped by specific, licensed distributors in the state of Alaska before being available for sale.
Another aspect of this bill would be the requirement that anyone receiving a delivery of cigarettes must be licensed by the state of Alaska, which would severely limit the purchase of untaxed cigarettes by individual consumers over the internet. Upon delivery of the cigarettes, the carrier/delivery agent would require that the purchaser show his/her license from the state before the delivery could be made.
Forty-six other states currently require a tax stamp on cigarettes and this bill draws from the statutes and experience of those other states. These other states have shown significant tobacco tax revenue increases by use of the stamp. Hawaii has shown an amazing 25% increase in tax revenue; Michigan reported an increase of 8.7% in its first year of their tax stamp. These results are encouraging, but it still does not give us a reliable basis to predict the success of tobacco tax stamp usage here in Alaska. Cigarette tax revenue is currently about $40 million a year, of which 76% goes into the School Fund and 24% goes toward the General Fund. But even a 1% increase in tax collected would amount to $400,000 in new revenue.
These stamps do not come free, of course, and distributors will indeed incur costs for the affixing of the stamps to individual packs of cigarettes and the cartons. The State of Alaska recognizes that cost and this bill does provide for a tax discount for distributors on a tiered basis to help them defer most of the cost involved.
SB 168 also provides a minimum price provision for wholesalers and retailers, set by the Dept. of Revenue, based on the wholesale list price provided by the tobacco manufacturers. This protects Alaskan distributors by creating a level playing field for competition.
SB 168 will fairly tax all individuals who purchase cigarettes, increase tobacco tax revenues and allow for more uniform tracking of cigarette sales in the State of Alaska.