Legislature(2003 - 2004)
02/23/2004 10:02 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 291 "An Act extending the transition period for activities involving unstamped cigarettes; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated that the Senate Labor & Commerce Committee is the sponsor of this legislation which would extend the transition period for the sale of unstamped cigarettes that were in the State prior to January 1, 2004, from March 31, 2004 to June 30, 2004. He noted that this extension would provide dealers and distributors an additional 90 days to dispose of unstamped cigarettes. JANE ALBERTS, Staff to Senator Con Bunde and Aide, Senate Labor & Commerce (L&C) Committee, explained that this bill is the result of an "unforeseen and unexpected" situation relating to the adoption of SB 168-CIGARETTE SALE/DISTRIBUTION during the 2003 Legislative session that required cigarettes for sale in the State to display a tax stamp which "would indicate that a tax had indeed been paid on the product." She reminded that SB 168 specified the date of March 31, 2004 as the deadline by which dealers and distributors must have disposed of any unstamped inventory purchased prior to January 1, 2004. She noted that, at the time SB 168 was adopted, this timeframe, based on the recent enactment of similar legislation in Hawaii, had been considered ample time for disposal. However, she continued, the tobacco companies' "once liberal" and long-standing supplier returned goods policy was changed in the fall of 2003 to a more restrictive policy that "makes it almost impossible for the dealers and distributors to return their cigarettes for full credit." She noted that, had the tobacco companies' policy not changed, the Department of Revenue could have issued credits for previously taxed cigarettes and the retailers and wholesalers could have repurchased cigarettes bearing the tax stamp. Therefore, she stated, this legislation was developed to allow for the depletion of the previously purchased inventory. In addition, she shared that the tobacco industry has been unresponsive to the Department of Revenue's request that their prior return policy be reinstated. Ms. Alberts reminded that SB 168 also prohibits cigarettes from being "loss leader," or reduced price, items. This restriction, she stated, prevents dealers and distributors from being able to sell their unstamped inventory more quickly. Therefore, she noted, were this legislation not adopted, the unsold inventory would be considered, as of March 31, 2004, as contraband and would be subject to State seizure. She stated that this legislation is being presented, at the recommendation of the Department of Revenue, in order to extend the deadline to June 30, 2004 in order to provide dealers and distributors time to sell their unstamped cigarette inventory. She pointed out that the Members' packets contain numerous letters in support of the legislation. JOHANNA BALES, Program Manager, Cigarette and Tobacco Products Excise Tax, Department of Revenue, testified via teleconference from Anchorage and expressed that the Department has received in excess of 50 communications from distributors and retailers voicing concern regarding this situation. She relayed that as a result of the Department's efforts to discuss the situation with tobacco manufacturers, relief might be forthcoming to assist distributors with the tax stamp situation. However, she noted, no remedy to address the retailers' situation has been determined. She stated that the Department supports this legislation. MIKE ELERDING, President, Northern Sales Company Alaska, Inc., testified via teleconference from Ketchikan to voice that the tobacco industry unanimously supports this legislation. He also noted that he has submitted written testimony, dated February 23, 2004, [copy on file] in support of this bill. Co-Chair Green moved to report the bill from Committee with individual recommendations and accompanying fiscal note. Senator Bunde stated that people like Mr. Elerding had assisted in the original tax stamp legislation, and he assured that there was no intent to have people like him "financially inconvenienced by the process." Continuing, he requested that the passage of this bill be expedited. Co-Chair Wilken concurred and noted that the current situation was "unintended" and were the result of "the rules" being changed. There being no objection, SB 291 was REPORTED from Committee with zero fiscal note #1, dated February 9, 2004, from the Department of Revenue.
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