03/22/2004 03:30 PM House L&C

SB 291-UNSTAMPED CIGARETTES                                                                                                 
                                                                                                                                
CHAIR ANDERSON  announced that the  next order of  business would                                                               
be SENATE BILL  NO. 291, "An Act extending  the transition period                                                               
for activities involving unstamped  cigarettes; and providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
Number 1698                                                                                                                     
                                                                                                                                
SENATOR CON BUNDE, Alaska State Legislature, presented SB 291 on                                                                
behalf of the Senate Labor and Commerce Committee, sponsor,                                                                     
which he chairs.  He testified:                                                                                                 
                                                                                                                                
     This  is probably  a good  illustration why  we have  a                                                                    
     legislature  and  we don't  put  all  our laws  in  the                                                                    
     constitution,   because   things    change   that   are                                                                    
     unforeseen. ...  Way back when we  passed the cigarette                                                                    
     tax,  ... it  turned  out there  was a  bit  of a  gray                                                                    
     market that  was established and,  in order to  help us                                                                    
     enforce our  Alaska law on  cigarette taxes,  we needed                                                                    
     to establish  a stamping  procedure so  that cigarettes                                                                    
     sold in Alaska were stamped.                                                                                               
                                                                                                                                
     We passed this bill last  year with your help, and then                                                                    
     unforeseen  circumstances  arose.   And  that  is,  the                                                                    
     tobacco  manufacturers,  cigarette manufacturers,  used                                                                    
     to have a very liberal  return policy.  Apparently, any                                                                    
     unsold  stock  could  have been  returned  for  a  full                                                                    
     credit.   For  whatever reason,  they chose  not to  do                                                                    
     that any longer.                                                                                                           
                                                                                                                                
     We had  ... a  reasonable deadline  in the  bill, which                                                                    
     was by  March 31  all unstamped cigarettes  should have                                                                    
     been sold.  It turns  out that [retailers] are not able                                                                    
     to  sell their  ... arrearage,  if you  will, or  their                                                                    
     stock, and  they won't  be able to  return them  to the                                                                    
     manufacturer.   And it certainly  wasn't the  intent of                                                                    
     this legislation to cause a loss for those retailers.                                                                      
                                                                                                                                
     So what we've done in this  bill is extend to June 30th                                                                    
     the  deadline  for   selling  unstamped  cigarettes  in                                                                    
     Alaska.    This  certainly  should be  ample  time  for                                                                    
     retailers to dispose of  all their previously purchased                                                                    
     cigarettes that were unstamped.   And then, after that,                                                                    
     we  can move  forward with  the new  law that  requires                                                                    
     stamps ... and enforcement of Alaska's tax laws.                                                                           
                                                                                                                                
Number 1850                                                                                                                     
                                                                                                                                
MIKE  ELERDING,  Owner,  Northern  Sales  Company  of  Alaska,  a                                                               
wholesale   distributor  operating   in  Southeast   Alaska  that                                                               
primarily sells tobacco products, testified as follows:                                                                         
                                                                                                                                
     We support  the passage  of Senate  Bill 291.  ... Last                                                                    
     year  the  passage  of Senate  Bill  168  required  all                                                                    
     cigarettes  imported  into  the   state  to  possess  a                                                                    
     tobacco  stamp  on  each carton  of  cigarettes.    The                                                                    
     effective date of  ... Senate Bill 168  was January 1st                                                                    
     [2004], and  there was a  90-day transition  period, as                                                                    
     Senator Bunde  pointed out, through March  31, to phase                                                                    
     in the conversion from  stamped to unstamped inventory.                                                                    
     ... Effective March 31st, it's  going to be illegal for                                                                    
     retailers   ...   or   anyone  to   possess   unstamped                                                                    
     cigarettes.  But, unfortunately,  there are still a lot                                                                    
     of  unstamped  inventory  ...   at  retail,  which  ...                                                                    
     creates a problem.                                                                                                         
                                                                                                                                
     As Senator  Bunde said, the primary  reason the initial                                                                    
     90 days didn't go through  was because of a change that                                                                    
     the  manufacturers   implemented  after   we'd  already                                                                    
     passed  Senate   Bill  168.     So,  without   ...  the                                                                    
     legislature's action,  we're going to have  a number of                                                                    
     retailers  in  the state  who  ...  find themselves  in                                                                    
     possession of illegal cigarettes  that would be subject                                                                    
     to seizure  ... and, as  a result, they could  suffer a                                                                    
     severe financial loss from this.   The easy and correct                                                                    
     way to fix this would be  to extend the date from March                                                                    
     31 to June 30, as Senator  Bunde has done ... in Senate                                                                    
     Bill 291.                                                                                                                  
                                                                                                                                
Number 1933                                                                                                                     
                                                                                                                                
JOHANNA BALES, Excise Audit Manager,  Tax Division, Department of                                                               
Revenue, noted that she is  the program manager for the cigarette                                                               
and tobacco products  tax.  Ms. Bales reported  that her division                                                               
had   received  approximately   100  phone   calls  from   retail                                                               
businesses  due  to  their  concerns   over  the  change  in  the                                                               
[cigarette]  manufacturers'  policy  and the  resulting  possible                                                               
loss of  revenue to their businesses.   She said, "In  a way, I'm                                                               
testifying for  those 100 retailers  across the state  who called                                                               
us ... and are hoping for the passage of this legislation."                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD asked  what  would happen  if this  bill                                                               
doesn't pass by March 31, 2004.                                                                                                 
                                                                                                                                
MS. BALES replied  that she would be meeting  with the governor's                                                               
office [March  23, 2004] to  discuss this issue, and  believes it                                                               
would  be  possible to  suspend  enforcement,  in this  instance,                                                               
until her  division is certain it  is carrying out the  intent of                                                               
the law.                                                                                                                        
                                                                                                                                
SENATOR  BUNDE commented  that absent  clear legislative  intent,                                                               
the  law  would  require  that  the  unstamped  tobacco  products                                                               
purchased  before the  law  went  into effect  would  have to  be                                                               
confiscated.                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  reassured Senator  Bunde that  the House                                                               
Rules  Standing  Committee  [which   he  chairs]  would  expedite                                                               
calendaring for SB 291.                                                                                                         
                                                                                                                                
Number 2038                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved  to report SB 291  out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  SB 291 was reported  from the                                                               
House Labor and Commerce Standing Committee.