Legislature(2003 - 2004)
06/22/2004 02:55 PM Senate L&C
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* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
June 22, 2004
2:55 p.m.
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Bettye Davis
Senator Hollis French
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 1001
"An Act relating to taxes on cigarettes and tobacco products, to
tax stamps on cigarettes, to forfeiture of cigarettes and of
property used in the manufacture, transportation, possession, or
sale of unstamped cigarettes, to accounting for and use of part
of the proceeds of the additional cigarette tax, and to licenses
and licensees under the Cigarette Tax Act; relating to unfair
cigarette sales; and providing for an effective date."
MOVED SB 1001 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB1001
SHORT TITLE: TOBACCO TAX; LICENSING; PENALTIES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
WITNESS REGISTER
Ms. Joanna Bales, Program Manager
Cigarette and Tobacco Products Excise Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Commented on SB 1001.
Commissioner Joel Gilbertson
Department of Health &
Social Services
PO Box 110601
Juneau, AK 99801-0601
POSITION STATEMENT: Commented on SB 1001.
ACTION NARRATIVE
TAPE 04-43, SIDE A
SB1001-TOBACCO TAX; LICENSING; PENALTIES
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 2:55 p.m. All members were
present. The first order of business to come before the
committee was SB 1001.
MS. JOANNA BALES, Program Manager, Cigarette and Tobacco
Products Excise Tax Division, Department of Revenue (DOR),
identified the major changes in the bill. First, it outlines the
intent to provide funding to the tobacco control programs at
minimum levels recommended by the U.S. Department of Health and
Human Services - approximately $4 million each year.
CHAIR BUNDE clarified that the money goes to state agencies that
work with tobacco cessation, not the non-profits to pay their
staff.
MS. BALES agreed and added that the money would go to Department
of Health and Social Services (DHSS). A person is allowed to
import two cartons of cigarettes per month without incurring the
tax, what the federal government allows people to import duty-
free. The cigarettes cannot be transported through the mail and
must be for personal use.
SB 1001 changes the threshold from 1,000 cigarettes to 5,000
cigarettes for a class C felony in the cigarette shipping
restriction law. The reason is that the threshold for a class C
felony theft is $500 and the tax due on 5,000 cigarettes would
be $500.
Another provision adds a section saying that the State of Alaska
can collect cigarette taxes from out-of-state sellers to the
fullest extent allowed under the constitution. This language
gives the state some leeway when an out-of-state seller is
selling into the state. The other tobacco products (OTP) tax,
which is levied on individuals who bring in other tobacco
products for personal consumption remains in this version.
CHAIR BUNDE related that this section pertained mostly to
cigars.
MS. BALES added that manufacturers are now making machine-made
cigars that meet the definition of a cigar, but are being
advertised as a substitute for cigarettes.
SENATOR RALPH SEEKINS asked what the difference would be for a
pack of cigarettes and a pack of cigars.
MS. BALES answered that the mini-cigar called Prime Time is
being sold in Alaska and can be bought on the Internet for $18
per carton. If a person brought that into the state, the tax
would be $18 for a total of $36. A carton of cigarettes would
run from $42 - $70 per carton. Without this provision, one would
only pay $18 for a carton of cigars.
SENATOR SEEKINS asked why the tax wasn't paid on the weight of
the product.
MS. BALES replied that some states have done that and found that
is more convoluted to administer.
SENATOR GARY STEVENS asked if there were any tax exemptions.
MS. BALES replied that the state has no authority to levy a tax
on military installations, Indian reservations or on Indian
Country. There are two such locations in Alaska - the Metlakatla
Smoke Shop and the Klawock Smoke Shop. She emphasized that these
exemptions were strictly for personal consumption.
MS. BALES said that the bill also clarifies a forfeiture of
property provision that would only come into play when the crime
committed was a felony, not a misdemeanor.
CHAIR BUNDE summarized that this bill increases the tax to a
full dollar the day that it's effective and has a floor stock
tax to prevent stock piling and taxes other tobacco products.
SENATOR STEVENS wanted to know how the additional monies going
to cessation programs were going to be used.
MS. BALES replied that the $4 million tax is in addition to the
$4 million to $5 million that is received each year from the
master settlement agreement. The commissioner of the Division of
Health and Social Services would address how the funds are used.
COMMISSIONER JOEL GILLBERTSON, Department of Health and Social
Services (DHSS), explained that adding $4 million would augment
existing funds coming from the master settlement agreement. His
department provides a variety of services with the tobacco
control program dollars for cessation and intervention.
Competitive grants are awarded to different organizations like
the Tobacco Control Alliance, preventive ads are placed on radio
and T.V. and a private toll-free quit line is operated for
cessation services. Funds come to the department first and are
disbursed through grants and contracts.
CHAIR BUNDE asked if there was a mechanism in place that could
absorb the $4 million tax increase effectively.
COMMISSIONER GILBERTSON said that an orderly ramp-up is needed
in program services.
SENATOR STEVENS asked what major organizations his department
would provide grants to.
COMMISSIONER GILBERTSON replied to organizations for cessations
and education, the quit-line, advertising efforts, and possible
new programs. Some funds are used in-house for things like
epidemiological surveys, data collection and general services.
CHAIR BUNDE asked if municipalities could apply for and receive
the competitive grants.
COMMISSIONER GILBERTSON replied yes.
SENATOR SEEKINS moved to pass SB 1001 from committee with
individual recommendations and attached fiscal notes. Senators
Davis, French, Seekins, Gary Stevens and Chair Bunde voted yea;
and SB 1001 moved from committee.
There being no further business to come before the committee,
Chair Bunde adjourned the meeting at 3:15 p.m.
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