NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

The most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website.  The Adobe PDF version includes all attachments, whereas the HTML version does not.  Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:

Garcia

 

DATE TYPED:

1/30/03

 

HB

 

 

SHORT TITLE:

Cigarette Delivery Sales Act

 

SB

58

 

 

ANALYST:

Smith

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

NFI

 

 

 

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

Responses Received From

DFA

 

SUMMARY

 

     Synopsis of Bill

 

Senate Bill 58 bill makes a variety of technical improvements to the Cigarette tax statutes. It enacts the “Cigarette Delivery Sales Act”. The purpose of the act is to enforce compliance. The salient features are listed below.

 

·        Restricts sales of cigarettes to consumers whose age address is verified.  

·        Delivery of cigarettes must include a copy of the act. 

·        Delivery may not take place unless all taxes are paid on the purchase.

·        All distributors/sellers must register with TRD and must provide a record of sale including the consumer's name and address and the brand & quantity of cigarettes sold. 

·        Places monetary and criminal penalties on those who violate the act and provides for forfeiture of fixtures, equipment, materials, and personal property for those who knowingly attempt to defraud or fail to satisfy requirements.

·        Requires distributors to obtain and apply cigarette stamps to their product within 72-hours of receipt of cigarette packages and are forbidden to sell or distribute the stamps to another person or distributor. 

·        Distributors are further restricted to buy cigarettes from a licensed cigarette manufacturer or importer. 

·        Tax-exempt stamps are provided to licensed distributors that are in fully compliance with the reporting requirements of the Cigarette Tax Act. 

 

     Significant Issues

 

Under the Master Settlement Agreement (MSA), states are required to strictly enforce the model statute that “protects the public health gains associated with the MSA".  The Model Statute adopted in New Mexico during the 1999 legislative session (NMSA 6-14-13) requires any tobacco manufacturer selling cigarettes for consumption in New Mexico (whether directly, or through distributor, retailer or similar intermediary or intermediaries) to place $0.0167539 (from 2003 through 2006) for each cigarette sold in an escrow fund.  In essence, the model statute ensures the market share of the original participating manufacturers (OPMs) by equalizing the cigarette price of the small manufacturers (non-participating manufacturers) and the OPMs-- assuming the tax is passed directly on to the consumer.

 

FISCAL IMPLICATIONS

 

If the model statute is not strictly enforced and the MSA is deemed to be a contributing factor in the loss of market share experienced by the OPMs, the non-participating manufacturer’s adjustment will apply to payments received by the states.  This adjustment equals three times the market shares loss experienced by the OPMs.

 

SS/ls