Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports if they are used for other purposes.

 

Current FIRs (in HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us).  Adobe PDF versions include all attachments, whereas HTML versions may 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

HTRC

DATE TYPED

02-17-04

HB

CS/86/aHFL#1

 

SHORT TITLE

Tobacco Stamp Procedure Changes

SB

 

 

 

ANALYST

Neel

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

 

 

 

$577.2

$571.4

 

Recurring

General Fund

$164.6

$162.9

 

Recurring

Credit Enhancement Acct. (GF)

$14.0

$13.9

 

Recurring

Recreation Fund

$28.1

$27.8

 

Recurring

Cigarette Fund

$14.0

$13.9

 

Recurring

UNM Cancer Center

$21.0

$20.8

 

Recurring

NMFA (UNM)

$149.8

$148.3

 

Recurring

NMFA (UNM Health Science)

$63.0

$62.4

 

Recurring

NMFA (DOH)

(Parenthesis ( ) Indicate Revenue Decreases)

 

Relates to:

HB 83, Tobacco Sales Delivery Act;

HB 59  Increase Tobacco Products Tax

SB 67,  Nonparticipating Tobacco Manufacturers

 

SOURCES OF INFORMATION

LFC Files

 

Responses Received From:

Taxation and Revenue Department (TRD)

Human Services Department (HSD)

Department of Health (DOH)

 

No Responses Received From:

Health Policy Commission (HPC)

Department of Finance and Administration (DFA)

 

SUMMARY

 

Synopsis of HFL #1

 

The House Floor amendment strikes the $400 thousand appropriation.

 

Synopsis of Original Bill

 

The House Taxation and Revenue Committee Substitute for House Bill 86 amends the Cigarette Tax Act to statute to modify Section 7-12-(2-13) NMSA 1978 to regulate who may purchase, obtain and apply tobacco stamps.  CS/HB 86 would also require tax exempt stamps to be applied to tax exempt tobacco, remove two tobacco tax waivers, reduce the volume discount on tobacco tax stamps, provide for licensure for tobacco manufacturers and distributors, regulate the shipment of unstamped cigarettes within the state, require reporting and impose civil and criminal penalties for violation. 

 

CS/HB 86 would appropriate $400,000 to the Taxation and Revenue Department for implementation. Any unexpended and unencumbered balance remaining at the end of FY05 will be reverted back to the general fund.

 

The specific changes are as follows:

 

·        Tax-exempt cigarettes--including sales by tribal entities--would be required to have stamps.

·        Cigarettes sold on railroad passenger trains and cigarettes distributed by manufacturers to consumers as free samples would also require a stamp. 

·        Serial numbers would be required on stamps and stamps must now be applied to the pack of cigarettes within 10 days from receipt of the cigarettes.

·        Tax stamp discounts are reduced from 4% to 1.0% on the first $30,000 worth of stamps purchased in a month and from 3% to 0.8% on the next $30,000.  The discount for purchases over $60,000 is reduced from 2% to 0.5%.

·        Manufacturers and distributors may only sell to other licensed distributors or retailers. Distributors and retailers may only buy cigarettes from licensed manufacturers or distributors.  Additional record keeping requirements are also imposed for distributors, manufacturers and retailers.  Retailers do not have new requirements for sales to consumers. 

·        The shipment of unstamped cigarettes to someone other than a licensed distributor, without first filing a notice of shipment or possessing appropriate shipping documentation, would be subject to penalties.

·        Civil penalties for violations of the act would be increased. 

·        New detailed reporting requirements are added for distributors and manufacturers. 

·        Criminal penalties are added for violations of the act.

 

 

 

 

 

 

FISCAL IMPLICATIONS

 

Fiscal impacts are due to the proposed reduction of the cigarette stamp discount rate.  The current weighted discount rate is approximately 2.2%.  This is the case because nearly 90% of stamp sales occur at the 2% discount rate.  This proposal would cause the average discount rate to decrease to 0.55% and generate a little over $1 million in additional cigarette tax revenue.  This revenue would be distributed to each of the cigarette tax beneficiaries.  In the event that the revenues distributed to the Credit Enhancement Account (CEA) at NMFA are not needed to meet current debt obligations, this revenue will be deposited in the General Fund.  It is assumed that the General Fund will receive the CEA distribution for the next few years.

 

ADMINISTRATIVE IMPLICATIONS

 

TRD notes that additional personnel (two totaling $80 thousand) and systems support will be required ($400 thousand).   

 

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