Senate committee approves tax stamp bill

Posted: Tuesday, May 06, 2003

JUNEAU (AP) A bill to make it easier to prosecute illegal cigarette sales was approved Monday by a Senate Finance Committee.

The bill would require that a state tax stamp be affixed to each pack of cigarettes sold in Alaska. Regulators could then tell at a glance whether some black market cigarettes were being sold.

The Senate Finance Committee approved the bill and sent it to the Rules Committee, which schedules bills for a floor vote.

Sen. Con Bunde, who chairs the committee sponsoring the bill, said the sale of black market cigarettes creates an unfair disadvantage for retailers who legally sell cigarettes.

Illegal cigarette sales is a problem in Alaska, but how widespread of a problem is impossible to determine, said a spokeswoman with the state Department of Revenue, which collects taxes on cigarettes.

Alaska imposes a $1 per pack tax on the sale of cigarettes, which along with federal taxes increases the price of cigarettes.

Johanna Bales, of the state Department of Revenue tax division, said the state saw cigarette sales drop by about 23 percent after the tax was imposed in 1997. But state surveys of tobacco use did not show such a dramatic drop, she said.

Prior to the tax increase, about 53 million packs of taxable cigarettes were sold in Alaska, she said. There are between 40-42 million packs of cigarettes sold now, she said.

Bales said the state's current laws regulating the sale of tobacco are difficult to enforce and the bill approved on Monday would help.

The measure would also give law enforcement and state regulators the authority to seize cigarettes that are being illegally sold, Bales said.

Mike Elerding, president of Northern Sales Company of Alaska, testified in favor of the bill. Elerding said it will give cigarette distributors the ability to compete with out-of-state sellers.

If approved, Alaska would join 46 other states that currently use tax stamps on cigarette packages. Bunde said it was unclear how much money the bill could raise, but said two other states that used such a tax stamp saw an increase in revenues from legal sales.

Hawaii approved such a measure and followed it up with vigorous enforcement of the new law and saw a 50 percent increase in revenues, Bunde said. Michigan also approved a tax stamp but did not vigorously police the measure and saw 10 percent more in tobacco revenues.

The bill is Senate Bill 168.

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