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MEMORANDUM INISUPPORT OF LEGISLATIONI submi( in accordance with Assembly Rule I lll,( ie) Bill Number: A'ssen bly __ Senate_ ~ I M'emo on original d~raftoflbilll O ?oTemo on amended bill Sponsors: M'embers of'Assembty: Edward H. Lehner _ Senators; John J. Marchi Introducedlat the request' ofL-_ An,Act to amend the tax law and the administrative code of TitVeof Bfll: the city of New York, in relationito authorizing only manufacturers and importers to act as agents for affixing tax stamps on cigarettes to repeaT subdivision ten of section D4'6-8'.0 of the city of New York relating to appointment o-- temporary agents. Purpose on General' Idea of Bill: The purpose is to make it more difficult for criminal elements to engage inicigarette tax forgery and to stemitne annuall combineditax loss to the City andiState of approximately 50 million dollars. 'ummary of Specific Provisions: Require,domestic cigarette manufacturers to affix the City and State tax stamp to the pack beneath the cellophane wrapper prior to delivery of the product intoltne State. The stamp would also have the date of packaging to assist New Yorkers in determining freshness. Effects of Pfesent' Law which This' Bill would Alter: Currently the City and'State tax stamps are af:fixed to the cellophane wrapper after the packs liave been dbliveredi to New Yor::. This has resulted in a great deal of f'orger;y estimated co result in an annual loss to the City and State of New York of approximately 50 milllion dollars. Jus!tification: By requiring the tax,stamp to be affixeci by the manufacturer beneath the celTophane wrapper and the date of pa'ckaging prior to shipment of the goods into the S!tate, we WiTll greatly' reduce the opportunity for criminal elements to sell forged tax, stamps,, and we will substantially increase, tax revenues to the City and State. 0 ~ ~ ~. 0 . Pr,ior Leyislative History: riscal! Implications for State and Local Governments: IPA kA Recover for City and State:of New York 50 million dbllars al.-nu,ally. Efte.ctive Date: First day of January next succeeding the date' of ' which it shall become a iaw..

SE,vA T€' r;py-4ll-s143' `. I,v, ]tNAl t--I,ntroauced' by Sen --read twice and ordered printedr, anN wrlenipr'i nt=-al to be commi tted! to tne'commiteee'on -------- A. A'a S. c MbL Y' IN ASStMdLY--Introduceo by M. of A'. --re:ad' once and~reflerred to the' Lommittee on Atv AcT to~ a'menG the tax l aw and'd the' . auministrative'cod!e'of the'city ' ot'f iild'w. Yo~rksi i.nmn relati.on toa:utihor'i'Zin~gonlly mar,uriactuirers and importers to act, as aqen2s flor aif'f ix i ng, tax stamps on ciqarettes and:to repeal suDUiviis'ion ten of section Dk6-n.CJ, of the auminiistratilve code of the city of New York rel'ating to appointment of temporary agents. The People ofi t.he: S~,tat.e~ o:f'~ New Yorlv,, represented in Senate and assemoly, do enact as, roI I~~ows~: .. IHSL;IAC S ate~.lmrodu st;inarurr. ~ TheSenatars:w.hose~~namesare~~.circlFdilxlaw~w.ish~to~.jpin me in the sponsorship or thn prorosal.' Ackerman Flynn Mendez Andrrson~ CahbkrNolanAucr~ .. Gall.lp4er Ohrenstem Bibbush Gazzar., . Ow<rus . BarclayColdl P.da.van. Bartostewiaz Goodhue. - PerryBeatty. Goodmaru Pisani. Berman 1lalpenn Presenl Bernstein Johnson RolisonBsuna .. Knon. ' Ruizr, Caemmenerhck. SehermerhornCOlindra l.avalle Smith Connon Leichten Solomon~ Cook. Levy. Stafford Dsly' Lombudi Taoviello. Dono.anNarchi Tcunzo, Diunne Marino, VolklerEckertMankowitzWarder' Farlty McCald Wtimstein Floss MeYa. Windc'ow W AS'SE)1BLY Anem blyIntrodhcer's ugnature_ The Atemben.of the Assemblly whose namea are:cGcled beloww wish to poun me in the spo.nsanhipp of :thispFOposal- Atiramson ~ Ha- BarharoHawley. BehanHealeyBrrsani. Henderson BetrosHevesi Bianchi. Hinchky. Boyland, HirschBiurowsHobioak, Bush HoatiSruecknea. airtlerHorad _ CalaeeroHoyt Cuale . Jaeoba. ~ Cochrane ~ Jenkins. Connelly. Johwon ConnenKeane Connor xehoe'. Cook'e IQell<her Cooperman pennsdyD'Amato , 14idder D'Andrea ~. 1Qisor Deane . 1Qappell De1 Toro . IQiemer, DiCarlo l:afayertte. Diggn. Lne. Emery. hrklirn. Eh`ali Lsh'er. Eippsito. Leh'ner Eva CentolI Farrell Levy' FernsliewuFink !j•pschwtz (O Finrueram Ibpresto. ,Ir~ Flack: Macf:e `Wil ~., Flanaean i Madison. (M.a' FlortuneMlrchtsel Flossed Mlrtin ' ^ F'riedmon MdCabe V 1Goldstem MlGrarth Oi Gorsks. Millar,G.W~ Gottfrted Millc.r. H.Sr~ ~. Grab.er Miller, SI F~\/. Gnnnin' MoGnari G:reea ~ M.ontanio Griffithi hf.urphyGulotta~ Nadler HatueNatle Hannr New.bunger HannonNicolosi Harenbrlg : NineNorn' Omzio Pssola Passannante. Perunc Pesce Pilli ttere . Proud, Reillye Betrzliarn Raford. Robich Rohilu . Ross Ryan Sandera Sehimmin[cr Shcimidl Sehumer Sean Seminerio . Senano Sheffer Siegel Silver Sinaler. Spano. Stlavisky Stephens Strelaan SWlihan, E.C. Solli'van: F. S'uni.an,P,N. TaHon WnDyke Vann Valeuai VtK+bo Walsh. D! Walsh: S. Warmn Wtlrrittm , Wemrle Weprm. Wrrtz Wilson Wmner 1lesoli litamr ILmmsr

~,ectiion 1. Subdivision niine of section four hundred seventy of tne tax law, as amended by chapter silx of the laws of niiineteen nunGreo sixtyYone, is amenoed to read as foTlows. M. of' A., LeH'NER LBOC-P 3'/27'/7'9 26-ci: Y-C~' h 9. u'Agent.'• Any per9an m~_nLs3LSSd~r_~_SS93L~SSL''~4iw1SII. '~'S~SSQ~_m~~SI~dLS!lLY~_45125i48_Sh£_5L~1SS~~S3Z~.a`s_3QY !'!~124fS~L__oS'~Sh_Si9~L~SSQSm authorizea by the taix Commission to purcnase anolafrix adnesive or meter stamps on, packages' of c igare'ttesuno.er thi sar t.i cl e.. Sen.~ 2. Suodivisionitwo of section four hunareaseventy one of sucn law, as amendeo by chapter siix of' the llaws of': nineteen nancrea siixty-one, iis amended', to read as tol Tows:: V'3V35'®l3' inciiaence of ana lliability for the tax shall be upon the consumer, and that any agent mr-aea+er who shall pay the tax to the tax Commiission shall 2. Lit i's' iintended, that the ul t i'mate collect the tax fnom -2~- Ldd`i-4(y43 the 9j,ySC!'j1uLiZLi_~S31=Ls purchaser or consumer. Except as hereinafter provided, the, tax sha11T be ad'vaneed andla pa'ila by the agent. The agent sha I il De 11 i'ab l e tor tne collect,ion and payment of tne tax on ciga:rettes imposed oy tni ; art iic 1 e and' sha l l pay the tax~ to~o the~~ tax, comm:i~~.s's,i~on by aurcnasinq, under such regulations as it shal!l prescrioer aunesiMe stamps of such desiqns' and denomiinations as it shall' prascri,be. The tax on cigarettes may afso oe pa'iidlby or tnrouqni -5

-3- LeUyI--Y43 tht:~ use of me~ter'iing1mac.niness ilf t~he~e taxx c.ommii~~sls~ion~ so p:res~cri'.b~es~.~ rrgpa.nts.t l~oc~ated'~ wi th~iin~ or wi thout the ~ sta:te,r s~ha~l~~l~ pUPcna.se: stamps and!affix such stamps in the manner prescribed tolpaCk~a'ges~ of': ciyarettes to be, solia withiln the state~-rn-wn*en-caec-any ata+cr-snn5etident+y-reee*v'rnq-5ncf+-st,"pee-pee+aaqes~et-eTSarettce tltrt+'-na t--Be--reC V7~re9--tA~--atlrehd5e--efld--t'lf t?x--5L23.mp:f-efl-3tl.tnp, a'Cwc,cc3e5-Ct-et'ddrette5--rVCtwTthStL7md.+Tg r-d.ny-e.ther--pre9rtY3.Te'n--ef' tnT9--dFtYe+'-=r-the-tex-eanfmtsuY~CR-may-9,y.-regG.+dtr,n nrj9rao'Tde-tnatte+e-tax-ar+-e+qarettes-7~npesee-ery,-th*t-artie+e-sha++-ae--ee+}eete9' s.mtneot-the-ase-er-ztemp5. Sec. 3. Section tour hundrea seventy-two o:f' such lawr as- amenc7ed by chapter two hundred seven of the laws or nbneteeni nunorea sixty-eignt9 is amended to reaaias f'ollows: yec. 47'2I. Preparation ano salie, of, szamps; commissiions; distributors. Lhe tax commission snall, prescriloer prepare and furmi.sn stamps of such aenominations and quantities as may be necessary for the payment of the tax on ciqarEttes imposed by, th'iis articJe, and may,from time to time and as often as it deems a6visaolie provide for the issuance and exclusive use of stamps:or a neN aesiqn anoiforbid the use of' stamps of any other design, in triamanner' anaw'i th thee effect pro:viide.d'd i n sect:il on twoo hunaredd seventy-four of this cnapter. S~?s1S_£L~LZ~S£rni£`~ha~l I_'_SS :SP_IL~3S_Sitsh_L19s3LQi1£5_$C=--'l4!_~r3L_i~1, !S:'a --~4iS'--5„"5Y~ __£r~__f4r--v£W'--Y4Lk_~t~2£_5£1£_4~2~11L_~I£Jl ~'4L~S ";y'!= lihe tax commission snal I make provisions far the sale of 7 a:363'51014

-4- ltlU9-Y -143 SuCn stamps at suchpllaCes and a'..tsuch times as it maydeemnecessary and may appoint agents for such purpose. Tne tax, commission may appoint E~e+~tS-Trt-eig~rrLtes,r manufacturers of Ciyarettes T-ar+e-ethter-ptrzor~s ~~__w±~~'__~~SQ':S~__~4__S1~3L'<25~~ r~ny~f~5~~~_-4_~SiL'~i'4.S_>ih:~' ~l~1L°4--1~S3ig5s__1m124!LQLS._~'F'_~511SII wiithin, or wiithout the stateasagentsto bu~yora.flfiix stampsto,be used in paying the tax hereinilmposedn but anagent snai l~ at al l times have the right to appoint the person In hiis employ wno is to affix the stamps toiany cigarettes unaer the agent's controll. Whenever the tax commission shall sell and uelivrer to any such agent any such stamps• such agent shadll be entitlea to receive as compensation for his services and expenses' as such agent in sell!ingl or aff ixiing such stamps, and to retain out of thP moneys to be paio by nFm for such stzmps• a commission an tne par value thereof. The tax commission is hereby autharizea to prescribe a scheduJe of cbmmissions, not exceeoinql five per centum,, allowable to such agent for buyingland affixing, such stamps. Such sch2dule shalT be unii'formwitn respect to the, airrerent types of stamps used, and may be on a graauatea scale wiitn respect to the number of stamps purchased. The tax, Co,nmission may in its oiscretilon permit aniagent to pay for sucni stdmps witnin thirty days after the date of purchase andl may require any such agent to fiille with the department of taxation, anu filnance abono issuetl!by a surety company approved by the superimtonoent of, insurance as to solvency and responsibility and duthorized toitransact business in the state in such amount as 013!03'5015

e. -5- Lnu9-~ v43 t~he~ tax commi~ssion~ ma.y~ f~ix'x too secure~ the~~e p.a.ymentt of' any. sums~ due'e frum sucn agent pursuant to this article.. Y" Sec. 4. Section four nunored seventy-three of such llaw, as amanoeu by cnapter four hunareo eiqoty-nine of the liaws of ninet.eenn hunureol forty,., i.samended too reaol . as fiollloiws: Nec. 473. Affixation and cancelllation of stamps; presumptiion., Each agent shal l affix wi'tniln the time nerei'nafter pr_scribed, to each package of cigarettesv stamps eviidenciing the payment or the tax imposea by this article ana sna9li cancel sucn stamNs before such cigarettes are offered for sale or oefore they are otnerwiise disposed'oP~-nn~asa-ztampz--neve--ocan--afif*xca--te 5aenr-paek~~es:--9l--eYg.areat~5--and.--e'~nce}~ea--berere:-~a.en-~:grn2. veee'rvea-tr+en4 =ln_'_u B~S~--2r__S'i9t?!'SLS~S__IlQL~~SnL3!?Y_LQl ~ 9Qhan~_4L_S!'Sn:r__LZ~£3L_21Z~L t4Ls1Qi2! L~___In_tQ2S~'r~_gh_31 1_~ f f i x_SI~?~R~_1:4_.L~_^IIS2£rBQLSS~3L~ZS~~'_1~ yn_;31_ I _m~r F:'_~~sh_Q3Sk_wS.i^_ICS_~3i,S_Qr1_~1h1L„_Z1?~__Sts~mS2__1ii~~__IZ~Qn. ~rriKg~__Ln__Lhp__23~k____Eacn dpal'er.-otnet-than-an-bgentT shall immeuiately upon the raceipt of any cigarettes at his place or ous i ne:ss'mark' i n ilnK.K o:neach, unopeneobox,.c.aTrton or otner €'ontaine.r ofsuChC:i:gare.ttes' thewo.rdl"receiveU"' anda thee yearg . ,nUntn, day' anu hour of s~uch'h recei~p:tv anOl sha:l l, a~,f~.r'Lx~ hY~s~ ~0 s'~iiy(]~a~~.ture' thereto:.'or iinn any~ O~:ther' manner~ pre~scr~ibed.. yAi ~ ~ ~ 0. ~ ~

-6- UbiJH-1~ /4,y cach ret.a~.iiI dealer sha~l~l open such~~ Do.x'.,~ Carton or~ o:the~r container wii'thiin twenty-tour hours after sucnireceipt and prior to~o exposing for sale or selling such Ci~g,a:rettes~ and e~xamine~~..the p'ackaqes contained' therein for the' purpose of' ascertaining whether or not the said pacwaqes have af'fixed thereto the proper tax stamp'; iif unstampeo or improperl'y stamped packages of cigarettes are' d'iscoverea, the retaiil deaiLer shalll immediately notify the oealer from whom said cigarettes were'purchased. Upon sucn no.t'i', f i ca:t i.on., the dea'.l erf. ro.m whom s'ai d. c i garett.es. werepurcnased wil'l repolace sucn unstamped or improperly sxampeui ,)acaages of cigarettes w'izh those upon wnich s"tamps nave, been Nroperl'y affixeo. 14_-S'i 1.irS`LS`<;5_53Srs.i'~h~~_Li~33ir_Q25~5_T~L~SJJ:3LL~~~P4_2~L519'yth~' r gr1_2m'a_ iimil4r ~9_YFY_3>SnSS_9Z_in a 12- Q3iLp Qii:4_12Y_S.IaL`.ii'S Srl~-3~9-_Sh r~Y--4 f_-5€G~i 2t9'__ F~51L__riLn4r.P~L~S~~~SY_4L~ Q_s~_4f.1niY SnaL>S.Fi.g._a3a_l ~_IZe'_S1:s3Q.~ II4'SS£SinS2- .Lt °wSSdSIo_yn 1t:.~ S--a- _Y31Sa! 1:a 2S xs9_S1,CLS24x whenever any ciigarettess arefiounoe intheplaceo:f b.usiine.ss o'f-3tlena ' dealer,othe.r' th'ani an aqent* without the'stamps affixed ano cancelled, or'not marked a;, hav.inql been rece'ivedw,i:r_hin the, p.r'ecedi.ngg twenty-four' hours,, thd pre'sumpti on sha l ll b.e'e that s.uchh c i garettEs. are' kept there:inii n. viic:laticni of tte provisions ot! this articie. Stamps' shaiil be arti,ced to each package at ciigarett:es at an aggregate .lenomiina~t.i~l.o~~n~ not'. llesls's than the~. coi9tants, thereirr.,g amo'~untt o~t' the ta'x~~ up~An~n t.h'e~t and snail be all in s'ucnimanher as to De visi,olW_ to tne purchaser. 03'63!501'7

Q', . -7- LnOY-1( , 1143 Sec. 5., Section four hunaredlseventy-six of sucn llaw, as amenaeG oy, chapter four hundreo fifty-five' of tne laws of nineteen hundred seventy-five, is amenoedito read as follows. Sec., 4:Z6. Refunds; sa'l'es ofi' stamps. Whenever any cigprettes upon which stamps have been placed have been sold and sniipped i,nto'another state for sale or use tnere or have become unrit for use and consumption or unsa:l'able, or have been destroyea,, the dy5ndealer shall be' entiltl,ed to a refuna of tne actual amount or tax so p:aid, provided appl'ication thereror is fileo .jiith the'ta:xe commiiss.ion wii.tnin twoyearsaY2ertheo s.tamp:s's were arri',xed to sucn cigarettesv except if an agreement under t.he p:.ruvisi~ons~s or section four hundred s~.e:venty-e~.iig.nt. (extending t,he peri,od for determinati,on,o:f tax imposed by tnis article) is maae mi'tnin the, two-year perioc for the, filing of' am appliaation for rervnu provided for i',n th i s sect i'onn the per i'od for f ill i ng an, appl'icationifor re#und snall not expire prior to six months after t'ne exp:iirat,i:.o:n ofthef period w.ithinwhilcnlan diet.erminat.iionma:ybe' maue pursuant to the aqreeme'nt,or any extension thereof. If the taxx cOmnril.SSiOn i'.ss s'.atiisfied' thatt any dea+err' jjggPy iSentitled ffoa reruno it shaliI issue' to such' dearfer agQ!2y stamps or suflf'ic,ient v,Iua to cover the refuno of the tax on cigarettes ZQrrLi,ij.5i2Lv may, suojact to auoi t by the comptrol ler, make a rerunai or the tax on cigaretses: No person shall sell or orrer for sale any sta:rnp or stamps issueo under this arti'c1e: except oy, wri,tten perrr.ossioni of tne tax'commiission. The tax commission may redeem V'.J:6J 5Q1ILp, 7

-8- 1bt74-~ -y4,1 unused stamps llawfullly in possession of any person. The tax co,i.missi'on may prescribe necessary rules and regulations concerning refunds, sales of stampst ana redemptions under the prov i s,i~ons,Oai th i s a:rt.i:c Te~:. Sec. o. Suodivision niine of section 04b-1.0 of' the a~amii~i.nistra't,ive : co~de, of the ~ City, o~.fl rVew YOr7¢~,~ a'S's amended b:y~ cn:3p~.ter one~ hundredd of~ the Taws~s of ni~~net.e~enn hundr~e'dd s~~i xty,-three~~. iis amenaed to read as follows: y. ^aqent.1. Any ptrsvn m~n~f3LS~L~f1_4r:_~i~s1r~SS~~4L_WiIII f_s~SrSSli~9_412~i'^1~_ing_Uh i StII_?.Sisii~~L3~Y r,p_U=ai, autnor i aea! to purchase ano' af f iix aunesiive or meter stamps under this tiitlle who i,s designatea as an ayant by the airector'of'finance. Sec. 7. Paragraph three,of subdivision a of' section J4'o-2.u of Su.cn~ co.de~j a~.s~s amend:ed' b~.y~ chapter eight hunar~e~d s'~e:vent~.y-s~.e:ven of tne,laws of nineteen nundreoiseventy-Fliver is amenaea to r8ad as f'oI 1ows: J. It i s intended that the ul tiimate inci dence of ano . 1i,joil,ity for the tax shall oe upon the consumer, and that any . uyent~--a'r~trrnnter--cr--tlcx~+cr who shal!1 pay the tax to the uirec:tor of finance shadl collect the tax f'rom y~~13Ls vurcnaser or consumer, thz 9,lidLLi'lZSt557Ls l'J.7CYJ.J01J',

-9- lbtll'i-( -Y4 S See:.~~ 23~- Subdivision a of~ section rJ4b-4:..0 Oal sLch.code'n as 3m2nded'by, chapter one~hundTeo of t.he.l~.a~.ws~e o~~f~ niineteen nunoreo~ i~ix'ty-t'hree~. i.s~,amended~d to readd ass to~l llo:ws,: ~ a. ihe d!irscto:r of fiinance shalli, subject to the approval of tne state tax commission, prescribe,, prepare and furnish stamps of' such aen!omi nat i ons and quont i;t iies as may be, necessary, Flor the paVment or the tax imposza by this title, and may, from time to cilme, proviloe for the ilssu'ance ano excl',usive use of stamps or a ne.+ aasign and florDia the use ofl stamps of any othet design. :Iuch Stamps shal:l be iin the form of a sinqlle stamp for the pay,mant of the tax imposed by thiiis title or, in lieu thereof, a j;o~.i.ntt s~inq!,Ile' Stamp: to~ be~ prep~.aTep'o and'~ ii5s~uetll O~.y~ t.he~ state at New Yorri ano the ciity for the payment o'f' the tax impo9ed by tnlis' title and the taxes imposed by a,rticle twenty'of tne tax'law. 25i~n_SLs3'nQ~_1h_31 1_~S~3S' :'_Sh3S_ t n'i'_SiS13 ~SSL.Qi_-24'--W h~~~__SM~Y~3L~ Np w__Yq_rIS'_ssLY_^ I'he di,rector' o'f, fi:nance may. max~ee su.ch~~ arTangement~s's with~ tne' state tax commission f~o~~.r~ ~t.h~e~ methoa oh acqui'ring,ana the manner of sharing the costs ot sucn joint sinyile stamps as he deems appropriate, fhe director niinance, suDject to the approva!1' of the state tax commissilon. snall maxe provisions for the sale of such stamps at such places as ne ma!y aeem necessary, and may aopoint fiiscad agents bor sucn aurNose. ye~c~.~ N~~.~ S~ubQi~v~i~s~i on O~ of~ section 0.4br4~.u~, of such cod2!,~ a'.ss ar,,~naeu oy local law number sixty-four of the city or New Yorx 036.3S02Q'.