HOUSE OF REPRESENTATIVES STAFF ANALYSIS REFERENCE ACTION ANALYST STAFF DIRECTOR SUMMARY ANALYSIS

Transcription

1 HOUSE OF REPRESENTATIVES STAFF ANALYSIS BILL #: HB 205 CS Transprtatin and Sale f Cigarettes SPONSOR(S): Altman and thers TIED BILLS: IDEN./SIM. BILLS: SB 816 REFERENCE ACTION ANALYST STAFF DIRECTOR 1) Business Regulatin Cmmittee 16 Y, 1 N, w/cs Mrris Liepshutz 2) Finance & Tax Cmmittee Levin Diez-Arguelles 3) Cmmerce Cuncil 4) 5) SUMMARY ANALYSIS By sme accunts, trafficking in cunterfeit and cntraband cigarettes is f grwing cncern t cigarette manufacturers and t state and federal regulatry agencies. A 2003 Gvernment Accunting reprt indicated that illegal cigarettes were the number ne seized prduct in the United States in 2002 with theft, hijackings and cunterfeiting f cigarettes and tax stamps n the rise. Other statistics pint t the internet as ne f the sales utlets f chice fr cunterfeit and stlen cigarettes. This legislatin implements a structured three-tiered system fr cigarette distributin: manufacturer r imprter t whlesale dealer t retail dealer. The legislatin adds manufacturers and imprters t the list f entities that must have permits in rder t perate in the state, implements additinal reprting requirements, and implements significantly increased penalties fr vilatins f the cigarette statutes. This structured distributin system, with its accmpanying reprting requirements and penalty prvisins is intended t assist the Divisin f Alchlic Beverages and Tbacc and Department f Business and Prfessinal Regulatin, in tracking the mvement f cigarettes in the state, ensuring that applicable taxes are cllected, and preventing the sale f r trafficking in cunterfeit r cntraband prducts. The Divisin indicates the cst f implementatin t be apprximately $500,000 fr the first year and apprximately $275,000 in subsequent years. It is unknwn t what extent this legislatin may curtail the lss f excise tax and sales tax revenue fr the state. The legislatin requires that the act take effect Octber 1, This dcument des nt reflect the intent r fficial psitin f the bill spnsr r Huse f Representatives. STORAGE NAME: h0205b.ft.dc

2 FULL ANALYSIS A. HOUSE PRINCIPLES ANALYSIS: I. SUBSTANTIVE ANALYSIS Ensure Lwer Taxes--The bill requires a permit fr manufacturers and imprters selling cigarettes in Flrida and establishes an annual fee f $100 fr the permit. The new regulatry, audit, and penalty prvisins created in this legislatin may help curtail the unlawful trafficking in cunterfeit and cntraband cigarettes and thereby result in the cllectin f additinal taxes due t the state and federal gvernment. B. EFFECT OF PROPOSED CHANGES: PRESENT SITUATION The Divisin f Alchlic Beverages and Tbacc [Divisin] in the Department f Business and Prfessinal Regulatin versees the regulatin f cigarettes and ther tbacc prducts and the cllectin f excise taxes n thse prducts. Specifically, Part I f chapter 210, Flrida Statutes, cncerns the taxatin and regulatin f cigarettes. Part II f chapter 210, Flrida Statutes, cncerns the taxatin and regulatin f ther tbacc prducts, e.g., chew, snuff, etc., and chapter 569 cncerns the retail sale f all types f tbacc. Sectin , F.S., requires every persn, firm r crpratin desiring t deal in cigarettes in Flrida as a distributing agent, whlesale dealer, r exprter t apply fr a cigarette permit. Similarly s , F.S., requires every persn, firm r crpratin desiring t sell cigarettes r ther tbacc prducts at retail t btain a retail tbacc prducts dealer permit. A distributing agent is ne wh receives cigarettes in interstate r intrastate cmmerce and distributes them t whlesalers r t ther distributing agents inside r utside f the state. A whlesale dealer sells cigarettes t retail dealers r t ther whlesalers. A whlesale dealer may be either a stamping agent, meaning they actually place the tax stamp n packages f cigarettes, r nn-stamping taxpaid whlesaler wh receives cigarettes frm whlesalers with the tax stamps already affixed. A persn wh perates cigarette vending machines in mre than ne place f business is cnsidered a whlesale dealer while a persn wh perates cigarette vending machines in their wn business is cnsidered t be a retail dealer. An exprter is a persn wh transprts tax-exempt cigarettes int Flrida under bnd fr delivery int freign cmmerce. 1 There is n definitin fr imprter r manufacturer in Part I f chapter 210. Sectin , F.S., requires that the apprpriate Flrida excise tax stamp be applied befre cigarettes can be ffered fr sale in this state. Stamps representing varius denminatins f tax are purchased in bulk by whlesale dealers [lcated within and utside f this state] and are affixed t packages as prf f payment. 2 Sectins and , F.S., prvide that excise taxes must be paid upn the first sale r transactin within this state whether r nt such sale r transfer is t the ultimate purchaser r cnsumer. Current law is unclear whether cigarette manufacturers are cnsidered whlesale dealers fr purpses f paying the excise tax. Fr FY , the Divisin cllected ver $417 millin in state excise tax revenue. Cigarettes that are nt prperly stamped may nt legally be sld in Flrida. 1 Title 26, s U.S.C. defines an exprt warehuse as..a bnded internal revenue warehuse fr the strage f tbacc prducts and cigarette papers and tubes, upn which the internal revenue tax has nt been paid, fr subsequent shipment t a freign cuntry, Puert Ric, the Virgin Islands, r a pssessin f the United States, r fr cnsumptin beynd the jurisdictin f the internal revenue laws f the United States. 2 The excise tax n a standard pack f 20 cigarettes is 33.9 cents. STORAGE NAME: h0205b.ft.dc PAGE: 2

3 Whlesale dealers are required t submit t the Divisin by the 10th day f each mnth a mnthly reprt f its purchases and sales f cigarettes within r withut the state fr the preceding mnth. Outf-state cigarette sales are reprted n a whlesale dealer s mnthly reprt as exempt frm the excise tax because the tax applies nly t sales in Flrida. Federal Regulatin The Bureau f Alchl, Tbacc and Firearms [ATF] in the U. S. Department f the Treasury enfrces Chapter 52 f Title 26 f the United States Cde and Chapter 114 f Title 18 f the United States Cde. Chapter 52 f Title 26, U.S.C., deals mainly with the permits required fr the manufacture, imprtatin and ther peratins invlving tbacc prducts, including federal excise taxes. Chapter 114 f Title 18, U.S.C., deals with trafficking in cntraband cigarettes. Cunterfeit, Cntraband and Gray Market Cigarettes A December 2002 Mrgan Stanley reprt estimates that cunterfeit cigarettes accunt fr an apprximate 2% and grwing market share vlume in the United States. 3 Accrding t an ATF spkesman, as quted in a 2003 Gvernment Accunting reprt, illegal cigarettes were the number ne seized prduct in the United States in 2002 with theft, hijackings and cunterfeiting f cigarettes and tax stamps n the rise. 4 In the bk Lightning Out f Lebann: Hezbllah Terrrists n American Sil the authrs warn f the presence f terrrist rganizatins in the United States and chrnicled a 2002 case invlving the illegal trafficking f cigarettes in which the prfits were funneled t a grup n the State Department s list f terrrist rganizatins. 5 A January 7, 2005 News Release frm U. S. Immigratin and Custms Enfrcement cited an investigatin f anther internatinal cigarette smuggling netwrk that distributed 2,313 cases f cunterfeit cigarettes with a retail value f apprximately $5.4 millin. Accrding t the News Release, the rganizatin was receiving cunterfeit and cntraband cigarettes frm Flrida and Texas cmpanies as well as manufacturers in Taiwan and China. The lss f revenue t the federal gvernment and state gvernments f New Yrk, Califrnia and Texas frm that ne rganizatin was apprximately $9.2 millin. 6 Accrding t an industry publicatin, Internet and mail-rder sales f cnsumer gds, including tbacc prducts, are the fastest-grwing businesses in the United States. 7 The Internet is ne f the sales utlets f chice fr cunterfeit vlume, stlen carg and stlen retail vlume, as well as gray market prducts. The federal Jenkins Act 8 requires any persn wh sells and ships tbacc prducts int a state t a cnsumer, ther than a licensed distributr, t reprt the sale t the buyer s regulatry agency; hwever, accrding t many industry reprts, this statute is nt aggressively enfrced. The Divisin reprts that it has received reprts under the Jenkins Act frm nly a few ut f state suppliers and lacks jurisdictin t require cmpliance. SUMMARY OF PROPOSED LEGISLATION This bill makes numerus changes t Part I f chapter 210, Flrida Statutes, pertaining t cigarette permitting, stamping, and reprting requirements. The primary changes invlve the institutin f a three-tiered distributin system, additinal reprting requirements and increased penalty prvisins. 3 State f the US Cigarette Industry: Nt a Pretty Picture, MrganStanley, Tbacc December 13, Terrrist Financing: U.S. Agencies Shuld Systematically Access Terrrists Use f Alternative Financing Mechanisms, GAO Reprt , Nvember GAO Reprt discusses this event. 6 El Pas Man Sentenced in Cigarette Smuggling Case, U. S. Immigratin and Custms Enfrcement, U. S. Department f Hmeland Security, January 7, news/newsreleases/articles/elpas htm [last visited February 15, 2005]. 7 Rise f the Rebels, Tbacc Reprter, September Jenkins Act, 15 U.S.C., s , prvides that any persn wh advertises cigarettes fr sale r wh ships cigarettes int a state t any persn ther than a licensed cigarette distributr must file a statement with the apprpriate state agency that lists the seller s name, trade name, and address f all business lcatins as well as the name and address f the persn t whm the shipments were made, the brand and quantity f cigarettes shipped. A vilatin f the Act is a federal misdemeanr. STORAGE NAME: h0205b.ft.dc PAGE: 3

4 The three-tiered distributin system prvides that a manufacturer, imprter, r a distributing agent acting n behalf f a manufacturer r imprter, may sell and distribute cigarettes nly t whlesale dealers and whlesale dealers may nly sell and distribute cigarettes t retail dealers r ther whlesale dealers. Retailers may nly purchase cigarettes frm whlesale dealers. The bill des nt prhibit dual licensure amng the classes f cigarette permits. This structured distributin system with its accmpanying reprting requirements and penalty prvisins is intended t assist the Divisin in tracking the mvement f cigarettes in the state, ensuring that applicable taxes are cllected, and preventing the sale f cunterfeit r cntraband prducts. New r Clarified Definitins The bill creates definitins fr the previusly undefined classes f imprter and manufacturer. Imprters are defined as ne wh, directly r indirectly, imprts finished cigarettes int the United States 9 and are required t hld a valid federal permit [26 U.S.C. s. 5712]. A manufacturer is defined as a persn wh manufactures, fabricates, assembles, prcesses, r labels a finished cigarette and is als required t hld a valid federal permit [26 U.S.C. s. 5712]. The term applies t dmestic but nt freign manufacturers. This legislatin expands the definitin f whlesale dealer t clarify that the term includes persns lcated utside f the state wh sell cigarettes t retail dealers r ther persns fr purpses f resale in Flrida. The expanded definitin excludes manufacturers, exprt warehuse prprietrs r imprters wh are prperly licensed under federal law if that manufacturer, exprt warehuse prprietr r imprter sells r distributes cigarettes in Flrida nly t stamping agent whlesalers r t exprt warehuse prprietrs r ther manufacturers. This definitin attempts t clarify that thse entities are nt respnsible fr affixing tax stamps t cigarette packages. The amended definitin als excludes vending machine peratrs frm the definitin f whlesale dealer. A retail dealer is defined as a persn, ther than a whlesale dealer, lcated inside r utside this state that sells cigarettes, and the definitin captures retail dealers licensed pursuant t s , Flrida Statutes. Vending machine peratrs will be cnsidered retail dealers. New Regulatry Prvisins A newly created s , Flrida Statutes, establishes a chain f distributin fr cigarettes in Flrida: manufacturers r imprters sell t whlesale dealers r imprters wh sell t retailers r t nnstamping whlesale dealers. An imprter may purchase cigarettes nly frm a manufacturer; a whlesale dealer may purchase cigarettes nly frm a manufacturer r imprter; r a nn-stamping whlesaler may purchase stamped cigarettes frm a stamping agent whlesaler; a retail dealer may nly purchase cigarettes frm a whlesale dealer. Cigarette distributing agents hld r transprt cigarettes n behalf f manufacturers r imprters but d nt wn r sell the prduct. Sectin , Flrida Statutes, requires anyne pssessing r transprting unstamped cigarettes in Flrida t have invices r delivery tickets fr the unstamped cigarettes in his r her actual pssessin. This sectin is further amended by this legislatin t require any persn wh ships unstamped cigarettes int Flrida t anyne ther than a whlesale dealer t ntify the Divisin prir t shipment. This new prvisin des nt apply t cmmn r cntract carriers perating with a prper bill f lading r freight bill that states the quantity, surce, and destinatin f the cigarettes. The Divisin r any law 9 26 U.S.C. s defines an imprter as..any persn in the United States t whm nntaxpaid tbacc prducts r cigarette papers r tubes manufactured in a freign cunty, Puert Ric, the Virgin Islands, r a pssessin f the United States are shipped r cnsigned; any persn wh remves cigars r cigarettes fr sale r cnsumptin in the United States frm a custms bnded manufacturing warehuse; and any persn wh smuggles r therwise unlawfully bring tbacc prducts r cigarette papers r tubes int the United States. STORAGE NAME: h0205b.ft.dc PAGE: 4

5 enfrcement fficer is authrized t stp and inspect these vehicles fr cntraband cigarettes upn reasnable grunds. Distributing agents, whlesalers, retailers, cmmn carriers and any ther persn handling, transprting r pssessing cigarettes fr sale r distributin in the state are required t maintain recrds f cigarettes received, sld r delivered within Flrida and make reprts t the Divisin by the 10 th day f the mnth. Recrds must be maintained fr a perid f three years and must be available fr inspectin and audit by the Divisin. This bill adds manufacturers and imprters t the list f entities required t cmply with these recrd-keeping and reprting requirements. Sectin (1), Flrida Statutes, requires whlesalers lcated inside r utside f Flrida t apply the cigarette excise tax stamp befre cigarettes are ffered fr sale in Flrida. This bill requires whlesalers in Flrida t apply the tax stamp within 10 days f receipt f the cigarettes and requires whlesalers utside f Flrida t apply the stamps befre shipping cigarettes int Flrida. This subsectin excludes cigarettes with a federal exemptin, 10 r an exemptin under Part I f ch. 210, frm the stamping requirement. T further the new distributin structure, this subsectin prvides that whlesale dealers may nly stamp cigarettes received frm manufacturers r imprters with valid federal permits. A new subsectin (5) is added t s , Flrida Statutes, t specify that nly whlesale dealers receiving unstamped cigarettes directly frm a manufacturer r imprter may hld r pssess unstamped cigarettes. Unstamped inventry is required t be kept separate frm stamped inventry and unstamped cigarettes may nt be transferred between whlesalers r between facilities f the same whlesaler. The Divisin reprts that there are apprximately 400 whlesale dealers reprting purchases frm 78 knwn manufacturers and imprters that are primarily lcated utside f the state; hwever, the exact number f entities selling r shipping cigarettes int Flrida is unknwn. Permit Renewals Under existing law the permit fee fr distributing agents is set at $5 at initial issuance and the permit is renewed as a matter f curse upn payment f a $5 renewal fee. Similarly, under existing law the permit fee fr whlesale dealers and exprters is set at $100 and are renewed as a matter f curse upn payment f a $100 renewal fee. This legislatin amends s , Flrida Statutes, t establish a $100 fee fr initial issuance and renewals f all cigarette permits and prvides that permits fr renewal are nt renewed as a matter f curse but must be subjected t the riginal standards fr issuance. In additin a permit may nt be issued, maintained, r renewed if the applicant, its fficers, r any persn wning mre than 10 percent interest: Has been finally adjudicated as wing $500 r mre in delinquent cigarette taxes; Had any cigarette permit revked by the Divisin within the previus tw years; Has been cnvicted f receiving r selling stlen r cunterfeit cigarettes r been invlved in cunterfeiting; Has imprted cigarettes in vilatin f federal law; r Has imprted r manufactured fr sale r distributin any cigarettes that d nt cmply with federal labeling and advertising requirements. A permit must be issued fr each place f business in the state, r if there is n Flrida business lcatin, a permit must be issued fr the entity s principal place f business U.S.C. s prvides exemptins frm tax fr tbacc prducts furnished fr emplyee use r experimental purpses; fr tbacc prducts transferred r remved in bnd frm dmestic factries and exprt warehuses and thse released in bnd frm custms custdy; and fr tbacc prducts exprted and returned. STORAGE NAME: h0205b.ft.dc PAGE: 5

6 As amended by this bill, s , Flrida Statutes, requires the Divisin t revke the permit f any persn wh wuld be ineligible t btain a new permit under revised s , Flrida Statutes, r fr vilatins f Part I, Ch. 210 r Chapter 569 and extends the time restrictin n renewal frm six mnths t tw years. Enfrcement and Penalty Prvisins Increased enfrcement and administrative, civil, and criminal penalties are prvided in this legislatin t deal with cunterfeit and cntraband prducts and any ther vilatin f the act. Additinal Seizure and Frfeiture Authrity Sectin , Flrida Statutes, requires anyne pssessing r transprting unstamped cigarettes in Flrida t have invices r delivery tickets fr the unstamped cigarettes in his r her actual pssessin. The bill als permits the Divisin r its authrized agent, r a law enfrcement fficer, t stp a vehicle and inspect the vehicle fr cntraband cigarettes, if the fficial has knwledge r reasnable grunds t believe that a vehicle is transprting cigarettes in vilatin f the state s cigarette tax law. Under current law, the Divisin is authrized t seize, cnfiscate, and frfeit fr the use and benefit f the state, any cigarettes fr which the state s cigarette excise taxes are unpaid (s (1), F.S.). The bill extends the Divisin s authrity t seize, cnfiscate, and frfeit cigarettes t any cigarettes that are held in vilatin f the state s cigarette tax law. The bill requires that all fixtures, equipment, and ther materials and persnal prperty n the premises f a whlesale dealer r retail dealer be frfeited t the state, if the whlesale dealer r retail dealer, with intent t defraud the state: Fails t keep r make a required recrd, return, reprt, r inventry; Keeps r makes a false r fraudulent recrd, return, reprt, r inventry; Refuses t pay any tax impsed by this part; r Attempts t evade r defeat the requirements f the state s cigarette tax law. The bill prhibits the state frm using r benefiting frm the seizure, cnfiscatin, and frfeiture f cigarettes and requires the state t destry these cigarettes. Additinal Criminal Penalties fr Tax Evasin Under current law, a whlesale dealer r retail dealer wh vilates the cigarette tax law cmmits a misdemeanr f the first degree, punishable by up t 1 year in prisn r up t a $1,000 fine (s (2), F.S.). A subsequent cnvictin is a felny f the third degree, punishable by up t 5 years in prisn r up t a $5,000 fine, and is subject t the habitual felny ffender statute. The bill extends these criminal penalties t all persns. Amended subsectin (3) specifies that a persn wh fails t cmply with any requirement f the cigarette tax law, with the intent t defraud the state, cmmits a felny f the third degree, punishable by up t 5 years in prisn r up t a $5,000 fine, and is subject t the habitual felny ffender statute. Additinal Criminal Penalties fr the Sale r Pssessin f Cunterfeit Cigarettes A new subsectin (9) in s , Flrida Statutes, prvides that, ntwithstanding any ther law, a persn r a manufacturer, imprter, distributing agent, whlesale dealer, r retail dealer wh sells r pssesses cunterfeit cigarettes is subject t the fllwing criminal penalties: Fr a first vilatin invlving less than tw cartns f cigarettes by an individual r retail dealer r 10 cartns by ther permittees, punishment f up t 5 years in prisn, up t a $1,000 fine r five times the retail value f the cigarettes, whichever is greater, r bth; Fr a subsequent vilatin invlving less than tw cartns f cigarettes, punishment f up t 5 years in prisn, up t a $5,000 fine r five times the STORAGE NAME: h0205b.ft.dc PAGE: 6

7 retail value f the cigarettes, whichever is greater, r bth, and the revcatin f the permit by the Divisin; Fr a first vilatin invlving tw r mre cartns f cigarettes, punishable by up t 5 years in prisn, up t a $2,000 fine r five times the retail value f the cigarettes, whichever is greater, r bth; and Fr a subsequent vilatin invlving tw r mre cartns f cigarettes, punishable by up t 5 years in prisn, a $50,000 fine r five times the retail value f the cigarettes, whichever is greater, r bth, and in the revcatin by the Divisin f the permit. This prvisin requires the Divisin, r a law enfrcement agency, t seize cunterfeit cigarettes and related machinery and als requires the Divisin t destry the seized cunterfeit cigarettes. Additinal Civil Penalties Presently s (5), Flrida Statutes, specifies that a $1,000 civil penalty may be impsed in lieu f the suspensin r revcatin f a permit fr a vilatin f Part I, Chapter 210. This bill increases the allwable penalty frm $1,000 t $2,500 and prvides that the penalty is in additin t the suspensin r revcatin f the permit. A new s , Flrida Statutes, is created t impse civil penalties, in additin t ther penalties prvided in the cigarette tax law, against a persn wh knwingly mits, neglects, r refuses t cmply with any duty impsed by the cigarette tax law, r t d r cause t be dne anything required by the cigarette tax law, r des anything prhibited by the cigarette tax law and specifies that the persn vilating these prvisins is liable fr a $1,000 fine r five times the retail value f the cigarettes, whichever is greater. This newly created sectin als impses civil penalties, in additin t ther penalties prvided in the cigarette tax law, against a persn wh fails t pay any taxes impsed by the cigarette tax law at the time prescribed by law r rules and further specifies that the persn is liable fr a penalty f five times the unpaid tax due. C. SECTION DIRECTORY: Sectin 1. Creates and amends several definitins in s , Flrida Statutes. Sectin 2. Amends subsectin (1) f s , Flrida Statutes, relating t the affixatin f tax stamps and creates a new subsectin (5) in sectin , Flrida Statutes, relating t the pssessin f unstamped cigarettes. Sectin 3. Creates a new s , Flrida Statutes, establishing a chain f distributin fr cigarettes. Sectin 4. Amends subsectins (1) - (3) and paragraph (a) f subsectin (4) f s , Flrida Statutes, relating t shipments f unstamped cigarettes and the maintenance f recrds by manufacturers and imprters. Sectin 5. Amends subsectin (1) f s , Flrida Statutes, and creates new subsectins (2) and (3) relating t seizures and frfeitures. Sectin 6. Amends subsectin (1) f s , Flrida Statutes, relating t issuance and renewal f permits, permit fees, and disqualifying ffenses. Sectin 7. Amends s , Flrida Statutes, relating t revcatin r suspensin f permits and the impsitin f civil penalties. STORAGE NAME: h0205b.ft.dc PAGE: 7

8 Sectin 8. Amends subsectins (2) and (3) f s , Flrida Statutes, and creates a new subsectin (9) relating t penalties fr tax evasin including seizure, frfeiture and destructin f prduct and the impsitin f civil and criminal penalties. Sectin 9. Creates a new s , Flrida Statutes, relating t civil penalties. Sectin 10. Reenacts paragraph (a) f subsectin (1) f s , Flrida Statutes, relating t criminal activity, fr the purpse f incrprating the amendment t s , Flrida Statutes, in a reference theret. Sectin 11. Reenacts paragraph (a) f subsectin (1) f s , Flrida Statutes, relating t the definitin f racketeering activity, fr the purpse f incrprating the amendments t s , Flrida Statutes, in a reference theret. Sectin 12. Prvides that the act will take effect Octber 1, II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT A. FISCAL IMPACT ON STATE GOVERNMENT: 1. Revenues: The Divisin f Alchlic Beverages and Tbacc, Department f Business and Prfessinal Regulatin prvided the fllwing estimate f revenue cllectins assuming the 78 knwn manufacturers perating in the state apply fr and are issued cigarette permits. REVENUE FY FY FY License Fees: $11, $11, $11, Taxes: Pssible, but Pssible, but Pssible, but indeterminate indeterminate indeterminate increase increase increase Other (identify): TOTAL: $11, $11, $11, Expenditures: The Department s Divisin f Infrmatin Technlgy will require apprximately $200,000 in nnrecurring budget authrity fr staff augmentatin t develp, test and implement the revised cmputer applicatin. The nging supprt f the cmputer applicatin can be absrbed under current resurces. EXPENDITURES FUNDING SOURCE (AB&T TRUST FUND) Nn-Recurring Effects FY FY FY Operating Capital Outlay State Stds. 7, Other Persnal Services Cmputer Applicatin 0 0 Develpment, Testing and Implementatin 200,000 Expenses State Stds. 12, Subttal 220, STORAGE NAME: h0205b.ft.dc PAGE: 8

9 Accrding t the Divisin f Alchlic Beverages and Tbacc in the Department f Business and Prfessinal Regulatin, in rder fr the Divisin t issue permits t the new manufacturers and imprters and t capture the purchase and sales infrmatin required by this bill the Divisin will need an additinal fur psitins in the Tallahassee central ffice with cmbined related prjected csts f $496,305, $280,085, and $284,081 in FY , FY , FY , respectively. The psitins needed include ne Regulatry Specialist II t issue the permits, tw Revenue Specialist IIs t capture the reprted infrmatin, and ne Tax Auditr II t audit the infrmatin. Equipment and space will be needed fr these psitins, as well as prgramming t capture, recrd, and utilize the infrmatin. EXPENDITURES FUNDING SOURCE (AB&T TRUST FUND) Recurring Effects FY FY FY Salaries/Benefits # f FTE s 1 Regulatry Spec. II 2 Revenue Specialist II 1 Tax Auditr II 38,425 73,037 44,502 39,386 74,863 45,615 40,370 76,735 46,755 Expenses 26,052 26,052 26,052 Other (Travel) 93,600 93,600 93,600 Subttal 275, , ,512 Nn-Operating Expenditures FY FY FY Service Charges (t General Revenue) Other Indirect Csts Subttal B. FISCAL IMPACT ON LOCAL GOVERNMENTS: 1. Revenues: Nne. 2. Expenditures: Nne. C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR: T the extent prvisins f this legislatin limit the sale f cunterfeit and cntraband cigarettes in the state, cigarette manufacturers whse prducts are subject t thse abuses will benefit and legitimate businesses prtected. D. FISCAL COMMENTS: In additin t the estimates revenues and expenditures listed in A. FISCAL IMPACT ON STATE GOVERNMENT, it is pssible that there will be an additinal cst incurred by departmental attrneys as well as the Department f Legal Affairs t prsecute ffenders. A. CONSTITUTIONAL ISSUES: III. COMMENTS 1. Applicability f Municipality/Cunty Mandates Prvisin: This bill des nt require cunties r cities t spend funds r take an actin requiring the expenditure f funds; des nt reduce the authrity that cities r cunties have t raise revenues in the aggregate; and des nt reduce the percentage f a state tax shared with cities r cunties. STORAGE NAME: h0205b.ft.dc PAGE: 9

10 2. Other: The majrity f new entities permitted under this prpsed legislatin are believed t be lcated utside f the state. The Divisin may lack legal jurisdictin t require cmpliance with these permitting and reprting requirements if the ut-f-state shippers d nt maintain a physical presence in the State f Flrida thereby creating a nexus within which t bring them under Flrida jurisdictin. B. RULE-MAKING AUTHORITY: Nne. C. DRAFTING ISSUES OR OTHER COMMENTS: Nne. IV. AMENDMENTS/COMMITTEE SUBSTITUTE & COMBINED BILL CHANGES On February 22, 2005, the Cmmittee n Business Regulatin adpted ne strike-all amendment by Representative Altman and apprved the bill with CS, 16 Yeas, 1 Nay. This strike-all amendment addressed several deficiencies in the bill as riginally filed. The CS: Brings all cigarette permits under a single license fee: $100; Deletes applicatin t freign r ff-shre manufacturers due t the state s inability t establish jurisdictin; Clarifies that the prvisin f sample prducts is nt impaired; als restates current exemptins fr military bases, etc. Creates a bifurcated penalty standard: ne fr individuals and ne fr entities issued cigarette permits which recgnizes the ptential that a cigarette permit hlder culd inadvertently be in pssessin f a cunterfeit/ cntraband prduct; Crrects the unintentinal repeal f the prhibitin and penalty fr less than 50 cartns f cntraband; Clarifies that a newly created civil penalty is an alternative t, nt in additin t, already existing civil penalties; Changes shall t may in penalty prvisin t give department discretin regarding fines; and Crrects drafting missins and makes clarifying changes, mstly regarding distributing agents. STORAGE NAME: h0205b.ft.dc PAGE: 10