Legislature(2003 - 2004)

05/05/2003 09:02 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR SENATE BILL NO. 168(L&C)                                                                                            
     "An  Act relating to  issuance and revocation  of licenses  for                                                            
     the  importation,   sale,  distribution,   or  manufacture   of                                                            
     cigarettes  and tobacco products;  relating to a tax  refund or                                                            
     credit   for  unsaleable,   returned,   or  destroyed   tobacco                                                            
     products;  relating   to restrictions   on  and  penalties  for                                                            
     shipping  or  transporting  cigarettes;   relating  to  records                                                            
     concerning   the  sale  of  cigarettes;  amending   and  adding                                                            
     definitions  relating  to  cigarette  taxes;  relating  to  the                                                            
     payment  of cigarette taxes;  relating to penalties  applicable                                                            
     to  cigarette   taxes;  relating  to  the  definition   of  the                                                            
     wholesale  price of  tobacco products;  relating to payment  of                                                            
     cigarette  taxes  through  the  use of  cigarette  tax  stamps;                                                            
     relating  to provisions  making certain  cigarettes  contraband                                                            
     and  subject to  seizure and  forfeiture;  relating to  certain                                                            
     crimes,  penalties, and interest  concerning tobacco  taxes and                                                            
     stamps;  relating  to cigarette  sales;  and providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-chair Wilken explained  that this legislation addresses cigarette                                                            
sales and distribution  by mandating that a tax stamp  be applied to                                                            
each pack of  cigarettes sold in the  State thereby signifying  that                                                            
the tobacco tax has been paid.                                                                                                  
                                                                                                                                
Senator  Bunde,  the  bill's  sponsor,  expressed  that "this  is  a                                                            
tobacco distributor-friendly  bill" as it would impede  "the gray or                                                            
black"  marketing of  cigarettes  in the  State that  is  negatively                                                            
impacting  legitimate  businesses  that pay  the one  dollar a  pack                                                            
State tax. He noted that  requiring the State stamp to be affixed to                                                            
each pack  of cigarettes  would assure that  the State tax  would be                                                            
paid. He  informed that  this legislation  was prompted  by a  radio                                                            
advertisement  he heard for an out-of-state tobacco  distributor who                                                            
claimed  that, by  purchasing  cigarettes  from him,  the  purchaser                                                            
would avoid paying  the State tax. Upon hearing that  advertisement,                                                            
Senator Bunde  checked with  the Department  of Revenue and  learned                                                            
that  numerous  out-of-state   purchases  are  being  made  and  are                                                            
circumventing the current dollar-a-pack tax.                                                                                    
                                                                                                                                
Senator Bunde  informed that the State must establish  a State stamp                                                            
program in  order to qualify for a  federal law that specifies  that                                                            
it would  be illegal for  an entity to sell  cigarettes without  the                                                            
affixed  stamp were  a State  stamp required.  He  stated that  this                                                            
would address  the out-of-State distributor  issue. He communicated                                                             
that  Alaskan  distributors   support  this  legislation  as  it  is                                                            
intended  to address  those  entities  that  receive an  unfair  tax                                                            
advantage by not paying the State tax.                                                                                          
                                                                                                                                
Furthermore, Senator Bunde  explained that this legislation provides                                                            
a minimum  price provision  for wholesalers  and retailers  based on                                                            
the wholesale  list  price provided  by the  tobacco manufacturers.                                                             
This minimum price, he  attested, would create a level playing field                                                            
for competition in the  State. He noted that higher cigarette prices                                                            
might also deter young people from smoking.                                                                                     
                                                                                                                                
                                                                                                                                
SFC 03 # 75, Side B 09:50 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Bunde stated that  while the Department of Revenue estimates                                                            
that the  stamp tax could  increase State  revenue by approximately                                                             
$500,000,  the exact  amount of  money that  this legislation  might                                                            
raise  is  speculative.  He  pointed  out  that  Hawaii   vigorously                                                            
enforces its tax  stamp program and has increased  its cigarette tax                                                            
revenue by  fifty percent. In contract,  he noted that Michigan  has                                                            
not vigorously  enforced its program  and has increased its  revenue                                                            
approximately ten percent.                                                                                                      
                                                                                                                                
Senator  Olson  asked  whether  the  industry   has  indicated  that                                                            
compliance with this legislation would present a hardship.                                                                      
                                                                                                                                
Senator  Bunde  stated   that  industry  representatives   would  be                                                            
presenting testimony.                                                                                                           
                                                                                                                                
Co-Chair  Wilken stated  that the  tobacco tax  currently  generates                                                            
approximately  $40 million  annually.  He calculated  that were  the                                                            
State to collect an additional  ten percent of that amount, it would                                                            
generate four  million dollars for the general fund  and the tobacco                                                            
tax school fund.                                                                                                                
                                                                                                                                
Senator  Bunde  explained  that the  tobacco  tax revenue  could  be                                                            
dedicated toward  the school fund because these appropriations  were                                                            
"grandfathered in" as existing policy.                                                                                          
                                                                                                                                
Co-chair Wilken  expressed that 70  percent of the revenue  would be                                                            
dedicated  to the  school  fund with  24  percent dedicated  to  the                                                            
general fund. He stated that this would be significant money.                                                                   
                                                                                                                                
JENNIFER APP, Alaska Advocacy  Director, American Heart Association,                                                            
testified via  teleconference from Anchorage in support  of the bill                                                            
on  behalf of  Alaska's  tobacco-free  kids.  She stated  that  this                                                            
legislation would decrease  "the ability of people and businesses to                                                            
illegally  avoid the tax,"  and it would  assist in keeping  tobacco                                                            
"out of  the hands  of youth."  She attested  that non-face-to-face                                                             
sales such  as websites  and mail orders  account for approximately                                                             
14-percent  of all sales  to youth. Furthermore,  she asserted  that                                                            
these sales  are detrimental to efforts  to reduce youth  smoking as                                                            
no proof of  age is required in these  transactions and the  ability                                                            
to avoid  paying the State  tobacco tax allows  purchase to  be less                                                            
expensive.  She  attested  that  this  legislation   would  prohibit                                                            
Internet and  mail order distributors  from avoiding the  State tax.                                                            
She stated  that the proof  of age issue is  also addressed  in this                                                            
bill,  as it requires  that  all shipments  must be  delivered  to a                                                            
person  licensed  under  Sec.  43.50.105   or  to other   identified                                                            
entities specified in Section 9 of the bill.                                                                                    
                                                                                                                                
Co-chair  Wilken  asked  whether  the  American  Heart  Association                                                             
supports this legislation.                                                                                                      
                                                                                                                                
Ms. App responded in the affirmative.                                                                                           
                                                                                                                                
Senator Bunde  acknowledged the work conducted by  the Department of                                                            
Revenue in this endeavor.                                                                                                       
                                                                                                                                
JOHANNA  BALES, Revenue  Auditor and  Program  Manager, Cigarette  &                                                            
Tobacco  Products Excise  Tax, Department  of  Revenue informed  the                                                            
Committee that  the Department is in favor of this  tax stamp as she                                                            
expressed  that tax enforcement  efforts are  currently hampered  by                                                            
the  absence  of  a  stamp.  Moreover,  she  attested  that  "it  is                                                            
virtually impossible" to  determine whether the tax has been paid on                                                            
any given  pack of cigarettes  as tracking  via retailer invoice  is                                                            
impossible  as  no   pack  is  distinguishable  from   another.  She                                                            
explained to the  Committee that prior to the one-dollar-a-pack  tax                                                            
legislation, approximately  53 million packs of cigarettes were sold                                                            
annually; however,  she noted that  the annual amount has  decreased                                                            
to approximately  42 million packs. She stated that  the Department,                                                            
in its attempts  to enforce the tax,  uncovered approximately  1,000                                                            
individuals  who are  purchasing cigarettes  via  the Internet.  She                                                            
stated that  these individuals attest  that were a stamp  program in                                                            
place, they would have  known whether the tax was or was not paid by                                                            
the  vendor.  She   stated  that  the  Department  calculates   that                                                            
approximately   $600,000  was   not  collected   due  to   Internet,                                                            
distributor, or mail order activities over a 13-month period.                                                                   
                                                                                                                                
Ms.  Bales stated  that  once the  State enacts  a  State stamp  tax                                                            
program,  the federal  Contraband  Cigarette Trafficking  Act  would                                                            
assist in the  enforcement of tax. She affirmed that  46 states have                                                            
tax  stamp  programs, including  the  program  recently  enacted  in                                                            
Hawaii,  which has  a "very  aggressive"  eleven-member enforcement                                                             
team.                                                                                                                           
                                                                                                                                
Co-Chair  Green  asked whether  language  in  the bill  addresses  a                                                            
situation wherein a person,  while traveling out of state, purchases                                                            
tobacco for  his or her own personal  consumption and transports  it                                                            
back to the State.                                                                                                              
                                                                                                                                
Ms.  Bales  clarified  that  this  legislation  proposes  to  change                                                            
existing tobacco  law by implementing a stamp tax.  Furthermore, she                                                            
stated that  because no exemption  for the transport of tobacco  for                                                            
personal  consumption   currently  exists,  the  individual   should                                                            
currently be  paying the State tax.  However, she stated  that while                                                            
this scenario  "is impossible to enforce,"  the Department  does not                                                            
consider it to be a "huge problem."                                                                                             
                                                                                                                                
Co-Chair Wilken stated  therefore that "the trip wire" would be when                                                            
an individual  distributes  the cigarettes  for profit  or for  some                                                            
manner other than personal use.                                                                                                 
                                                                                                                                
Ms. Bales  responded  that current  statute specifies  that  persons                                                            
transporting  cigarettes  into  the  State  should  be  licensed  to                                                            
transport the  cigarette, should pay  the cigarette tax,  and should                                                            
file  a  monthly  report.  She stated  that  the  statute  does  not                                                            
differentiate  between personal  and non-personal  consumption.  She                                                            
stated  that individuals  who  have  been detected  of transporting                                                             
goods  into the  State  for personal  use  have been  treated  "very                                                            
leniently."                                                                                                                     
                                                                                                                                
Co-Chair Green  asked whether the transport of cigarettes  is viewed                                                            
with "the same sort of standard" as the transport of liquor.                                                                    
                                                                                                                                
Ms. Bales  responded that  "there is a very  big difference"  as the                                                            
tax on alcohol  is applicable at the  point of purchase.  Therefore,                                                            
she informed that because  the tax is paid at point of purchase, the                                                            
alcohol could be legally  transported, with the exception being that                                                            
federal  law  prohibits  the  mailing  of  alcohol.   Therefore  she                                                            
concluded  that  the alcohol  tax  "is not  as problematic"  as  the                                                            
cigarette tax.                                                                                                                  
                                                                                                                                
Co-Chair Wilken asked for  further information regarding the sale of                                                            
cigarettes bought via the Internet.                                                                                             
                                                                                                                                
Senator Bunde  noted that the Internet  seller does not require  the                                                            
purchaser to prove that they are of legal purchasing age.                                                                       
                                                                                                                                
Co-chair Wilken asked how  this legislation would enforce the tax in                                                            
this case.                                                                                                                      
                                                                                                                                
Ms. Bales responded that  this legislation would require a purchaser                                                            
to  apply to  the Department  of  Revenue for  a license,  and  upon                                                            
receipt of  the license,  they could make  a purchase. Furthermore,                                                             
she  explained  that shipping  cigarettes  through  the  mail to  an                                                            
unlicensed individual  is prohibited. In addition,  she relayed that                                                            
fines  would  be  levied  upon  the  common  carrier   shipping  the                                                            
cigarettes  were  the receiver  of  the  cigarettes  unlicensed.  In                                                            
conclusion,  she stated that  the intent of  the bill is to  curtail                                                            
all shipment of  cigarettes via interstate commerce  unless it would                                                            
be shipped to someone who is licensed and who is paying the tax.                                                                
                                                                                                                                
Co-Chair  Wilken surmised  therefore  that rather  than placing  the                                                            
onus on the seller, the  State would require the individual "sitting                                                            
at home" making  the purchase to be licensed. However,  he attested,                                                            
this  would be  difficult  to enforce  because  the  State would  be                                                            
required to become aware of the action.                                                                                         
                                                                                                                                
Ms.  Bales expounded  that  the federal  Jenkins  Act requires  that                                                            
anyone  conducting interstate  commerce  by shipping  cigarettes  to                                                            
someone who  is not a licensed distributor  must notify the  state's                                                            
Department  of  Commerce   of that   shipment.  She  stated  that  a                                                            
violation  of this Act  would result  in a  misdemeanor charge.  She                                                            
continued that  were this law violated under the federal  Contraband                                                            
Cigarette  Act it  would result  in a  felony charge.  However,  she                                                            
reiterated   that  the  Contraband   Cigarette  Act  would   not  be                                                            
applicable until the State incorporates a stamp tax.                                                                            
                                                                                                                                
Co-Chair  Wilken  asked whether  the  Internet  seller  would ask  a                                                            
purchaser for his or her license number.                                                                                        
                                                                                                                                
Ms. Bales  responded that  this information  would be required  were                                                            
the stamp tax legislation enacted.                                                                                              
                                                                                                                                
Ms. Bales  continued that,  in addition,  private carriers,  such as                                                            
Federal  Express, who  might ship  cigarettes would  be required  to                                                            
verify that the person  receiving the package be of legal age and be                                                            
licensed.                                                                                                                       
                                                                                                                                
Senator  Bunde  pointed  out  that   rather  than  the  State  being                                                            
responsible for the enforcement,  charges at the federal level could                                                            
be levied.  He stated  that cigarette  suppliers  in the  "sovereign                                                            
nations,  the  Indians  [indiscernible]  are  potentially  going  to                                                            
ignore it."                                                                                                                     
                                                                                                                                
Co-Chair  Green asked whether  a person,  with cigarettes and  doing                                                            
interstate travel, would  be required to follow these same licensing                                                            
regulations.                                                                                                                    
                                                                                                                                
Ms. Bales  stated that  it depends  on the  individual state's  law;                                                            
however,  she continued,  were that  a state's law  similar to  this                                                            
legislation, the  person should pay the state's tax.  She noted that                                                            
some  states allow  a  person to  transport  a specified  number  of                                                            
cigarettes for personal consumption without penalty.                                                                            
                                                                                                                                
Co-Chair Wilken  exampled a scenario wherein a business  might order                                                            
cigarettes  via the Internet,  and upon receipt  of the cigarettes,                                                             
would sell them  at the going market value and "pocket  the tax." He                                                            
asked whether this type of activity occurs.                                                                                     
                                                                                                                                
Ms. Bales declared  that this does happen. She further  exampled the                                                            
difficulty of  enforcing the current State cigarette  tax by sharing                                                            
that a licensed distributor  could present the State examiner with a                                                            
legitimate  invoice on  which the  State tax is  reflected as  being                                                            
paid. However,  she continued that without a stamp  being affixed to                                                            
each packet  of cigarettes, the examiner  has no method by  which to                                                            
identify the packs of cigarettes  on which a tax has been or has not                                                            
been paid.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  asked who is authorized  to apply the stamp  to the                                                            
pack.                                                                                                                           
                                                                                                                                
Ms. Bales clarified  that generally the distributor  would affix the                                                            
stamp  to  the  pack;  however,  the  retailer  could  purchase  the                                                            
equipment and the stamp from the Department and affix the stamp.                                                                
                                                                                                                                
Senator Taylor  asked for the amount of the total  current State tax                                                            
on cigarettes.                                                                                                                  
                                                                                                                                
Ms. Bales  explained that  the State tobacco  tax is currently  five                                                            
cents per cigarette or one dollar per pack of twenty cigarettes.                                                                
                                                                                                                                
Senator Taylor  asked whether, according to State  statute, he would                                                            
be required  to remit  to the State  of Alaska  97-cents were  he to                                                            
purchase  a  pack  of cigarettes,  for  example  in  Kentucky  which                                                            
charges a three-cent per pack cigarette tax.                                                                                    
                                                                                                                                
Ms. Bales  clarified that  the State  of Alaska  would not credit  a                                                            
purchaser  for  the  amount  of tax  they  paid  in  another  state;                                                            
therefore, she  stated that the State tax of one dollar  per pack of                                                            
cigarettes  should be  remitted to  the State.  However, she  stated                                                            
that Kentucky  would issue  a credit to an  Alaskan distributor  for                                                            
the Kentucky  tax,  were the cigarettes  purchased  in Kentucky  for                                                            
resale in  Alaska. Additionally  she noted  that Kentucky would  not                                                            
require the Kentucky  stamp to be affixed to packs  being shipped to                                                            
Alaska for consumption.                                                                                                         
                                                                                                                                
Co-Chair  Wilken referred  the Committee  to the  "State Tax  Guide"                                                            
comparison  chart, dated  January 1,  2003 [copy  on file] that  was                                                            
supplied by Senator Bunde.  He noted that Kentucky, with a cigarette                                                            
tax  of   three  cents   per  pack,   has  the   lowest  tax   while                                                            
Massachusetts,  with the highest  state tax,  charges $1.50  tax per                                                            
pack.                                                                                                                           
                                                                                                                                
MIKE  ELERDING,   Owner,  Northern  Sales  Company,   testified  via                                                            
teleconference  from  Ketchikan,  and stated  that  his company  and                                                            
other  Alaska-based  wholesale  tobacco  distributors  support  this                                                            
legislation. He avowed  that the stamp tax would enable the State to                                                            
collect  a ten-dollar  per  carton  cigarette  excise  tax on  every                                                            
carton  of cigarettes  imported  into  the  State. In  addition,  he                                                            
attested   that  the   legislation   would   provide  Alaskan-based                                                             
distributors with  the ability "to compete on a level  playing" with                                                            
out-of-state  distributors. He urged  the Committee to support  this                                                            
legislation.                                                                                                                    
                                                                                                                                
Senator  Olson asked  whether  there  are concerns  regarding  stamp                                                            
counterfeiting.                                                                                                                 
                                                                                                                                
Ms.  Bales  confirmed  that  counterfeit  stamps  are  a  nationwide                                                            
problem.  She  continued that  stamp  manufacturers  are  diligently                                                            
addressing  this issue and are producing  stamps that are  difficult                                                            
to  counterfeit.   She   announced   that,  as   specified  in   the                                                            
Department's  fiscal note, the State  is proposing "to purchase  the                                                            
most expensive  stamps which  have the  most up-to-date counterfeit                                                             
measures" including special inks.                                                                                               
                                                                                                                                
Co-Chair  Wilken   commented  that  the  Members'  backup   material                                                            
addresses  the  counterfeit  issue and  includes  information  about                                                            
Meyercord, a stamp manufacturer.                                                                                                
                                                                                                                                
Co-chair  Wilken  asked  the  distributor  to  explain  the  process                                                            
whereby the State stamp is affixed to each pack of cigarettes.                                                                  
                                                                                                                                
Mr.  Elerding  explained  that  wholesale  distributors,  who  order                                                            
cigarettes  directly from manufacturers,  would be required  to have                                                            
stamping equipment  in their facility  and would affix the  stamp on                                                            
each pack  at that  location. He  stated that  his company would  be                                                            
required to centralize  the stamping operation at  a single location                                                            
rather than conducting  it at each of its five distribution centers.                                                            
                                                                                                                                
Co-Chair Wilken asked for  clarification that each pack, rather than                                                            
each carton, would require a stamp.                                                                                             
                                                                                                                                
Mr. Elerding verified  that while the stamp must be  affixed to each                                                            
pack, the automated  stamping equipment  would provide an  efficient                                                            
stamping process. He communicated  that the legislation provides for                                                            
a  State  "reimbursement  to  the  distributors  that  is  close  to                                                            
covering  the  cost   of  the  stamp  operation."  Nonetheless,   he                                                            
communicated  that the process  would be an  expense and that  small                                                            
distributors  could  not amortize  the  expense  as well  as  larger                                                            
distributors.  He noted  however,  that the Unfair  Cigarette  Sales                                                            
Measure,  defined in  Article 6  of Section  17 of  the bill,  would                                                            
assist distributors in  offsetting the additional expense associated                                                            
with the stamping process.                                                                                                      
                                                                                                                                
Co-Chair  Wilken   asked  whether  a  uniform  State   stamp  or  an                                                            
individual distributor stamp would be used.                                                                                     
                                                                                                                                
Mr. Elerding clarified  that the State stamp would be the only stamp                                                            
allowed.                                                                                                                        
                                                                                                                                
Co-chair  Wilken  asked  the  amount  the  distributor  anticipates                                                             
spending on this project.                                                                                                       
                                                                                                                                
Mr. Elerding stated that,  in addition to the cost of the equipment,                                                            
the company would  be required to locate adequate  space in which to                                                            
conduct  the  stamping  procedure  and must  provide  the  necessary                                                            
labor. He estimated the  total expense to be approximately $75,000 a                                                            
year, with  $50,000 of that being  reimbursed by the State  by means                                                            
of a discount on the purchase of the stamps.                                                                                    
                                                                                                                                
Senator  Taylor   understood  that  Canada  has  experienced   "huge                                                            
problems" with bootlegging,  hijacking, and counterfeiting since the                                                            
nation increased its cigarette  taxes. He asked whether the State of                                                            
Alaska  has  experienced  an  increase   in bootlegging   or  black-                                                            
marketing since  the cigarette tax was raised to one  dollar a pack.                                                            
                                                                                                                                
Ms. Bales responded  that the State  has experienced an increase  in                                                            
these activities;  particularly, in  "gray market" activities  where                                                            
cigarettes  manufactured for other  countries are finding  their way                                                            
to the United States. She  noted that while the State might be aware                                                            
of this  situation, there  are no current  provisions in Alaska  law                                                            
that would  allow these cigarettes  to be seized. She asserted  that                                                            
enacting a stamp tax would address this situation.                                                                              
                                                                                                                                
Senator  Olson  asked  the  projected  costs   associated  with  the                                                            
enforcement of this legislation.                                                                                                
                                                                                                                                
Ms. Bales  responded that  while the  Department of  Law has  a zero                                                            
fiscal  note  attached  to  this  legislation,   the  Department  of                                                            
Revenue's $251,700 fiscal  note would provide for three positions to                                                            
handle the  purchase, sale, administration,  and enforcement  of the                                                            
new tax stamp program and cigarette shipping restrictions.                                                                      
                                                                                                                                
Senator  Olson  asked  whether  this  tax  stamp  legislation  would                                                            
encompass all types of tobacco.                                                                                                 
                                                                                                                                
Ms. Bales responded  that the tax would be limited  to cigarettes as                                                            
it would be impossible  to automate a stamp process  for the various                                                            
packaging or variety of product sizes.                                                                                          
                                                                                                                                
Senator Olson  asked whether  the intent of  this legislation  is to                                                            
penalize transporters of cigarettes.                                                                                            
                                                                                                                                
Ms. Bales responded  yes, that private  carriers would be  penalized                                                            
were  they  to knowingly  deliver  cigarettes  to  an  underage  and                                                            
unlicensed individual.                                                                                                          
                                                                                                                                
Senator Olson voiced concern  that transporters would be responsible                                                            
for enforcing this legislation.                                                                                                 
                                                                                                                                
Senator Bunde  voiced the importance of noting that  the key element                                                            
regarding   the  responsibility   of   transporters   is  the   term                                                            
"knowingly."                                                                                                                    
                                                                                                                                
Senator  Olson furthered  that  "the last  thing" on  a small  rural                                                            
transporting  company's  mind  would  be  to monitor  each  pack  of                                                            
cigarettes.   He   continued   to  voice   concern   regarding   the                                                            
transporting issue.                                                                                                             
                                                                                                                                
Amendment #1:  This amendment inserts a new subsection  into Section                                                            
43.50.849 Definitions.  of the bill on page 21, line  28 as follows.                                                            
                                                                                                                                
     (12) "trade  discount" means a price reduction  that is offered                                                            
     by a cigarette  manufacturer on the date of sale,  is reflected                                                            
     on  the invoice  as a deduction  from the  manufacturer's  list                                                            
     price  and is fully  earned and determininable  on the  date of                                                            
     sale.                                                                                                                      
                                                                                                                                
Senator Bunde moved for the adoption of Amendment #1.                                                                           
                                                                                                                                
Co-Chair Wilken objected for explanation.                                                                                       
                                                                                                                                
Senator  Bunde stated  that, at  the request  of distributors,  this                                                            
amendment would  define the term "trade  discount" which  is a price                                                            
reduction offered  by a cigarette manufacturer on  the date of sale.                                                            
He explained  that the discount  would be  reflected on the  invoice                                                            
and would be a  factor in the "minimum markup" determination  of the                                                            
retail price  of the cigarettes.  He stated  that the Department  of                                                            
Revenue does not object to the amendment.                                                                                       
                                                                                                                                
Ms. Bales clarified  that the intent  of the amendment is  to assure                                                            
that cigarettes  could not be sold below "cost" which  is defined as                                                            
the price paid less the discount.                                                                                               
                                                                                                                                
Co-chair Wilken  surmised that this  amendment, rather than  address                                                            
concerns  regarding   the  tax  stamp,   addresses  industry   trade                                                            
concerns.                                                                                                                       
                                                                                                                                
Senator Bunde voiced that it addresses minimum price concerns.                                                                  
                                                                                                                                
Co-chair Wilken removed his objection.                                                                                          
                                                                                                                                
There being no further objection, Amendment #1 was adopted.                                                                     
                                                                                                                                
Senator  Taylor  moved  to  report  the  bill  from  Committee  with                                                            
individual recommendations and accompanying fiscal notes.                                                                       
                                                                                                                                
Senator  Taylor   then  objected  to  his  motion.   He  voiced  his                                                            
continuing  objection  to  taxation  legislation;  specifically  tax                                                            
legislation   that  would   result  in   expenses  and  enforcement                                                             
difficulties  to  the  State.  He  reminded   Members  of  testimony                                                            
indicating  that the cigarette tax  has resulted in bootlegging  and                                                            
other  illegal activities,  and  he  worried that  this legislation                                                             
would  further  those  activities.  He  voiced  that  while  Alaskan                                                            
retailers  and wholesalers  have  legitimate concerns,  the  expense                                                            
associated  with   this  legislation  is  "far  greater"   than  its                                                            
projected benefit.                                                                                                              
                                                                                                                                
Senator Taylor removed his objection.                                                                                           
                                                                                                                                
There being no further  objection, CS SB 168 (FIN) was REPORTED from                                                            
Committee  with fiscal note  #1 in the amount  of $251,700  from the                                                            
Department  of Revenue and zero fiscal  note #2 from the  Department                                                            
of Law.                                                                                                                         
                                                                                                                                

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