LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                                May 3, 2001
  
  
          TO:  Honorable Rodney Ellis, Chair, Senate Committee on Finance
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB2378  by Kuempel (Relating to the cigarette tax and
               providing a penalty.), As Engrossed
  
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*  No significant fiscal implication to the State is anticipated.        *
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The bill would amend Chapter 154 of the Tax Code.  Cigarettes not in
compliance with federal laws and regulations relating to ingredients,
importation, and previous exportation could not receive a state cigarette
tax stamp.

Violation of this chapter's provisions regarding the affixing of tax
stamps is currently an offense; under this bill the person would have to
"knowingly" affix a stamp for an offense to have occurred.  The
Comptroller would be directed to distribute cigarette tax stamps that
would, by the use of numbers or marks, allow the identification of the
person applying those tax stamps.  Persons importing cigarettes for sale
in Texas would have to maintain copies of customs certificates for those
cigarettes and submit to the Comptroller, with their monthly report,
copies of those customs certificates.

The bill would amend Chapter 35 of the Business and Commerce Code by
adding a provision allowing cigarette sellers, distributors, and
manufacturers sustaining direct economic or commercial injury from the
illegal stamping of cigarettes in Texas to bring an action for
appropriate injunctive relief, in addition to other remedies provided by
law.

The bill would amend Chapter 48 of the Penal Code by adding a felony
offense for knowingly importing, acquiring, holding, owning, possessing,
or transporting, for sale or distribution in Texas, cigarettes not in
compliance with federal laws and regulations and that could not be
legally stamped in Texas.  An exception would be made for cigarettes
imported by an individual for personal use and for cigarettes lawfully
sold in duty-free stores.  The offense would be punishable by a fine up
to $5,000, imprisonment up to five years, or both.

The bill would reinforce existing laws relating to the importation of
cigarettes that had been exported by American manufacturers for foreign
markets.  Such importation of cigarettes is a violation of federal law.
Under current state law, tax stamps cannot be applied to cigarettes that
do not comply with federal standards for labels and warnings, are labeled
in a fashion indicating they were intended for sale outside the U.S.,
have packages that have been altered, have been imported into the U.S. in
violation of federal law after January 1, 2000, or that violate federal
trademark or copyright laws.

This bill would take effect September 1, 2001.
  
Local Government Impact
  
No significant fiscal implication to units of local government is
anticipated.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD