LEGISLATIVE BUDGET BOARD

Austin, Texas

FISCAL NOTE, 78TH LEGISLATIVE REGULAR SESSION

May 21, 2003

TO:	Honorable Troy Fraser, Chair, Senate Committee on Business & Commerce
FROM:	John Keel, Director, Legislative Budget Board
IN RE:	HB3139 by Wilson (Relating to delivery sales of cigarettes; providing penalties.), As Engrossed

The Comptroller's Office estimates there could be a potential revenue gain to the state depending on taxpayer compliance.

The bill would amend the Health and Safety Code by adding a new subchapter (Delivery Sales of Cigarettes), which would control the remote purchase of cigarettes by Texas consumers (using the Internet, telephone lines, or mail to place orders) and the delivery of those cigarettes using mail or other delivery services.

Persons making "delivery sales" would be required to comply with various provisions, which would include verification of the purchaser's age, payment of applicable taxes to the Comptroller's Office, and reporting details of such sales to the Comptroller's Office. Persons making "delivery sales" would have to comply with each law generally applicable to the sales of cigarettes that occur completely within the state.

An offense under the new subchapter could be up to a third-degree felony. Failure to pay taxes due on delivery sales would result in a civil penalty of five times the taxes due, in addition to other penalties provided by law. The Texas Attorney General, tobacco products manufacturers, or export warehouse proprietors permitted by the federal government, could bring suit in a Texas court to prevent or restrain violations of the new subchapter.

This bill would take effect September 1, 2003.

Note: A national research company has estimated that Internet web sites will sell $2.2 billion worth of cigarettes this year in the U.S. If, under the provisions of this bill, Texans share of those sales were in proportion to its share of the national population and Texas received one-tenth of the tax revenue those sales would generate, Texas tax collections would rise by $4 million per year. However, the size and timing of these gains cannot be determined.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

302 Office of the Attorney General, 304 Comptroller of Public Accounts, 501 Department of Health

LBB Staff:

JK, JRO, WP, SD