S3649-2011 Actions

• Sep 23, 2011: SIGNED CHAP.556
• Sep 12, 2011: DELIVERED TO GOVERNOR
• Jun 23, 2011: returned to senate
• Jun 23, 2011: passed assembly
• Jun 23, 2011: ordered to third reading rules cal.593
• Jun 23, 2011: substituted for a451b
• Jun 16, 2011: referred to ways and means
• Jun 16, 2011: DELIVERED TO ASSEMBLY
• Jun 16, 2011: PASSED SENATE
• Jun 14, 2011: ORDERED TO THIRD READING CAL.1218
• Jun 13, 2011: COMMITTEE DISCHARGED AND COMMITTED TO RULES
• Jun 7, 2011: REPORTED AND COMMITTED TO FINANCE
• May 18, 2011: PRINT NUMBER 3649A
• May 18, 2011: AMEND AND RECOMMIT TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
• Feb 28, 2011: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

S3649-2011 Memo

BILL NUMBER:S3649

TITLE OF BILL:
An act
to amend the tax law and the administrative code of the city of New
York, in relation to the destruction of seized and forfeited cigarettes
and tobacco products

PURPOSE:
This bill would discontinue the practice of the government re-selling
counterfeit or seized cigarettes.

SUMMARY OF PROVISIONS:
Section 1 amends section 1846 of the tax law by continuing to allow
for the resale of cigarette vending machines with the money being
used for the state general fund but discontinuing the practice of
selling seized or counterfeit cigarettes to inmates or secondary
retailers. It would also grant the holders of the trademark of the
seized product to examine the seized goods in order to identify fraud
techniques and other information. In addition to this, it would also
allow the state to retain small amounts of the seized goods that do
not violate any federal counterfeit laws to be used by law
enforcement in sting operations that fight the illegal distribution
of cigarettes.

Section 2 amends section 1846-a of the tax law would remove the right
of the municipality to resell counterfeit cigarettes and require that
they be destroyed.

Section 3 amends section 11-4021 of the administrative code of the
city of New York by continuing to allow for the resale of cigarette
vending machines with the money being used for the state general fund
but discontinuing the practice of selling seized or counterfeit
cigarettes to inmates or secondary retailers. It would also grant the
holders of the trademark of the seized product to examine the seized
goods in order to identify fraud techniques and other information.

Section 4 sets the effective date.

JUSTIFICATION:
Currently, when counterfeit cigarettes are seized by law or tax
enforcement, notice is published in the newspaper where the seizure
occurs and the products are available for sale to the public,
secondary retailers, and the prison system. Funds generated from the
sale of cigarettes and other seized products are earmarked for the
general fund, meaning they can be used for any legitimate government
purpose. Though precedents exist for the government to sell seized
items (i.e. homes, cars, etc) , cigarettes are a common consumer
product and in many cases the products being sold are substandard and
in some cases dangerous to the public.

This bill would take the state of New York out of the business of
selling counterfeit and seized cigarettes and put it in the business
of removing these products from circulation. Furthermore, by allowing
the manufacturers of the products to inspect the seized goods, it
will allow the state to work with the manufacturers in identifying


ways in which these frauds are being perpetrated and thereby allowing
these products to be sold in a legitimate manner. if people choose to
purchase these products, it should be done legitimately with the
appropriate taxes being levied after the appropriate inspection of
the product has been concluded.

LEGISLATIVE HISTORY:
2009-10: A.11460 - Referred to Ways and Means/S.8255 - Passed Senate

FISCAL IMPLICATIONS:
Some revenue would be lost due to the elimination of the tobacco resale.
However, it will lead to more legitimate sales and thereby more
revenue to the state through cigarette taxes, thereby making the loss
in revenue negligible.

EFFECTIVE DATE:
This act shall take effect immediately.

S3649-2011 Text

 S T A T E   O F   N E W   Y O R K
 
 
                                         3649
 2011-2012 Regular Sessions
 I N  SENATE
 February 28, 2011
 
 Introduced  by Sen. GALLIVAN -- read twice and ordered printed, and when
 printed to be committed to the Committee on Investigations and Govern
 ment Operations
 

AN ACT to amend the tax law and the administrative code of the  city  of
 New York, in relation to the destruction of seized and forfeited ciga
 rettes and tobacco products
 

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section 1.

Section 1846 of the tax law, as added by chapter 65 of  the
 laws of 1985, subdivision (a) as amended by section 2 of part E of chap
 ter  93  of the laws of 2002, subdivision (a-1) as added by section 3 of
 part J of chapter 383 of the laws of 2001, subdivision (d) as  added  by
 chapter 384 of the laws of 1999, is amended to read as follows:

 

S  1846.  Seizure and forfeiture of cigarettes.--(a) Whenever a police
 officer designated in section 1.20 of the criminal procedure  law  or  a
 peace  officer  designated  in  subdivision four of section 2.10 of such
 law, acting pursuant to his or her special duties,  shall  discover  any
 cigarettes  subject to tax provided by article twenty of this chapter or
 by chapter thirteen of title eleven of the administrative  code  of  the
 city of New York, and upon which the tax has not been paid or the stamps
 not  affixed  as required by such article or such chapter thirteen, they
 are  hereby  authorized  and  empowered  forthwith  to  seize  and  take
 possession  of  such  cigarettes,  together  with any vending machine or
 receptacle in which they are held for  sale.  Such  cigarettes,  vending
 machine  or  receptacle seized by a police officer or such peace officer
 shall be turned over to the commissioner. Such seized cigarettes,  vend
 ing machine or receptacle, not including money contained in such vending
 machine or receptacle, shall be forfeited to the state.  The commission
 er  may,  within  a  reasonable  time  thereafter, upon publication of a
 notice to such effect for at least five successive days, before the  day
 of  sale, in a newspaper published or circulated in the county where the
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD04509-03-1
 
       S. 3649                             2
 seizure was made, sell such forfeited [cigarettes and] vending  machines
 or receptacles at public sale and pay the proceeds into the state treas
 ury  to  the  credit of the general fund. [Cigarettes so seized and sold
 shall  be sold only to an agent under article twenty of this chapter and
 the notice of sale shall contain a provision to this  effect.]  Notwith
 standing any other provision of this section, the commissioner may enter
 into  an  agreement  with  any city of this state which is authorized to
 impose a tax similar to that imposed by article twenty of  this  chapter
 to  provide  for  the disposition between the state and any such city of
 the proceeds from any such sale.  ALL CIGARETTES FORFEITED TO THE  STATE
 SHALL  BE  DESTROYED  OR  USED FOR LAW ENFORCEMENT PURPOSES, EXCEPT THAT
 CIGARETTES THAT VIOLATE, OR ARE SUSPECTED OF VIOLATING,  FEDERAL  TRADE
 MARK LAWS OR IMPORT LAWS SHALL NOT BE USED FOR LAW ENFORCEMENT PURPOSES.
 IF  THE  COMMISSIONER  DETERMINES THE CIGARETTES MAY NOT BE USED FOR LAW
 ENFORCEMENT PURPOSES, THE COMMISSIONER MUST, WITHIN  A  REASONABLE  TIME
 AFTER THE FORFEITURE OF SUCH CIGARETTES, UPON PUBLICATION OF A NOTICE TO
 SUCH  EFFECT  FOR  AT  LEAST  FIVE  SUCCESSIVE  DAYS  BEFORE  THE DAY OF
 DESTRUCTION, IN A NEWSPAPER PUBLISHED OR CIRCULATED IN THE COUNTY  WHERE
 THE SEIZURE WAS MADE, DESTROY SUCH FORFEITED CIGARETTES. THE COMMISSION
 ER  MAY,  PRIOR TO ANY DESTRUCTION OF CIGARETTES, PERMIT THE TRUE HOLDER
 OF THE TRADEMARK RIGHTS IN THE  CIGARETTES  TO  INSPECT  SUCH  FORFEITED
 CIGARETTES  IN ORDER TO ASSIST IN ANY INVESTIGATION REGARDING SUCH CIGA
 RETTES.
 (a-1) Whenever a police officer designated  in  section  1.20  of  the
 criminal procedure law or a peace officer designated in subdivision four
 of  section  2.10  of  such  law,  acting pursuant to his or her special
 duties, shall  discover  any  cigarettes  which  have  been  stamped  in
 violation of section four hundred eighty-b of this chapter, such officer
 is   hereby  authorized  and  empowered  forthwith  to  seize  and  take
 possession of such cigarettes, and such cigarettes shall be subject to a
 forfeiture action pursuant to the procedures  provided  for  in  article
 thirteen-A  of  the  civil  practice  law  and rules, as if such article
 specifically provided for forfeiture of cigarettes  seized  pursuant  to
 this  section as a preconviction forfeiture crime. Subdivisions (b), (c)
 and (d) of this section shall not apply to cigarettes seized pursuant to
 this subdivision.
 (b) In the alternative, the tax commission, on  reasonable  notice  by
 mail  or otherwise, may permit the person from whom said cigarettes were
 seized to redeem the said cigarettes, and any vending machine or  recep
 tacle seized therewith, by the payment of the tax due, plus a penalty of
 fifty  per  centum  thereof,  plus interest on the amount of tax due for
 each month or fraction thereof after such  tax  became  due  (determined
 without  regard  to  any  extension of time for filing or paying) at the
 rate applicable under subparagraph (ii) of paragraph (a) of  subdivision
 one  of  section  four  hundred eighty-one of this chapter and the costs
 incurred in such proceeding, which total payment shall not be less  than
 five  dollars;  provided, however, that such seizure and sale or redemp
 tion shall not be deemed to relieve any person from fine or imprisonment
 provided for in this article for violation of any provision  of  article
 twenty of this chapter.
 (c)  In  the  alternative,  [if  the tax commission concludes that any
 cigarettes seized pursuant to this section, when offered at public sale,
 will bring a price less than the reasonably estimated  price  which  the
 department  of  correctional services would have to pay for the purchase
 of such cigarettes for sale to or use by inmates in  institutions  under
 the  jurisdiction of such department,] the tax commission may dispose of
 
       S. 3649                             3
 [such] ANY cigarettes SEIZED PURSUANT TO THIS SECTION, EXCEPT THOSE THAT
 VIOLATE, OR ARE SUSPECTED OF VIOLATING, FEDERAL TRADEMARK LAWS OR IMPORT
 LAWS, by transferring them to the department  of  correctional  services
 for sale to or use by inmates in such institutions.
 (d)  Cigarettes seized pursuant to a violation of section four hundred
 seventy-three-b of this chapter shall be destroyed [or sold  for  export
 at  the  discretion  of the commissioner]. The department may also seize
 and destroy any  vending  machine  or  receptacle  in  which  cigarettes
 stamped  in  violation  of  section four hundred seventy-three-b of this
 chapter are held for sale.
 

S 2.

Section 1846-a of the tax law, as added by chapter 61 of the laws
 of 1989, subdivision (a-1) as added by chapter 552 of the laws of  2008,
 is amended to read as follows:

 

S  1846-a.  Forfeiture  action  with  respect to tobacco products. (a)
 Whenever a police officer designated in section  1.20  of  the  criminal
 procedure  law  or  a  peace  officer  designated in subdivision four of
 section 2.10 of such law, acting pursuant to his special  duties,  shall
 discover  any  tobacco  products in excess of five hundred cigars or ten
 pounds of tobacco which are being imported for sale in the  state  where
 the person importing or causing such tobacco products to be imported has
 not  been  appointed  as  a distributor pursuant to section four hundred
 seventy-two of this chapter, such police officer  or  peace  officer  is
 hereby  authorized  and empowered forthwith to seize and take possession
 of such tobacco products. Such tobacco products seized by a police offi
 cer or peace officer shall be turned over to the commissioner [of  taxa-
 tion  and finance].   Such seized tobacco products shall be forfeited to
 the state. [The] ALL TOBACCO PRODUCTS FORFEITED TO THE  STATE  SHALL  BE
 DESTROYED  OR  USED  FOR  LAW  ENFORCEMENT PURPOSES, EXCEPT THAT TOBACCO
 PRODUCTS THAT VIOLATE, OR ARE SUSPECTED OF VIOLATING, FEDERAL  TRADEMARK
 LAWS  OR  IMPORT LAWS SHALL NOT BE USED FOR LAW ENFORCEMENT PURPOSES. IF
 THE COMMISSIONER DETERMINES THE TOBACCO PRODUCTS MAY NOT BE USED FOR LAW
 ENFORCEMENT PURPOSES, THE commissioner [of  taxation  and  finance  may]
 MUST,  within a reasonable time thereafter, upon publication of a notice
 to such effect for at least five successive  days,  before  the  day  of
 [sale] DESTRUCTION, in a newspaper published or circulated in the county
 where  the  seizure  was  made,  [sell]  DESTROY  such forfeited tobacco
 products [at public sale and pay the proceeds into the state treasury to
 the credit of the general fund.   Tobacco products so  seized  and  sold
 shall  be  sold  only to a distributor appointed under article twenty of
 this chapter and the notice of sale shall contain a  provision  to  this
 effect].    THE  COMMISSIONER  MAY,  PRIOR TO ANY DESTRUCTION OF TOBACCO
 PRODUCTS, PERMIT THE TRUE HOLDER OF THE TRADEMARK RIGHTS IN THE  TOBACCO
 PRODUCTS  TO  INSPECT  SUCH FORFEITED PRODUCTS IN ORDER TO ASSIST IN ANY
 INVESTIGATION REGARDING SUCH TOBACCO PRODUCTS.
 (a-1) Whenever a police officer designated  in  section  1.20  of  the
 criminal procedure law or a peace officer designated in subdivision four
 of section 2.10 of the criminal procedure law, acting pursuant to his or
 her  special  duties,  discovers  any  roll-your-own  tobacco that is in
 violation of section four hundred eighty-c of this chapter, the  officer
 is  authorized  and  empowered to seize and take possession of the roll
 your-own tobacco, and the roll-your-own tobacco is subject to a  forfei
 ture  action  under the procedures provided for in article thirteen-A of
 the civil practice law  and  rules,  as  if  that  article  specifically
 provided  for  forfeiture  of  roll-your-own  tobacco  seized under this
 section as a preconviction forfeiture crime. Subdivisions (b) and (c) of
 
       S. 3649                             4
 this section do not apply to roll-your-own tobacco  seized  pursuant  to
 this subdivision.
 (b) In the alternative, the commissioner, on reasonable notice by mail
 or otherwise, may permit the person from whom said tobacco products were
 seized  to  redeem  the  said tobacco products by the payment of the tax
 due, plus a penalty of fifty per centum thereof, plus  interest  on  the
 amount  of  tax  due  for  each month or fraction thereof after such tax
 became due (determined without regard  to  any  extension  of  time  for
 filing  or  paying)  at  the  rate applicable under subparagraph (ii) of
 paragraph (a) of subdivision one of section four hundred  eighty-one  of
 this  chapter  and  the  costs  incurred in such proceeding, which total
 payment shall not be less than five  dollars;  provided,  however,  that
 such  seizure  and sale or redemption shall not be deemed to relieve any
 person from fine or  imprisonment  provided  for  in  this  article  for
 violation of any provision of article twenty of this chapter.
 (c) In the alternative, [if the commissioner concludes that any tobac-
 co  products  seized  pursuant  to  this section, when offered at public
 sale, will bring a price less than the reasonably estimated price  which
 the  department  of  correctional  services  would  have  to pay for the
 purchase of such tobacco products for sale  to  or  use  by  inmates  in
 institutions under the jurisdiction of such department,] the commission
 er  may  dispose  of [such] ANY tobacco products SEIZED PURSUANT TO THIS
 SECTION, EXCEPT THOSE THAT  VIOLATE,  OR  ARE  SUSPECTED  OF  VIOLATING,
 FEDERAL  TRADEMARK  LAWS  OR  IMPORT  LAWS,  by transferring them to the
 department of correctional services for sale to or  use  by  inmates  in
 such institutions.
 

S  3. 

Section  11-4021  of the administrative code of the city of New
 York, as added by chapter 765 of the laws of 1985, is amended to read as
 follows:

 

S 11-4021 Seizure and forfeiture of cigarettes. (a) Whenever a  police
 officer  designated  in  section 1.20 of the criminal procedure law or a
 peace officer designated in subdivision five of  section  2.10  of  such
 law,  acting  pursuant  to  his special duties, shall discover any ciga
 rettes subject to any tax provided by chapter thirteen  of  this  title,
 and  upon  which  the tax has not been paid or the stamps not affixed as
 required by such chapter,  they  are  hereby  authorized  and  empowered
 forthwith to seize and take possession of such cigarettes, together with
 any  vending machine or receptacle in which they are held for sale. Such
 cigarettes, vending machine or receptacle seized by a police officer  or
 such peace officer shall be turned over to the commissioner of finance.
 (b) The seized cigarettes and any vending machine or receptacle seized
 therewith, but not the money contained in such vending machine or recep
 tacle  shall  thereupon be forfeited to the city, unless the person from
 whom the seizure is made, or the owner of such seized cigarettes,  vend
 ing  machine  or  receptacle,  or any other person having an interest in
 such property, shall within ten days  of  such  seizure,  apply  to  the
 commissioner  of finance for a hearing to determine the propriety of the
 seizure, or unless the commissioner of finance shall on his  own  motion
 release the seized cigarettes, vending machine or receptacle. After such
 hearing the commissioner of finance shall give notice of his decision to
 the petitioner. The decision of the commissioner shall be reviewable for
 error, illegality, unconstitutionality or any other reason whatsoever by
 a  proceeding  under article seventy-eight of the civil practice law and
 rules if application therefor is made to the supreme court within thirty
 days after the giving of the notice of such  decision.  Such  proceeding
 shall  not  be  instituted  unless  there  shall first be filed with the
 
       S. 3649                             5
 commissioner of finance an  undertaking,  issued  by  a  surety  company
 authorized  to  transact  business in New York state and approved by the
 superintendent of insurance of New York state as to solvency and respon
 sibility,  in  such  amount  as  a  justice  of  the supreme court shall
 approve, to the effect that if such  proceeding  be  dismissed,  or  the
 seizure  confirmed,  the petitioner will pay all costs and charges which
 may accrue in the prosecution of the proceeding.
 (c) The commissioner of finance may, within a  reasonable  time  after
 the  forfeiture  to  the  city of such [cigarettes,] vending machines or
 receptacles, upon publication of a notice to such effect  for  at  least
 five  successive  days,  in  a  newspaper published or circulated in the
 city, sell such forfeited [cigarettes and] vending machines or  recepta
 cles  at  public sale and pay the proceeds into the treasury of the city
 to the credit of the general fund. [Cigarettes so seized and sold  shall
 be  sold  only  to an agent under chapter thirteen of this title and the
 notice of sale shall contain a provision to this  effect.]  Such  seized
 [cigarettes,]  vending  machines  or  receptacles  may  be sold prior to
 forfeiture if the owner of the seized property  consents  to  the  sale.
 Notwithstanding any other provision of this section, the commissioner of
 finance  may  enter  into  an agreement with the state tax commission to
 provide for the disposition between the city and state of  the  proceeds
 from  any  such  sale.    ALL CIGARETTES FORFEITED TO THE STATE SHALL BE
 DESTROYED OR USED FOR LAW ENFORCEMENT PURPOSES, EXCEPT  THAT  CIGARETTES
 THAT  VIOLATE,  OR ARE SUSPECTED OF VIOLATING, FEDERAL TRADEMARK LAWS OR
 IMPORT LAWS SHALL NOT BE USED  FOR  LAW  ENFORCEMENT  PURPOSES.  IF  THE
 COMMISSIONER  DETERMINES THE CIGARETTES MAY NOT BE USED FOR LAW ENFORCE
 MENT PURPOSES, THE COMMISSIONER OF FINANCE  MUST,  WITHIN  A  REASONABLE
 TIME  AFTER THE FORFEITURE TO THE CITY OF SUCH CIGARETTES, UPON PUBLICA
 TION OF A NOTICE TO SUCH EFFECT FOR AT LEAST FIVE SUCCESSIVE DAYS, PRIOR
 TO DESTRUCTION, IN A NEWSPAPER PUBLISHED  OR  CIRCULATED  IN  THE  CITY,
 DESTROY  SUCH  FORFEITED CIGARETTES. SUCH COMMISSIONER MAY, PRIOR TO ANY
 DESTRUCTION OF CIGARETTES, PERMIT  THE  TRUE  HOLDER  OF  THE  TRADEMARK
 RIGHTS  IN  THE CIGARETTES TO INSPECT SUCH FORFEITED CIGARETTES IN ORDER
 TO ASSIST IN ANY INVESTIGATION REGARDING SUCH CIGARETTES.
 (d) In the alternative, the commissioner  of  finance,  on  reasonable
 notice  by mail or otherwise, may permit the person from whom said ciga
 rettes were seized to  redeem  the  said  cigarettes,  and  any  vending
 machine  or  receptacle seized therewith, or may permit the owner of any
 such cigarettes, vending machine or receptacle to redeem  the  same,  by
 the  payment  of  the  tax due, plus a penalty of fifty percent thereof,
 plus interest on the amount of tax due for each month or fraction there
 of after such tax became due (determined without regard to any extension
 of time for filing or paying) at the rate applicable  under  subdivision
 [(d)]  D of section 11-1317 of this title and the costs incurred in such
 proceeding, which total payment shall not be  less  than  five  dollars;
 provided, however, that such seizure and sale or redemption shall not be
 deemed  to  relieve any person from fine or imprisonment provided for in
 this chapter for violation of any provisions of this chapter or  chapter
 thirteen of this title.
 (e) In the alternative, [if the commissioner of finance concludes that
 any  cigarettes  seized pursuant to this section, when offered at public
 sale, will bring a price less than the reasonably estimated price  which
 the  department of correction would have to pay for the purchase of such
 cigarettes for sale to or use  by  inmates  in  institutions  under  the
 jurisdiction  of  such  department,]  the  commissioner  of  finance may
 dispose of [such] ANY cigarettes SEIZED PURSUANT TO THIS SECTION, EXCEPT
 
       S. 3649                             6
 THOSE THAT VIOLATE, OR ARE SUSPECTED  OF  VIOLATING,  FEDERAL  TRADEMARK
 LAWS  OR  IMPORT  LAWS,  by  transferring  them  to  the  department  of
 correction for sale to or use by inmates in such institutions.
 

S 4. This act shall take effect immediately.

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