Bill S3649A-2011

Relates to the destruction of seized and forfeited cigarettes and tobacco products

Relates to the destruction of seized and forfeited cigarettes and tobacco products.

Details

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

Votes

VOTE: COMMITTEE VOTE: - Investigations and Government Operations - Jun 7, 2011
Ayes (7): Marcellino, Alesi, Golden, Nozzolio, Zeldin, Squadron, Diaz
Ayes W/R (1): Peralta
VOTE: COMMITTEE VOTE: - Rules - Jun 14, 2011
Ayes (20): Skelos, Alesi, Farley, Hannon, Johnson, Larkin, LaValle, Libous, Marcellino, Maziarz, Nozzolio, Saland, Seward, Breslin, Dilan, Krueger, Parker, Perkins, Smith, Stewart-Cousins
Ayes W/R (3): Sampson, Duane, Montgomery
Nays (1): Hassell-Thompson

Memo

BILL NUMBER:S3649A

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: The last state auction of seized cigarettes, held in 2008, four years after the previous sale, brought the state $74,334 in revenue. Whether the staff time in organizing the sale, the price of publishing notices, and other indirect costs outweigh the revenue is unclear.

EFFECTIVE DATE: This act shall take effect immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ 3649--A 2011-2012 Regular Sessions IN 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 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee 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 (c) as amended by section 169 of subpart B of part C of chapter 62 of the laws of 2011, 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 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 IN THE STATE REGISTRY, DESTROY SUCH FORFEITED CIGARETTES. THE COMMISSIONER MAY, PRIOR TO ANY DESTRUCTION OF CIGARETTES, PERMIT THE TRUE HOLDER OF THE TRADE- MARK RIGHTS IN THE CIGARETTES TO INSPECT SUCH FORFEITED CIGARETTES IN ORDER TO ASSIST IN ANY INVESTIGATION REGARDING SUCH CIGARETTES. (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 corrections and community supervision 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 commis-
sion may dispose of [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 corrections and community supervision 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, subdivision (c) as amended by section 170 of subpart B of part C of chapter 62 of the laws of 2011, 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 IN THE STATE REGISTRY 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 seizure was made, sell] DESTRUCTION, 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 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 corrections and community supervision 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 commissioner may dispose of [such] ANY tobacco products SEIZED PURSUANT TO THIS SECTION, EXCEPT THOSE THAT VIOLATE, OR ARE SUSPECTED OF VIOLAT- ING, FEDERAL TRADEMARK OR IMPORT LAWS, by transferring them to the department of corrections and community supervision 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 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. THE COMMISSIONER OF FINANCE MAY ALSO TRANSFER ANY SEIZED CIGARETTES TO THE STATE FOR DESTRUCTION. 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 ENFORCEMENT PURPOSES, THE COMMISSIONER OF FINANCE MUST, WITHIN A REASONABLE TIME AFTER THE FORFEITURE TO THE CITY OF SUCH CIGARETTES, UPON PUBLICATION 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 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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