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S08177 Summary:

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S08177 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          8177
 
                    IN SENATE
 
                                      June 14, 2000
                                       ___________
 
        Introduced  by  Sen.  FUSCHILLO  -- (at request of the Governor) -- read
          twice and ordered printed, and when printed to  be  committed  to  the
          Committee on Rules
 
        AN  ACT  to  amend the public health law, in relation to the shipment of
          cigarettes; and to amend the tax law and the  administrative  code  of
          the  city  of New York, in relation to penalties for violations of the
          cigarette tax
 

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  Legislative  findings. The legislature finds and declares
     2  that the shipment of cigarettes sold via the internet or by telephone or
     3  by mail order to residents of this  state  poses  a  serious  threat  to
     4  public health, safety, and welfare, to the funding of health care pursu-
     5  ant  to  the  health  care reform act of 2000, and to the economy of the
     6  state. The legislature also  finds  that  when  cigarettes  are  shipped
     7  directly  to  a  consumer, adequate proof that the purchaser is of legal
     8  age cannot be obtained by the vendor, which enables minors to avoid  the
     9  provisions  of  article  13-F  of  the public health law. It is also the
    10  legislature's finding that by preventing shipment of cigarettes directly

    11  to consumers, the State will be better able to measure and monitor ciga-
    12  rette consumption and to better determine the public health  and  fiscal
    13  consequences  of  smoking.  The  legislature further finds that existing
    14  penalties for cigarette bootlegging are inadequate. Therefore, the  bill
    15  enhances  existing  penalties  for possession of unstamped or unlawfully
    16  stamped cigarettes.
    17    § 2. The public health law is amended by adding a new section  1399-ll
    18  to read as follows:
    19    §  1399-ll.  Unlawful shipment or transport of cigarettes. 1. It shall
    20  be unlawful for any person engaged in the business of selling cigarettes
    21  to ship or cause to be shipped any cigarettes  to  any  person  in  this
    22  state  who  is  not:  (a)  a person licensed as a cigarette tax agent or

    23  wholesale dealer under article twenty  of  the  tax  law  or  registered
    24  retail dealer under section four hundred eighty-a of the tax law; (b) an
    25  export  warehouse  proprietor  pursuant  to  chapter  52 of the internal
    26  revenue code or an operator of a customs bonded  warehouse  pursuant  to
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD12415-03-0
        S. 8177                             2
 
     1  section  1311  or  1555  of title 19 of the United States Code; or (c) a
     2  person who is an officer, employee or agent of the United States govern-

     3  ment, this state or a department, agency, instrumentality  or  political
     4  subdivision  of  the  United  States  or this state, when such person is
     5  acting in accordance with his or her official duties.  For  purposes  of
     6  this  subdivision,  a person is a licensed or registered agent or dealer
     7  described in paragraph (a) of  this  subdivision  if  his  or  her  name
     8  appears  on a list of licensed or registered agents or dealers published
     9  by the department of taxation and finance, or if such person is licensed
    10  or registered as an agent or dealer under article twenty of the tax law.
    11    2. It shall be unlawful for any common or contract carrier to knowing-
    12  ly transport cigarettes to any person in this state reasonably  believed

    13  by  such  carrier  to be other than a person described in paragraph (a),
    14  (b) or (c) of subdivision one of  this  section.  For  purposes  of  the
    15  preceding  sentence,  if  cigarettes  are transported to a home or resi-
    16  dence, it shall be presumed that the common  or  contract  carrier  knew
    17  that such person was not a person described in paragraph (a), (b) or (c)
    18  of  subdivision  one of this section. It shall be unlawful for any other
    19  person to knowingly transport cigarettes to any person  in  this  state,
    20  other  than to a person described in paragraph (a), (b) or (c) of subdi-
    21  vision one of  this  section.  Nothing  in  this  subdivision  shall  be
    22  construed  to  prohibit a person other than a common or contract carrier

    23  from transporting not more than eight hundred cigarettes at any one time
    24  to any person in this state.
    25    3. When a person engaged in the business of selling  cigarettes  ships
    26  or  causes  to  be  shipped  any cigarettes to any person in this state,
    27  other than in the cigarette manufacturer's original container  or  wrap-
    28  ping,  the container or wrapping must be plainly and visibly marked with
    29  the word "cigarettes".
    30    4. Whenever a police officer designated in section 1.20 of the  crimi-
    31  nal  procedure  law or a peace officer designated in subdivision four of
    32  section 2.10 of such law, acting pursuant to his or her special  duties,
    33  shall discover any cigarettes which have been or which are being shipped

    34  or  transported  in  violation  of  this  section, such person is hereby
    35  empowered and authorized to seize and  take  possession  of  such  ciga-
    36  rettes,  and  such  cigarettes  shall  be subject to a forfeiture action
    37  pursuant to the procedures provided for in  article  thirteen-A  of  the
    38  civil  practice  law and rules, as if such article specifically provided
    39  for forfeiture of cigarettes seized pursuant to this section as  a  pre-
    40  conviction forfeiture crime.
    41    5. Any person who violates the provisions of subdivision one or two of
    42  this  section  shall be guilty of a class A misdemeanor and for a second
    43  or subsequent violation shall be guilty of a class E felony.   In  addi-

    44  tion  to  the criminal penalty, the commissioner may impose a civil fine
    45  not to exceed five thousand dollars  for  each  such  violation  on  any
    46  person  who violates subdivision one or two of this section. The commis-
    47  sioner may impose a civil fine not to exceed five thousand  dollars  for
    48  each  violation  of  subdivision  three  of  this  section on any person
    49  engaged in the business of selling cigarettes who ships or causes to  be
    50  shipped any such cigarettes to any person in this state.
    51    §  3. Paragraph (k) of subdivision 1 of section 480 of the tax law, as
    52  amended by chapter 629 of the laws  of  1996,  is  amended  to  read  as
    53  follows:
    54    (k)  No  agent  shall  sell  cigarettes  and no distributor shall sell
    55  tobacco products to an unlicensed wholesale dealer, or  to  a  wholesale

    56  dealer whose license has been suspended or revoked, or to a retail deal-
        S. 8177                             3
 
     1  er  who  [has  been  forbidden to continue selling cigarettes or tobacco
     2  products, as the case may be]  is  not  registered  under  section  four
     3  hundred  eighty-a  of  this  article,  or  whose  registration  has been
     4  suspended  or  revoked, and no wholesale dealer shall sell cigarettes or
     5  tobacco products to a retail dealer [so forbidden after  notice  of  the
     6  prohibition]  who  is not registered under section four hundred eighty-a
     7  of this article, or whose registration has been  suspended  or  revoked,
     8  and  no retail dealer [so forbidden] shall [continue selling] sell ciga-

     9  rettes or tobacco  products  unless  such  dealer  is  registered  under
    10  section four hundred eighty-a of this article.
    11    §  4.  Subdivision  1  of  section  480-a of the tax law is amended by
    12  adding a new paragraph (e) to read as follows:
    13    (e) The commissioner may refuse to register as a retail dealer or  may
    14  revoke  the  registration  of  a  retail dealer where the applicant's or
    15  retail dealer's place of business is at the same premises as that  of  a
    16  retail  dealer  whose  retail  dealer  registration has been revoked and
    17  where such revocation is still in effect, unless the applicant or retail
    18  dealer provides the commissioner with adequate documentation demonstrat-
    19  ing that such applicant or retail dealer acquired the premises or  busi-

    20  ness  through  an  arm's length transaction as defined in this paragraph
    21  and that the sale or lease was not conducted, in whole or in  part,  for
    22  the purpose of permitting the original registrant to avoid the effect of
    23  the  previous  revocation  for  the  same premises. For purposes of this
    24  paragraph, "arm's length transaction" means a sale of a fee or all undi-
    25  vided interests in real property, or lease of any  part  thereof,  or  a
    26  sale  of  a business, in good faith and for valuable consideration, that
    27  reflects the fair market value of such real property or lease, or  busi-
    28  ness,  in  the  open  market,  between two informed and willing parties,
    29  where neither is under any compulsion to participate in the transaction,

    30  unaffected by any unusual conditions indicating a reasonable possibility
    31  that the sale or lease was  made  for  the  purpose  of  permitting  the
    32  original  registrant  to avoid the effect of the previous revocation for
    33  the same premises.  The following sales or leases shall be presumed  not
    34  to  be  arm's  length  transactions  unless  adequate  documentation  is
    35  provided demonstrating that the sale or  lease  was  not  conducted,  in
    36  whole  or in part, for the purpose of permitting the original registrant
    37  to avoid the effect of the previous revocation for the same premises:
    38    (i) a sale between relatives; or
    39    (ii) a sale between related companies or partners in a business; or

    40    (iii) a sale or lease affected by other facts  or  circumstances  that
    41  would  indicate  that  the sale or lease is entered into for the primary
    42  purpose of permitting the original registrant to avoid the effect of the
    43  previous revocation for the same premises.
    44    § 5. Subdivision 3 of section 480-a of the tax law, as added by  chap-
    45  ter  190 of the laws of 1990, paragraph (a) as amended by chapter 629 of
    46  the laws of 1996, is amended to read as follows:
    47    3. In addition to any other penalty imposed by this chapter:  (a)  Any
    48  retail  dealer  who violates the provisions of this section shall, after
    49  due notice and an opportunity for a hearing, for a  first  violation  be
    50  liable  for  a  civil fine not less than five hundred dollars but not to

    51  exceed [one] two  thousand  dollars  and  for  a  second  or  subsequent
    52  violation  within  three years following a prior finding of violation be
    53  liable for a civil fine not less than one thousand dollars  but  not  to
    54  exceed [two] three thousand five hundred dollars; or
    55    (b) Any person who owns or, if the owner is not the operator, then any
    56  person  who  operates  one  or more vending machines through which ciga-
        S. 8177                             4
 
     1  rettes or tobacco products are sold in this state and who  violates  the
     2  provisions  of  this  section shall, after due notice and an opportunity
     3  for a hearing, for a first violation be liable for a civil fine not less

     4  than  seventy-five  dollars  but not to exceed [one] two hundred dollars
     5  and for a second or subsequent violation within three years following  a
     6  prior  finding of violation be liable for a civil fine not less than two
     7  hundred dollars but not to exceed [three] six hundred dollars.
     8    § 6. Paragraph (d) of subdivision 4 of section 480-a of the  tax  law,
     9  as  added  by  chapter  629  of  the laws of 1996, is amended to read as
    10  follows:
    11    (d) After review of the suspension or revocation  of  registration  by
    12  the commissioner or his designee is complete, or the time within which a
    13  retail dealer may request such review has expired without such a request
    14  having  been  made,  notice  of the suspension or revocation of a retail

    15  dealer registration pursuant to this subdivision shall be given  by  the
    16  commissioner  to the head of the division of the lottery for the purpose
    17  of enforcement of section sixteen hundred seven of this chapter and such
    18  division may suspend or revoke any license  issued  with  respect  to  a
    19  lottery  agent's  specific  location  pursuant to article thirty-four of
    20  this chapter if such lottery agent is  a  retail  dealer  of  cigarettes
    21  whose registration for such location is suspended or revoked pursuant to
    22  this  section.    In  addition,  notice of such suspension or revocation
    23  shall also be given to the division of alcoholic  beverage  control  and
    24  such  suspension  or  revocation shall constitute cause, for purposes of
    25  section one hundred eighteen of the alcoholic beverage control law,  for

    26  revocation,  cancellation  or suspension of any license or permit issued
    27  pursuant to such law.
    28    § 7. Paragraph (b) of subdivision 1 of section 481 of the tax law,  as
    29  amended  by  chapter  61  of  the  laws  of  1989, is amended to read as
    30  follows:
    31    (b) (i) In addition to any other penalty imposed by this article,  the
    32  commissioner  [of taxation and finance] may impose a penalty of not more
    33  than one hundred fifty dollars for each two hundred cigarettes, or frac-
    34  tion thereof, in excess of [two] one thousand cigarettes in unstamped or
    35  unlawfully stamped packages in the possession or under  the  control  of
    36  any  person.  In  addition, the commissioner may impose a penalty of not
    37  more than [fifty] seventy-five dollars for  each  fifty  cigars  or  one

    38  pound  of  tobacco,  or fraction thereof, in excess of two hundred fifty
    39  cigars or five pounds of tobacco in the possession or under the  control
    40  of  any  person and a penalty of not more than one hundred fifty dollars
    41  for each fifty cigars or pound  of  tobacco,  or  fraction  thereof,  in
    42  excess of five hundred cigars or ten pounds of tobacco in the possession
    43  or  under  the  control of any person, with respect to which the tobacco
    44  products tax has not been paid or assumed by a  distributor  or  tobacco
    45  products  dealer; provided, however, that any such penalty imposed shall
    46  not exceed [five] seven thousand five hundred dollars in the  aggregate.
    47  The  commissioner may impose a penalty of not more than [fifty] seventy-

    48  five dollars for each fifty cigars or one pound of tobacco, or  fraction
    49  thereof,  in  excess  of  fifty  cigars  or  one pound of tobacco in the
    50  possession or under the  control  of  any  tobacco  products  dealer  or
    51  distributor  appointed  by  the  commissioner, and a penalty of not more
    52  than one hundred fifty dollars for each fifty cigars or pound of  tobac-
    53  co,  or  fraction thereof, in excess of two hundred fifty cigars or five
    54  pounds of tobacco in the possession or under the  control  of  any  such
    55  dealer  or  distributor,  with respect to which the tobacco products tax
    56  has not been paid or assumed by a  distributor  or  a  tobacco  products
        S. 8177                             5
 
     1  dealer;  provided,  however,  that  any  such  penalty imposed shall not

     2  exceed [ten] fifteen thousand dollars in the aggregate.
     3    (ii)  The penalties imposed by this subparagraph may be imposed by the
     4  commissioner in addition to any other penalty imposed by  this  article,
     5  but  in  lieu of the penalties imposed by subparagraph (i) of this para-
     6  graph:
     7    (A) (I) not less than thirty dollars but not  more  than  two  hundred
     8  dollars  for each two hundred cigarettes, or fraction thereof, in excess
     9  of one thousand cigarettes but less than or equal to five thousand ciga-
    10  rettes in unstamped or unlawfully  stamped  packages  knowingly  in  the
    11  possession or knowingly under the control of any person;
    12    (II)  not less than seventy-five dollars but not more than two hundred

    13  dollars for each two hundred cigarettes, or fraction thereof, in  excess
    14  of  five  thousand  cigarettes but less than or equal to twenty thousand
    15  cigarettes in unstamped on unlawfully stamped packages knowingly in  the
    16  possession or knowingly under the control of any person; and
    17    (III)  not less than one hundred dollars but not more than two hundred
    18  dollars for each two hundred cigarettes, or fraction thereof, in  excess
    19  of  twenty  thousand cigarettes in unstamped or unlawfully stamped pack-
    20  ages, knowingly in the possession or knowingly under the control of  any
    21  person.
    22    (B)(I) not less than twenty-five dollars but not more than one hundred
    23  dollars for each fifty cigars or one pound of tobacco, or fraction ther-

    24  eof,  in  excess  of  two hundred fifty cigars or five pounds of tobacco
    25  knowingly in the possession  or  knowingly  under  the  control  of  any
    26  person, with respect to which the tobacco products tax has not been paid
    27  or assumed by a distributor or tobacco products dealer; and
    28    (II) not less than fifty dollars but not more than two hundred dollars
    29  for  each  fifty  cigars  or  pound  of tobacco, or fraction thereof, in
    30  excess of five hundred cigars or ten pounds of tobacco knowingly in  the
    31  possession or knowingly under the control of any person, with respect to
    32  which  the  tobacco  products  tax  has  not  been  paid or assumed by a
    33  distributor or tobacco products dealer; provided, however, that any such

    34  penalty imposed under this clause shall not exceed ten thousand  dollars
    35  in the aggregate.
    36    (C)  (I)  not  less  than  twenty-five  dollars  but not more than one
    37  hundred dollars for each fifty cigars or one pound of tobacco, or  frac-
    38  tion thereof, in excess of fifty cigars or one pound of tobacco knowing-
    39  ly  in the possession or knowingly under the control of any person, with
    40  respect to which the tobacco products tax has not been paid  or  assumed
    41  by a distributor or tobacco products dealer; and
    42    (II) not less than fifty dollars but not more than two hundred dollars
    43  for  each  fifty  cigars  or  pound  of tobacco, or fraction thereof, in
    44  excess of two hundred fifty cigars or five pounds of  tobacco  knowingly

    45  in  the  possession  or  knowingly under the control of any person, with
    46  respect to which the tobacco products tax has not been paid  or  assumed
    47  by  a  distributor or a tobacco products dealer; provided, however, that
    48  any such penalty imposed under this clause shall not exceed twenty thou-
    49  sand dollars in the aggregate.
    50    (iii) Any penalty provided for in this paragraph shall  be  determined
    51  as  provided  in section four hundred seventy-eight of this chapter, and
    52  may be reviewed only pursuant to such section.   Such penalty  shall  be
    53  collected  in  the same manner as the taxes imposed by this article. The
    54  commissioner [of taxation and  finance,]  in  [his]  the  commissioner's
    55  discretion, may remit all or part of such penalty. Such penalty shall be

        S. 8177                             6
 
     1  paid  to  the  department  [of  taxation and finance] and disposed of as
     2  hereinafter provided with respect to moneys derived from the tax.
     3    § 8. Subdivision (d) of section 1814 of the tax law, as added by chap-
     4  ter 65 of the laws of 1985, is amended to read as follows:
     5    (d)  Any  person,  other than an agent [so authorized] licensed by the
     6  [tax commission] commissioner,  who  possesses  or  transports  for  the
     7  purpose  of  sale  any unstamped or unlawfully stamped packages of ciga-
     8  rettes subject to tax imposed by section  four  hundred  seventy-one  of
     9  this  chapter,  or  who sells or offers for sale unstamped or unlawfully
    10  stamped packages of cigarettes in violation of the provisions of article

    11  twenty of this chapter shall be guilty of a misdemeanor.  Any person who
    12  violates the provisions of this subdivision after having previously been
    13  convicted of a violation of this subdivision within the  preceding  five
    14  years shall be guilty of a class E felony.
    15    § 9. Subdivision (e) of section 1814 of the tax law, as added by chap-
    16  ter 65 of the laws of 1985, is amended to read as follows:
    17    (e)  (1)  Any  person, other than an agent [so authorized] licensed by
    18  the [tax commission] commissioner, who willfully possesses or transports
    19  for the purpose of sale twenty thousand or more  cigarettes  subject  to
    20  the  tax  imposed by section four hundred seventy-one of this chapter in
    21  any unstamped or unlawfully stamped packages or who willfully  sells  or

    22  offers  for  sale twenty thousand or more cigarettes in any unstamped or
    23  unlawfully stamped packages in violation of article twenty of this chap-
    24  ter shall be guilty of a class E felony.
    25    (2) Any person, other than an agent licensed by the commissioner,  who
    26  willfully  possesses  or transports for the purpose of sale thirty thou-
    27  sand or more cigarettes subject to  the  tax  imposed  by  section  four
    28  hundred  seventy-one  of  this  chapter  in  any unstamped or unlawfully
    29  stamped packages or who willfully sells or offers for sale thirty  thou-
    30  sand  or more cigarettes in any unstamped or unlawfully stamped packages
    31  in violation of article twenty of this chapter  shall  be  guilty  of  a
    32  class D felony.
    33    §  10.  Subdivision b of section 11-1317 of the administrative code of

    34  the city of New York is amended to read as follows:
    35    b. (1) In addition to any other penalty imposed by this  section,  the
    36  commissioner  of  finance  may  impose  a  penalty  of not more than one
    37  hundred dollars for each two hundred cigarettes or fraction  thereof  in
    38  excess  of  [two]  one  thousand  cigarettes  in unstamped or unlawfully
    39  stamped packages in the possession or under the control of  any  person.
    40  Such  penalty shall be determined as provided in section 11-1310 of this
    41  chapter, and may be reviewed only pursuant to such section. Such penalty
    42  may be enforced in the same manner as the tax imposed by  this  chapter.
    43  The  commissioner of finance, in his or her discretion, may remit all or
    44  part of such penalty. Such penalty shall be paid and disposed of in  the
    45  same manner as other revenues under this chapter.

    46    (2)  The  penalties  imposed  by  this paragraph may be imposed by the
    47  commissioner of finance in addition to any other penalty imposed by this
    48  section, but in lieu of the penalties imposed by paragraph one  of  this
    49  subdivision:  (a)  not  less  than  thirty dollars but not more than two
    50  hundred dollars for each two hundred cigarettes, or fraction thereof, in
    51  excess of one thousand cigarettes but less than or equal to  five  thou-
    52  sand cigarettes in unstamped or unlawfully stamped packages knowingly in
    53  the  possession  or  knowingly  under the control of any person; (b) not
    54  less than seventy-five dollars but not more than two hundred dollars for
    55  each two hundred cigarettes, or fraction  thereof,  in  excess  of  five

    56  thousand cigarettes but less than or equal to twenty thousand cigarettes
        S. 8177                             7
 
     1  in  unstamped or unlawfully stamped packages knowingly in the possession
     2  or knowingly under the control of any person; and (c) not less than  one
     3  hundred  dollars  but  not  more  than  two hundred dollars for each two
     4  hundred  cigarettes,  or  fraction thereof, in excess of twenty thousand
     5  cigarettes in unstamped or unlawfully stamped packages, knowingly in the
     6  possession or knowingly under the control of any  person.  Such  penalty
     7  shall  be determined as provided in section 11-1310 of this chapter, and
     8  may be reviewed only pursuant to  such  section.  Such  penalty  may  be

     9  enforced  in  the  same  manner  as the tax imposed by this chapter. The
    10  commissioner of finance, in his or her discretion, may remit all or part
    11  of such penalty. Such penalty shall be paid and disposed of in the  same
    12  manner as other revenues under this chapter.
    13    §  11.  Subdivisions (b) and (c) of section 11-4012 of the administra-
    14  tive code of the city of New York, as added by chapter 765 of  the  laws
    15  of 1985, are amended to read as follows:
    16    (b)  Any person, other than an agent so authorized by the commissioner
    17  of finance, who possesses or transports for  the  purpose  of  sale  any
    18  unstamped  or  unlawfully  stamped packages of cigarettes subject to tax
    19  under chapter thirteen of this title, or who sells or  offers  for  sale
    20  unstamped  or  unlawfully stamped packages of cigarettes in violation of

    21  the provisions of such chapter shall be guilty of a  misdemeanor.    Any
    22  person  who  violates  the  provisions  of this subdivision after having
    23  previously been convicted of a violation of this subdivision within  the
    24  preceding five years shall be guilty of a class E felony.
    25    (c)  (1)  Any person, other than an agent so authorized by the commis-
    26  sioner of finance, who willfully possesses or transports for the purpose
    27  of sale twenty thousand or more cigarettes subject to the tax imposed by
    28  chapter thirteen of this title in any unstamped  or  unlawfully  stamped
    29  packages  or  who  willfully sells or offers for sale twenty thousand or
    30  more cigarettes in any  unstamped  or  unlawfully  stamped  packages  in
    31  violation of such chapter shall be guilty of a class E felony.

    32    (2)  Any  person, other than an agent appointed by the commissioner of
    33  finance, who willfully possesses or transports for the purpose  of  sale
    34  thirty thousand or more cigarettes subject to the tax imposed by chapter
    35  thirteen  of  this title in any unstamped or unlawfully stamped packages
    36  or who willfully sells or offers for sale thirty thousand or more  ciga-
    37  rettes  in  any unstamped or unlawfully stamped packages in violation of
    38  such chapter shall be guilty of a class D felony.
    39    § 12. Severability clause. If any clause, sentence, paragraph,  subdi-
    40  vision,  section  or  part of this act shall be adjudged by any court of
    41  competent jurisdiction to be invalid, such judgment  shall  not  affect,
    42  impair,  or  invalidate  the remainder thereof, but shall be confined in

    43  its operation to the clause, sentence, paragraph,  subdivision,  section
    44  or part thereof directly involved in the controversy in which such judg-
    45  ment shall have been rendered. It is hereby declared to be the intent of
    46  the  legislature  that  this  act  would  have been enacted even if such
    47  invalid provisions had not been included herein.
    48    § 13. This act shall take effect on the ninetieth day after  it  shall
    49  have  become  a  law; provided, however, that subdivision two of section
    50  1399-ll of the public health law as added by section  two  of  this  act
    51  shall take effect January 1, 2001.