Bill to Stop Cigarette Tax Evasion Schemes is Signed into Law

Tuesday, September 27, 2016

SACRAMENTO – Assembly Bill (AB) 1901, a bill which will provide authority to the Board of Equalization (BOE) to stop tax evasion schemes involving illegally reusing cigarette tax stamps, was signed by Governor Brown.

Current law requires cigarette distributors to pay an 87-cents excise tax on each pack of cigarettes.  Prior to sales, distributors are required to affix a cigarette tax stamp as proof that the tax has been paid for each pack of cigarettes.  BOE investigators have uncovered sophisticated tax evasion schemes where the stamps were being reused on cigarette packs in order to avoid paying the excise tax.  Current law does not authorize BOE investigators to seize these unaffixed stamps during inspections, even though it is clear that the stamps are being collected to avoid paying taxes. 

“There is no legitimate reason for retailers to collect used and unaffixed cigarette tax stamps, except to aggregate them for tax evasion purposes.  These stamps are not used for collectibles, and therefore, have no value except for tax evasion purposes,” Assemblymember Quirk, author of AB 1901, explained.   

“I am happy that Governor Brown recognizes the loophole in current law that enables unscrupulous distributors and retailers to avoid paying hundreds of thousands of dollars in taxes.  AB 1901 will allow inspectors to seize aggregated detached used stamps and help make the marketplace fair and equitable for those that are legitimately paying the excise tax,” stated Assemblymember Quirk when told his bill was signed into law. 

Elected in 2012, Bill Quirk brings his PhD in astrophysics and career as an educator and scientist to the State Assembly.  He is the Chair of the Assembly Select Committee on California’s Clean Energy Economy, and a member of the Assembly Committees on Agriculture, Appropriations, Public Safety, Revenue & Taxation, Rules, and Utilities & Commerce.

Website of Assemblymember Quirk: http://www.asmdc.org/quirk