Despite its billing as a non-tax revenue bill, Senate Bill 1, this session’s major piece of fiscal legislation, actually includes a tax increase for certain businesses.
From the House Committee Report:
ARTICLE 9. CIGARETTE TAX STAMPING ALLOWANCESECTIONA9.01.AASubsection (a), Section 154.052, Tax Code, is amended to read as follows:
(a) A distributor is, subject to the provisions of Section154.051, entitled to 2.5 [three] percent of the face value of stamps purchased as a stamping allowance for providing the service of affixing stamps to cigarette packages, except that an out-of-state distributor is entitled to receive only the same percentage of stamping allowance as that given to Texas distributors doing business in the state of the distributor.
At first glance, the tax increase may not be apparent-but follow me here.
Under current law, cigarette distributors are required to administer and collect cigarette taxes on behalf of the state via a stamp-based system. This system requires that each pack of cigarettes be individually stamped and taxes paid-regardless of whether the product is actually sold or not-as soon as the distributor receives the product. Understandably, this kind of system carries with it certain risks and burdens.
And so, in exchange for overseeing this complex and time-consuming tax, distributors retain 3 percent of the amount of the tax they pay to help cover the cost of administration. But Senate Bill 1 proposes to change that.
Under the bill’s proposed language-both in the House and Senate versions-distributors would see the cigarette tax stamp discount reduced from 3 percent to 2.5 percent. The Legislative Budget Board estimates that this reduction will cost businesses $11.63 million in the 2012-13 biennium.
-Samantha SolizResearch Fellow, Center for Fiscal Policy