Newport to host tobacco tax administrators meeting

Paul McVay, chief revenue agent at the state Division of Taxation, said about
175 participants are expected to attend the Federation of Tax Administrators
Tobacco Tax Annual Meeting, which will be held at the Hyatt Regency Newport
on Goat Island. It’s the first time the meeting has landed in Rhode Island,
which has one of the highest per-pack excise tax rates in the nation.

According to the Federation of Tax Administrators, at the start of this year
Rhode Island trailed only New Jersey in tax rates states set on cigarettes (the
federal cigarette tax is 39 cents per pack). New Jersey put its per-pack tax
at $2.05, with Rhode Island at $1.71. The 75-cent increase included in Rhode
Island’s budget for 2005, will be the fourth year in a row the state has looked
to tobacco sales to shore up its budget.

Next year, Rhode Island’s rate of $2.46 per pack, will rival only New York
City’s rate. This year, the city imposed an additional $1.50 tax onto the state’s
$1.50 rate. Connecticut and Massachusetts, likely leery of cross-border trafficking,
both had their rates set at $1.51 at the start of this year. As of Jan. 1, the
median excise tax rate for the 50 states and the District of Columbia was 60
cents.

McVay said the economic effects of cigarette tax increases would be the topic
at a Monday morning session with a professor from Georgia State University.
Later in the morning, a panel will discuss regulatory tools to protect cigarette
revenues, such as taxpayer licensing, pre-paid sales tax on cigarette sales
and shipping and ways to collect taxes from Internet sales.

McVay said sales over the Internet are one of the states’ major concerns when
it comes to lost revenues. Although there is a federal law requiring sellers
outside of a state to provide the buyer’s contact information to a state’s tax
administrators, ostensibly allowing a state to track down and collect their
excise taxes, there is no stringent federal enforcement of the law, McVay said.

Other topics to be tackled over the course of the conference are last summer’s
battle between the Rhode Island state government and the smoke shop set up by
the Narragansett Indians, updates to U.S. and Canadian federal laws, and roundtables
featuring manufacturers and distributors. Government-only enforcement discussions
will also be held, as will closed-door regional sessions.

The Rhode Island office will send a couple of attendees to the conference,
as well as provide a number of volunteers to help with things like registration.
McVay said the majority of states will have some representation at the meeting,
along with a few of the Canadian provinces. Several other industry representatives
and major manufacturers will also attend.

“This meeting is about an exchange of ideas that can hopefully result in the
improved administration of cigarette and tobacco taxes,” McVay said. “At the
end of the week, it comes down to protecting tax revenues.”