From the Union Leader (partial article)
SMOKEY SNAFU: The tobacco tax wasn’t supposed to be this messy. It was supposed to go up a quarter this year and raise between $18 million and $23 million. But then lawmakers tried a clever way of keeping grocers happy.
The state would wait three months, and see if tax revenues from cigarette sales hit $50 million by Oct. 1. If they did, no tax increase. If they missed, the tax would go up 25 cents to $1.33 a pack.
At first, things looked bad for smokers. The state’s sales lagged through July and August. September started slow, but by the last day of the month, the state had pulled in $48 million in taxes.
Then came McLane Co. in Hopkinton on Sept. 30 to buy $3 million in tobacco stamps, which get pasted on each pack. The purchase would easily have put the state over the top and avoided the increase. The company lobbyist, Rick Newman, said his client worked all day, from 9 a.m., to get money accepted via wire transfer.
“We spent much of Tuesday trying to give the state of New Hampshire $3 million,” he said. It was a real experience in bureaucracy.” The company had never made a wire transfer for stamps before, and the tax office was not set up to handle the transfer. Later in the day, Newman said, the Department of Revenue Administration told McLane it could buy the stamps, but wouldn’t get them until Wednesday, Oct. 1, too late to avoid the tax hike.
Finally at 4:44 p.m., he said, the state accepted the funds at the Treasurer’s Office. But accounting hasn’t caught up with the money trail yet, so a revenue report issued Wednesday still shows $48 million.
The DRA has to certify the exact amount of stamp sales before the tax decision is made.
That process includes making sure McLane actually had enough cigarettes in its inventory to justify the $3 million stamp purchase. Newman said McLane has the cigarettes, “and we didn’t flood the warehouse with them.”
The delay in a final accounting meant confusion for store owners, who didn’t know whether they were supposed to collect the higher tax.
DRA didn’t help keep the issue straight. On Sept. 26, it sent retailers information that stated, “The legislature has increased the tobacco tax rate on cigarettes effective October 1, 2008.” Not much room for misinterpretation there, except for the fact it was only half the story. The release then instructed store owners to take a complete inventory on Sept. 30 to be ready for the increase.
Robin Paveglio, DRA’s taxpayer advocate and spokesman, said the department was trying to be helpful.
“We’re trying to keep the negative impact to a minimum,” she said. “If the perception was out there that an increase was certified, that was not an accurate perception.” It corrected the release on Oct. 1, saying the hike was on hold.
DRA can’t discuss transactions with any taxpayers, Paveglio said, so a comment on Newman’s claims about McLane was off-limits. But DRA has no way to accept wire transfers, and tobacco stamps are purchased in one way.
“They come to DRA with their money and they pay for them right at our window,” Paveglio said.
Sen. Joe Kenney, Republican candidate for governor, jumped on the controversy, saying Gov. Lynch should never have signed a tax bill that let bureaucrats determine whether a tax hike should take effect.