Firm Pitching Technology to Reduce Cigarette Smuggling

Source from:  LSJ.com 03/05/2009

Michigan-based company is unveiling new digital stamping technology that it says could help the state recoup $32 million annually in lost tax revenue due to illegal cigarette sales. Officials of Red Stamp, based in Wyoming, contend the stamping machines, which would apply a digitally coded stamp to packs of cigarettes at wholesaler's warehouses, would make it much easier for state inspectors to identity cigarettes with counterfeit stamps that were illegally smuggled into the state. The company demonstrated the new stamping machine, which costs about $145,000, during a news conference in Lansing today. Company officials are now speaking with state officials about the possibility of selling the technology. The cost of the equipment is estimated at about $11 million. It is not clear whether the state would pay for the equipment, or roughly 70 licensed wholesalers would be asked to share that cost. Since 1998, the state has required that every pack of cigarettes sold in the state include a tax stamp proving that a licensed wholesaler paid the $2-a-pack tax. Wholesalers now use stamping machines, which utilize 50-year-old technology, to place stamps on each individual pack. Because Michigan has among the nation's highest cigarette taxes, state officials say smuggling is rampant of lower-taxed cigarettes from other states into Michigan. The Journal of Health Economics recently estimated that $127 million in cigarette tax revenue goes uncollected every year in Michigan. Enditem