2224

VETOES

Without detailing all of the problems presented by this
legislation, we do wish to draw your attention to the
following, which we deem to be among the most significant:

1.   The legislation creates two new tax statutes, a
"Cigarette Sales Tax" and a "Cigarette Use Tax", each
imposing a tax upon sales of cigarettes at the projected
"retail cost" on a "per—pack" basis. For no apparent
reason, the term "retail cost" is defined to include the
existing 10¢ per pack State cigarette tax in proposed
Section 371A(c) but to exclude this tax in proposed Section
401A(c). Under present market conditions, and assuming a 5%
tax rate, this difference results in a 3¢ per pack tax on
transactions subject to the "Cigarette Sales Tax" and a 2¢
per pack tax on transactions subject to the "Cigarette Use
Tax".

In general, the 3¢ tax would be imposed upon any sale
by a Maryland wholesaler to a retailer, vending machine
operator or sub—wholesaler, whereas the 2¢ tax would be
imposed upon retail sales by persons other than Maryland
wholesalers who acquired their cigarettes from out—of—state
wholesalers or manufacturers.

2.   The different taxes imposed under the "Cigarette
Sales Tax" and "Cigarette Use Tax" would appear to make that
portion of the title of the bills which declares that the
legislation imposes "... a certain use tax on cigarettes
equal to the sales tax..." affirmatively misleading and thus
potentially violative of Article III, Section 29, of the
Maryland Constitution. Me are advised that the Attorney
General's Office is presently looking into this aspect of
the legislation.

3.   The rate of the tax imposed by this legislation is
described by proposed Section 371A(c) as "... the same as
the tax levied upon sales at retail as set forth in § 325 of
this Article...." When one turns to Section 325, however,
one discovers that two different tax rates are imposed: at
the rate of 5% under subsection (a) and at the rate of 2%
under subsections (c) and (d) . As it turns out, there are
presently before the Governor two bills which would repeal
the 2% rate subsections, effective July 1, 1979 (House Bill
1687 and Senate Bill 926). If the Governor signs either one
of these bills, we believe that the imposition of the tax at
the 5% rate can probably be sustained in the courts,
although the courts will have to assume that the General
Assembly knew that either House Bill 1687 or Senate Bill 926
would not only pass but would be signed by the Governor.

4.   The legislation does not say by whom it is to be
administered. We are writing to you on the assumption that
it is this office which is to administer the statute, but we
note that the word "Comptroller" is not mentioned. This