With Massachusetts recently following the lead of California to adopt encrypted (digital) tax stamping, AWMA has intensified efforts in this area.  AWMA opposes encrypted tax stamping in the absence of hard, empirical evidence that it is reducing contraband product.   Additionally, none of the major cigarette manufacturers are supporting the idea of encrypted tax stamping.  AWMA's Government Affairs Committee and Industry Affairs Committee, and Board of Directors will be reviewing the AWMA position and the whole issue encrypted stamping at the AWMA Show in Las Vegas.

Currently two competing tax stamping systems -- one made by Meyercord and it's technology partner, and other made by Red Stamp and its technology partner -- are the primary contenders when states examine the concept of digital stamping.    Both California and Massachusetts have adopted the Meyercord system.  To date, no state has adopted the Red Stamp system.

The encrypted tax stamp systems are incompatible with each other and also incompatible with conventional heat transfer tax stamps.    

"We're looking at a situation where the distributors selling into Massachusetts are going to have to maintain two separate tax stamping systems -- a conventional system for other states and an encrypted system for Massachusetts.   Conceivably, if surrounding states adopted different kinds of encrypted stamping systems, that number could go up to two or three different stamping systems.

"Even if the wisdom of an encrypted system could be proven by hard data, the idea of an encrypted system that is hardware platform independent -- and could run on stamping machines made by multiple manufacturers -- seems far more sensible than locking the hardware down to any single manufacturer,"  Ramminger noted.  "These are the kinds of issues the AWMA committees will be looking at."

When encrypted stamping was adopted in California, the state had one of the highest cigarette excise tax rates in the nation.   Today, it has one of the lower tax rates, making it a much less attractive target for contraband product.  "It is difficult to really get a handle on how much of the reduction in contraband product can be attributed to encrypted stamping and how much is simply due to California being a less profitable target for the bad guys, Ramminger noted.

In preparation for discussion of the issue at the Show, AWMA staff had a several hour conference call with Red Stamp.   A task force of members made up of AWMA Chairman Jon Burklund;  Melissa Tyroch from McLane Co. Government Affairs, Steve Mitchell from Pine State Trading, and Ramminger from AWMA, visited  Meyercord and its partner companies in the encrypted stamp area.

Below:  Melissa Tyroch from McLane and Steve Mitchell from Pine State examine an encrypted stamping machine at Meyercord on a recent visit by and AWMA task force.

Below:  AWMA Chairman Jon Burklund examines a mocked up carton of cigarettes bearing mock digital stamps  during the task force's trip to Buffalo, New York to visit Meyercord.