Tennessee White Paper
Richard M. Briggs, MD Tennessee State Senate
Earlier this year, Tennessee declared a state of emergency due to the opioid crisis. With all levels of government and advocacy groups working together to address this issue from a supply standpoint, it has become apparent that one facet has not garnered as much attention, the funding source of these drugs.
PC 472 was passed to tackle retail theft, specifically the sale of store credit for cash. We quickly realized that this cash is directly connected to overdoses in TN. Senator Briggs would like the advocate community to work with his office to encourage local law enforcement agencies across the state to start collecting the data on these transactions as directed by this new law. He believes we might have time to address the addiction and overdose crisis if we slow down the funding source. We would have a case to use the recovered sales tax revenue from this data to fund additional treatment services.
We have a crisis in Tennessee where goods are stolen and then returned to retailers for credit on a gift card.
Criminals steal retail items, return the items to the retail store without a receipt, and the store gives a store credit for the value of the items plus sales tax, even though no sales tax was ever collected. This is organized retail crime because the criminals operate as a business. The ring of criminals pays homeless people and addicts to return the stolen merchandise because only the person who actually steals can be prosecuted. The homeless person or drug addict is paid a small fee for helping out. The cards are then taken to a second hand buyer, like a pawn shop, check cashing company, or even businesses that operate out of a vehicle. The cards are sold for cash, usually 40 cents to the dollar. The goal of the new law is to be able to prosecute the ringleaders with felony theft charges, by combining all the cards sold into one charge. The only way to prosecute the ring leader is to collect the transaction data. If local law enforcement has a person of interest, they can run a report of all transactions that this person was involved in.
These criminal rings are taking advantage of the homeless and addict population, using them to fill a gap in the scheme. We believe this data will connect the dots, identifying hot spots of cash transactions. With this data, we will be able to connect the location of sale to the location of an overdose. Resources can be targeted to that area. We also believe that the drug dealers may also be part of the ring, so they get the money back immediately in drug sales.
If this data leads to recovering sales tax, then everyone wins. The law enforcement can catch the criminals, the retailer can cancel the card, and the state gets revenue back. It is estimated that the state loses $14 million a year in sales tax revenue to this crime. If we can recover this revenue, Sen. Briggs feels it would justify the fiscal note for enhanced penalties, as well as help fund more treatment that is desperately needed.
Public Chapter 472 requires all transactions involving cash for gift cards on the secondary market to be reported to local law enforcement. The law does not have a penalty for not reporting, so local law enforcement must be convinced to participate in this data collection. In addition, many local leaders are not aware of this problem or its connection to drug abuse.
Once the statewide data is available and shows a loss in sales tax revenue, Sen. Briggs will sponsor another bill in 2018 to enhance the penalties for those operating in a criminal ring and add a fine for failure to report. This data will positively impact the local communities by returning sales tax dollars back and thru targeted efforts to address the funding source for drug users. The data will demonstrate the fiscal impact of the crime and give much needed insight into the behaviors of the drug abusers.
In March of 2017, Knox County, excluding the City of Knoxville, had 19 overdoses. Of those 19 overdose victims, 16 had sold gift cards on the resale market for cash. Law enforcement find store cards on victims, not cash. Recovery advocates tell us this is the prime source of drug money for our youth. Cash from these transactions is funding drug abuse in our state. Addicts are used to return items and given cash or drugs for their part in the scheme. This cash is used for drugs and eventually will lead to an overdose and possibly death.
The real criminals are the ring leaders. For example, the top offender in Knoxville profited $96,000 in income from cards resold to just one business last year. In 2015 alone, Tennessee lost over $14 million in sales tax dollars and retailers lost over $200 million related to return fraud. The only way to recover the loss in sales tax revenue is to closely monitor these transactions, allowing the retailers to deactivate cards immediately.
Lastly, no one can argue that Tennessee needs treatment for addicts. We have too few beds and not enough appropriations to aid recovery nonprofits. This $14 million could help with this treatment shortage. A positive fiscal note can directly impact the available treatment.
We all need to work together, and address every spoke of the addiction wheel. To date, we have focused on the number of prescriptions on the street, limiting the supply chain. We have not addressed the funding source of the problem, which could also be the funding source for the solution.
This new law, requiring a statewide database, is just the start of the solution. Once the data is collected, local leaders will then have the tools necessary to assess the severity of the problem and work with advocacy organizations to target support efforts. The criminal leaders will be prosecuted, and retailers can maintain profitable brick and mortar stores. Sales tax will remain in the system and can be directed for treatment services. It is the hope of Senator Briggs that every community in Tennessee will participate in this first phase, give this data a chance to impact public policy decisions. Once the impact is presented in the data, we can work together to achieve positive results.
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