According to a 2009 report from the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. loses $5 billion per year in state excise taxes due to tobacco being smuggled in illegally.

At a time when governments are strapped for funding and are doing all they can to raise revenue, the loss of taxes due to counterfeiting is a major problem.

California has taken proactive steps to reduce some of the loss of revenue by working in conjunction with SICPA Security Inks and Systems USA and Meyercord Revenue Inc., previously a wholly owned subsidiary of Illinois Tool Works Inc. (ITW). The companies developed high-tech stamp technology, which state officials estimate has led to more than $150 million in additional tax revenue each year since the program began in 2005.

With an eye toward the expansion of the tobacco tax stamp market, SICPA announced the acquisition of Meyercord Revenue earlier this month. Meyercord currently provides 250 different tax stamps to 47 states, approximately 140 municipalities and Native American tribes.

SICPA is the world’s leading provider of security inks and systems for banknotes and other documents of record, and this acquisition fits nicely with their efforts.

“We are the world leader in tobacco tax control systems, and we are more and more focused on secure tax stamps for government revenue collection,” said Charles Finkel, SICPA’s executive vice president. “We have partnered with Meyercord in California for five years, and working with them, we saw that we have the capability to develop a more effective and secure tax stamp.

“We are looking to improve on the old technology of existing tax stamps,” Mr. Finkel added. “Governments cannot afford not to collect their taxes, and governments need to have the technology and expertise to collect them efficiently. We have technology that has been developed through our banknote business that can be incorporated into secure tax stamps. We started in this field nine years ago to develop systems that would help governments collect taxes more effectively, and now we have multi-government contracts worldwide.”

As a part of its acquisition, SICPA plans to retain the current employment level at Meyercord’s facility in Carol Stream, IL, near Chicago. Mr. Finkel said that SICPA plans to retain every Meyercord employee and keep its operations in the Chicago area.

SICPA won a five-year contract with California for the tobacco tax stamp program for five more years, and Massachusetts officials are now implementing the program.

“Our stamp program has been very effective in California, with savings of up to $153 million annually, and we continue to deliver positive results in the state and elsewhere,” Mr. Finkel said. He also said that while counterfeit attempts have been made, SICPA’s system has never been compromised. “California is very happy with our program, and when Massachusetts officials spoke with their counterparts in California, they saw the potential benefits for their state. And we are currently working with other states on potential projects.”