State Tobacco Tax Update

Thomas A. Briant, NATO Executive Director

With some 40 state legislatures either having adjourned their 2013 regular legislative sessions or will have adjourned their session by the end of June, the outcome of cigarette and tobacco tax increase legislation is beginning to take shape.

During 2013, 31 state legislatures have either considered or continue to debate bills to increase or decrease cigarette and/or other tobacco product tax rates. This compares with 23 states that introduced tax bills in 2012 and in the end four states enacted higher cigarette or OTP taxes last year. Going back one more year to 2011, 18 states debated tax increase proposals, and tax increases became law in only two states while New Hampshire passed a law actually lowering the cigarette tax by 10 cents a pack.

The states where cigarette and/or tobacco tax increase bills have either not been passed or died due to the legislature adjourning include the following:

The one state so far this year that has enacted cigarette and tobacco tax increases is Minnesota. Effective July 1, 2013, the Minnesota cigarette tax will increase by $1.60 per pack to a new rate of $2.83 per pack, the OTP tax rate will increase to 95% of the wholesale price, little cigars will be taxed as cigarettes, the existing fee on non-settlement cigarettes will increase to 50 cents per pack, and, as of January 1, 2014, moist snuff will be taxed at 95% or a minimum tax of $2.83 per container, whichever is greater.

Also, Arkansas and Tennessee both had bills pending that would either eliminate or phase out the state cigarette tax, but the bills were not acted upon or passed prior to these two state legislatures adjourning this year.

Those states with either cigarette or tobacco product tax increases still pending include the following: