Tobacco Tax Legislation Dominates the Month

By 
Angel Abcede, Senior Editor/Tobacco, CSP

Tobacco products

CHICAGO -- Lawmakers in 11 states got antsy with their calculators and made moves in March to increase taxes on cigarettes, cigars and other tobacco products (OTP), demonstrating mounting pressure on local legislatures to balance budgets and a growing movement to further regulate the category in general, according to the tobacco-retail trade group NATO.

Connecticut, Georgia, Hawaii, Iowa, Kansas, Massachusetts, Minnesota, New Hampshire, New Jersey, New York and Vermont all advanced legislation tied to increasing excise taxes. Five of those states and four additional states also moved ahead on other tobacco-related proposals, according to the Lakeville, Minn.-based association.

Where are the biggest threats? Hawaii and New Jersey are floating tobacco-tax increases for undetermined amounts, leaving retailers in limbo. In Georgia, Iowa and Kansas, House bills are in the works that could raise cigarette taxes by $1.50 per pack, while House lawmakers in Connecticut and Massachusetts are studying bills that would increase cigarette taxes by $1 per pack.

The big news for retailers in Mississippi, Oregon and Utah is that their lawmakers let separate bills die that would have raised tobacco taxes by varying amounts. 

Taxation and regulatory momentum appears to be gaining year over year, said Brian Carr, executive deputy director of NATO, in a recent column for CSP Daily News.

“With continued regulation on the horizon at each level of government, from local city councils to state legislatures, it is crucial that retailers proactively establish a relationship with their elected officials,” Carr said. “It is important to undertake this endeavor now so that when the time comes to fight back against legislation that could severely affect their business, retailers are not starting from square one, but rather from a point of familiarity with their elected officials.”

Here is a state-by-state breakdown of tobacco-related actions taken during the past month ...

Taxing tobacco

Cigarettes money

Here are the details on 15 states that made moves on potential tobacco taxes:

Advanced:

  • Connecticut: House Bill 5095, which would increase the cigarette tax by $1 per pack, was heard in the state’s Finance, Revenue and Bonding Committee on March 2. Separately, that finance committee on the same day also reviewed Senate Bill 10, which would increase the cigarette tax by 25 cents per pack, raise the tax cap on a cigar to $1.50, and impose a floor tax on cigarettes and tax e-cigarettes at 75% of wholesale.
  • Georgia: Lawmakers in late March introduced House Bill 1074, which would raise the tax on cigarettes by $1.50 per pack, increase the tax on cigars by 19% and increase tax on smokeless tobacco by 32% of the wholesale price. 
  • Hawaii: Two bills made moves in the House and Senate. Senate Bill 2843, which, effective July 1, 2050, would increase the tax on large cigars from 50 cents each to the lesser of $1 each or 50% of the wholesale price plus 50 cents each, passed the state Senate on March 6 and the House Committee on Consumer Protection and Commerce on March 20. Making similar rounds, House Bill 2654, which, effective July 1, 3000, would apply the tobacco tax to e-liquids and increase the tax on all tobacco products by an unspecified amount, also passed the Senate and the same House commerce committee. Two other House taxation bills that would have affected cigarettes, little cigars and e-liquids failed to move forward after missing procedural deadlines.
  • Iowa: House Bill 2339, which would increase the taxes on cigarettes by $1.50 per pack (from $1.36 to $2.86) and on OTP from 50% of the wholesale price to 67% of the wholesale price, added vaping products to the proposed OTP tax. However, a measure within the bill for a 50-cent cap on cigar taxes was removed for failure to meet a procedural deadline.
  • Kansas: Lawmakers introduced House Bill 2768 to increase the state tax on cigarettes by $1.50 per pack, which then went to the House Appropriations Committee. On the Senate side, Senate Bill 376, which would also increase the tax on cigarettes by $1.50 per pack but adds a tax increase on OTP from 10% to 65% of the wholesale price, was considered in a hearing in the Senate Assessment and Taxation Committee on March 22.
  • Massachusetts: House Bill 3314, which would increase the cigarette tax by $1 per pack (including a floor tax), the smokeless tax to 264% and the tax on cigars and smoking tobacco to 80%, was ordered to be studied.
  • Minnesota: House Bill 2790, which would increase the cigarette tax by 14 cents per pack, reinstate an automatic consumer-price index (CPI) increase in the state cigarette tax and raise the premium-cigar tax cap from 50 cents per cigar to $3.50 per cigar, was heard in the House tax committee on March 13.
  • New Hampshire: Senate Bill 409, which would change the tax on moist snuff from 65.03% of wholesale to $1.68 per ounce, was referred to an interim study by the Senate on Feb. 22. 
  • New Jersey: Gov. Phil Murphy’s budget proposes to increase tobacco taxes and impose a new tax on e-cigarettes. He has modeled the proposals after the tax increases in Senate Bill 1184, which would increase taxes on tobacco products anywhere from 30% to 68%; impose taxes on electronic cigarettes and similar nicotine-delivery products at 75%; increase the tax on snuff from 75 cents per ounce to $2.25 per ounce; tax cigars at $2.70 per cigar; tax cigarillos at 54 cents each; tax little cigars at 13.5 cents each; and tax pipe tobacco at $4.15 per ounce.
  • New York: Assembly Bill 9509B was amended to impose a vapor-products tax of 40 cents per fluid milliliter and to authorize a city with 1 million in population to impose a vapor tax of 10 cents per fluid milliliter. The bill also contains language to allow a city of 1 million or more to tax tobacco other than cigarettes at a rate not to exceed 10% of the purchase price.
  • Vermont: House Bill 922, which would impose a new tax of 46% of wholesale on e-cigarettes and vapor products, was up for a third reading on the House floor on March 22.

Dropped:

  • Mississippi: The following bills died in committee in late February through March: House Bill 906, which would have increased the tobacco equity tax on nonparticipating manufacturers from 27 cents per pack to 68 cents per pack; House Bill 1478, which would have increased the tax on cigarettes from 68 cents to $1.68 per pack; Senate Bill 2230 and 2701, which individually would have increased the tax on cigarettes from 68 cents to $2.18 per pack; Senate Bill 2445, which would have increased the tax on cigarettes from 68 cents to 98 cents per pack; and Senate Bill 3048, which as amended may have been used to increase the state cigarette tax.
  • Oregon: House Bill 4146, which increases the tax on cigarettes by an undetermined amount, failed due to legislative adjournment.
  • Utah: House Bill 88 could have imposed a tax on different nicotine-delivery systems, but it failed to move forward when the state legislature adjourned.

Uncertain:

  • Kentucky: In a battle between the House and Senate, House Bill 366, which was amended in committee to increase the cigarette tax by 50 cents per pack (with a floor tax), passed the House but was stripped of the tax in the Senate. Senators passed that version of the bill, but on March 21, the House refused to concur. NATO had no further update on the status of that measure.

Legal age of purchase

tobacco age 21

In Massachusetts, Senate Bill 1218, which would raise the minimum-purchase age for tobacco to 21 (although it would exempt anyone who reached the age of 18 before Jan. 1, 2017), received a favorable report from the Joint Committee on Public Health and was referred to the Senate Ways and Means Committee on March 19.

In Utah and Washington state, similar purchase-age bills failed when the state legislatures adjourned. 

Flavored-tobacco proposal

flavored cigars

New Jersey lawmakers in March introduced Senate Bill 2083, which would prohibit the sale of flavored cigars.

Other legislative activity

Cigarettes

Beyond several core legislative actions on tobacco, other related proposals surfaced in March, ranging from licensing to prohibiting the sale of tobacco products near schools.

  • Alaska: Senate Bill 15 would prohibit minors from purchasing or possessing electronic-smoking products and require any person who sells electronic-smoking products to obtain a business license. It passed the Senate and moved to the House on March 8, where it was referred to the House Labor and Commerce Committee and the House Finance Committee.
  • Connecticut: Lawmakers introduced House Bill 5293, which would prohibit the self-service display of vapor products in any retail establishment.
  • Hawaii: Two bills moved in both the House and Senate. Senate Bill 2304, effective July 1, 2050, would prohibit the sale of tobacco products, including e-cigarettes, within 500 feet of public or private schools, public parks and playgrounds, and grandfathers in licensees until Dec. 1, 2019. Senate Bill 2654, effective July 1, 3000, would prohibit shipments of tobacco products to anyone other than a licensee and would apply the tobacco products tax to e-liquids. It passed the Senate on March 6 and the House Committee on Consumer Protection and Commerce on March 20. Other bills that would have increased annual licensing fees, prohibit Internet and mail-order sales of tobacco products and prohibit the shipment of tobacco products to anyone other than license holders all died for failure to meet a procedural deadline.
  • Illinois: Legislators introduced House Bill 3877, which was recently amended to provide for the regulation of vapor-product retailers.
  • Massachusetts: House Bill 3524, which would require cigar retailers to obtain a “retail tobacconist” license, require retail tobacconist shops to have at least 80% of the total combined quarterly revenue be generated by the sale of tobacco and tobacco-related products, require retail tobacconists to operate an on-site humidor and not permit persons under the age of 21 inside the premises, and redefine “retail tobacco store,” was ordered to be studied.
  • New Hampshire: House Bill 1812, which would have regulated e-liquids by requiring labeling on products and by prohibiting the use of certain ingredients, failed to pass the House on March 6.
  • New Jersey: Senate Bill 1949 would require the licensing of manufacturers, distributors, wholesale dealers and retail dealers of electronic smoking devices and related products.
  • Utah: Gov. Gary Herbert on March 19 signed into law a bill that will require tobacco retailers to obtain a city or county permit and change the definition of those businesses considered retail tobacco specialty stores (and therefore be prohibited from being located in certain areas) to include any business that obtains more than 35% of its revenue from tobacco sales, devotes 20% or more of its display or shelf space to tobacco products or has a self-service display for tobacco products. The law will grandfather in such retailers lawfully in business on Dec. 31, 2015.