Last week, anti-tobacco Senators Durbin (D-IL), Lautenberg (D-NJ) and Blumenthal (D-CT) introduced the so-called “Tobacco Tax Equity Act,” Senate Bill 3081. Similar in form to legislation previously introduced by Senator Harkin (which has yet to get a hearing), the bill purports to equalize taxes for various types of tobacco products.
Specifically, the bill would:
- Raise the pipe tobacco rate by almost 800%, from $2.83 per pound to $24.78 per pound (equivalent to the rate for roll-your-own tobacco)
- Raise the snuff rate by almost 800%, from $1.51 per pound to $13.42 per pound
- Raise the chewing tobacco rate from 50 cents per pound to $5.37 per pound
- Maintain the same rate for large cigars (52.75% of the sale price), but impose a minimum tax of 5.033 cents per cigar (equivalent to the rate for cigarettes) and raise the maximum tax to $1.00 per cigar.
The bill has been touted by its sponsors as requiring all tobacco consumers to pay the same rates as cigarette consumers, although the rates for smokeless tobacco remain lower.
One provision that has not been discussed in the various press releases regarding the bill is a provision entitled “Other Tobacco Products.” This provision imposes a new tax on “other tobacco products,” a definition which has been expanded to include “any other product containing tobacco that is intended or expected to be consumed.” The provision taxes “other tobacco products” (including products determined to be a “tobacco product” by the FDA) at a rate equivalent to the tax rate for cigarettes, to be determined in accordance with regulations to be issued by the Treasury Department.
Given that the federal excise tax already covers cigarettes, roll-your-own tobacco, pipe tobacco, smokeless tobacco and cigars, the most obvious candidate for the new tax is e-cigarettes. E-cigarettes (at least to the extent they contain tobacco) could be considered a product that is “intended or expected to be consumed.” It is not clear how the Treasury Department would implement or collect the tax, given that there is currently no mechanism for licensing manufacturers or importers of e-cigarettes, or for reporting their sales.
For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.