As of August 1st, 2016 the state of Pennsylvania has joined the list of states that tax cigarettes and tobacco products. The new cigarette tax in which it taxes a rate of $2.60 per pack of 20 cigarettes, or $26 per carton of 10 packs. This marks a $1.00 increase per pack and $10.00 per carton of cigarettes. Snuff and chew tax increases of 55 cents per ounce went on the books as well.
This increase affects a myriad of merchants that had business near the state limits. Most of these merchant’s business was from people of out-of-state, who drove to Pennsylvania in order to save money on cigarette purchases. Before this cigarette tax, people from New Jersey were saving a $1.10 per cigarette pack by just making the drive to Pennsylvania.
However, out-of-state consumers are no longer going to make the drive to Pennsylvania for a mere 10 cent saving. The businesses near state limits will not be able to withstand the hit on their business and most of them would most likely close as they lose out-of-state business due to no longer having a price advantage.
Along with this cigarette tax, the cost of the retailer was changed from 6 percent to 7 percent. The “Cost of the Retailer” is defined as the basic cost of cigarettes to the retailer plus the cost of doing business by the retailer in excess of the basis cost of cigarettes, this is expressed as a percentage and applied to the basic cost of cigarettes.
With more tax changes coming in October 1st, 2016 on other tobacco products such as a tax increase of 55 cents per ounce on bagged tobacco.
The cigarette tax marks the largest tax change on the state’s smokers since Pennsylvania first imposed a cigarette excise tax in 1935. Making Pennsylvania’s cigarette tax the 10th-highest in the nation and also allowing the State to collect much needed funding.
Pennsylvania’s credit rating has been badly damaged by the long-term deficit. Pennsylvania’s Department of Revenue estimates that the higher cigarette tax will generate another $425 million a year for the state treasury. This will stimulate Pennsylvania’s economy and will
It is also estimated that cigarette sales will decline 9 percent, due to both the tax increase and an increase in the minimum retailer markup from 6 percent to 7 percent in the same law.