A common theme throughout the country in 2016 is states raising their cigrarette and tobacco taxes to generate revenue. In time when states need revenue, regressive type taxes like cigarettes and tobacco are easy passes. Politicians generally spin, adn the public usually accepts the rhetoric that the the taxes are raised to assist in public health and prevent youths from purchasing costly tobacco. Other states are also seizing the opportunity to collect more tax while also serving the public good of reducing the use of cigarettes and tobacco.
In 2016, Oregon will join other states in increasing its ciagrette taxes. Pursuant to House Bill (HB) 3601, the 1 cent increase will increase the cigarette tax rate to $1.32 per 20-pack and $1.65 per 25-pack.
While the tax hikes are not as high as sister states like Kansas, Florida, and California. Those states announced a recent tax hike on cigarettes. With the hike California will rank in the top 10 by moving the tax from $0.87 per pack to $2.87. Similarly, Kansas has sin tax increases proposed for 2016. Nearly identical California, the state would like to get $2.29 per pack, up from $0.79. While they are at it, they are also seeking a 50% increase in alcoholic beverage taxes from 8% to 12%.
Predictably, both proposals have been met with some opposition. When California came up with a tax bump in 2012, the tobacco community responded with about $47 million to shut down the legislation. Namely, about $27 million came from Altria (Phillip Morris) and another $11 million from R.J. Reynolds. Altria points to the regressive nature of tobacco taxes as it has a more burdensome effect on lower income smokers than on rich ones. Increasing tobacco taxes also creates a black market for tobacco, hurts legitimate businesses, and does not help state budgets.
Tobacco distributors should pay attention to the movement across the country to increase tobacco and alcohol taxes. An increase in tax can create a significant shift in your or your client’s business model. More interesting is the states' shift to broadly classifying new items into the tobacco or cigarette tax regimes that do not meet the classic definitions of a tobacco product or a cigarette. Generally, a cigarette is defined as a role of tobacco wrapped in paper. If the product lacks tobacco and the definition is left unchanged, there is a good chance that the product has escaped the tax. If you think you are paying too many taxes, we would be happy to look into it for you and get your money back.
About the Author
Mr. Donnini is the president and founder of Tobacco Tax Refunds, Inc. He is also multi-state sales and use tax attorney and a shareholder in the law firm Moffa, Sutton, & Donnini, PA, based in Fort Lauderdale, Florida. Mr. Donnini has extensive knowledge handling wholesale tax controversy and refunds.
In his law practice Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini obtained his LL.M. in Taxation at NYU. Mr. Donnini is licensed to practice law in Florida.
Have questions? Please do not hesitate to contact him via email [email protected] or phone at (954) 639-4496.