Federal Tobacco Tax Laws
On April 1, 2009, tobacco smokers were hit with the largest federal tax increase in recent history. Though local and state governments have been raising the sales tax on tobacco products for several years now, the federal taxes are on the wholesale end of the distribution chain. This article will explain the new taxes and how they affect your tobacco product.
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History of the Federal Tobacco Tax
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The federal tobacco tax is an excise tax, which is defined as a tax on the manufacture, purchase or sale of a good or service. It is typically a fixed percentage or dollar amount charged on a particular good based on the quantity purchased.
The tobacco tax is a specific excise tax, charged by the pound at the wholesale level.
Tobacco taxes have been around since the Civil War, instituted by the Act of 1862. At this time a long list of commodities were taxed and at the end of the war most were repealed, with the exception of the tobacco and alcohol taxes. Though excise taxes have been imposed and repealed on a variety of commodities since 1862, the only two that were never repealed, were the taxes on tobacco and alcohol.
Which Tobacco Products are Taxed
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Taxed tobacco products are broken down into small cigars (weighing not more than 3 lbs. per thousand), large cigars, cigarettes, cigarette papers, cigarette tubes, smokeless tobacco, pipe tobacco and roll-your-own-tobacco.
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Small and Large Cigars
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Small cigars will be taxed from 2009 to 2010 at $12.50 per thousand, from 2011 to 2012 at $25.00 per thousand, from 2013 to 2014 at $37.50 per thousand and from 2015 and thereafter at $50.00 per thousand.
Large cigars will be taxed at 52.4 percent of the price sold, but not to exceed 40 cents per cigar.
Cigarettes
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Cigarettes weighing no more than 3 lbs. per thousand will see the tax increase to $50.00 per thousand from $19.50 per thousand. The tax on cigarettes weighing more than three pounds per thousand will increase to $105.00 per thousand from $49.95 per thousand.
Cigarette Papers and Tubes
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The tax on cigarette papers will increase to $3.13 from $1.22 for each 50 papers, unless they are 6.5 inches in length, in which case each 2 3/4 inches of the length of each will be counted as one paper.
Cigarette tubes shall increase to $6.26 per 50 tubes from $2.44 per 50 tubes, with the same provision as papers for tubes longer than 6.5 inches in length.
Smokeless Tobacco
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The tax on snuff increased to $1.50 per pound from 58.5 cents per pound.
The tax on chewing tobacco increased to 50 cents per pound from 19.5 cents per pound.
Both have a proportionate tax increase at the like rate on all fractional parts of a pound.
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