Extras on Excise: Pennsylvania to Cigarettes and Other Tobacco Products — You’re All Getting Taxed!

In Pennsylvania, cigarettes are getting more taxes; tobacco products are getting taxes; e-cigarettes are getting taxes. They’re all getting taxes! The state took about nine months to pass a budget, but now that they’ve got one, it means they are handing out taxes like Oprah gives away cars to her audience.

The state’s new cigarette tax rate became effective on Aug. 1. The rate jumped $0.05, from $0.08 to $0.13 per cigarette. While this may not seem particularly pressing at first blush, the rate means that instead of paying $1.60 tax per pack of 20 cigarettes, Pennsylvanians are now paying $2.60.

This rate change has already had an added impact on people within the industry. Wholesalers, agents, dealers and retailers had to do an inventory of their products by close of business on July 31 and pay a floor tax. Essentially, a floor tax occurs when there has been a tax rate change. They must pay the new floor tax based on how many products there are in the inventory the last day of the old tax rate. The floor tax rate for each cigarette is $0.05. This means for a pack of 20s, the tax is $1. Floor taxes must be remitted to the Department of Revenue within 90 days.

Other similar products are not getting spared. Other tobacco products had long been free from taxation in Pennsylvania, but via H.B. 1198, they have become taxable items. Additionally, e-cigarettes are getting taxed now.

Effective Oct. 1, 2016, tobacco products will be taxed at the rate of $0.55 per ounce (save for cigars, which are still exempt). While the majority of states that tax e-cigarettes impose the tax based on a percentage of the e-liquid, Pennsylvania imposes an ad valorem tax of 40 percent of the price retailers pay on e-liquids and vaping devices.

These taxes aren’t happening in a vacuum. Other states are imitating this Oprah-style handout of increased cigarette tax rates too.

Connecticut raised its cigarette taxes on July 1 from $0.1825 to $0.195 per cigarette (from $3.65 to $3.90 per pack of 20). In April, Louisiana cigarette taxes went up to $1.08 per pack of 20 from $0.86. And dramatically, West Virginia hiked its taxes over 50 percent – from $0.55 per 20 to $1.25 per pack on July 1, also raising taxes on other tobacco products and imposing a $0.075 per milliliter tax on e-liquid.

Unlike the car giveaway winners, smokers and vapers in these states aren’t likely to be jumping for joy.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you predict other specific states will raise their cigarette tax rates in the near feature?

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