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State Tobacco Legislation Update. Ellen Borrow, Esq. Legislative Analyst Tobacco Merchants Association FTA Tobacco Conference September 12, 2005 Bozeman, Montana ellen@tma.org. State Highlights. State Legislative Tracking – 2005 (As of August 31, 2005).
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State Tobacco Legislation Update Ellen Borrow, Esq. Legislative Analyst Tobacco Merchants Association FTA Tobacco Conference September 12, 2005 Bozeman, Montana ellen@tma.org
State Legislative Tracking – 2005(As of August 31, 2005) Introduced# of StatesApproved# of States Anti-Counterfeit 30 21 7 7 Cigarette Fire Safety 24 16 1 1 Internet/Mail Order 27 17 7 6 Cigarette Excise Tax 112 30 9 7 OTP Excise Tax 43 23 6 5
Anti-Counterfeiting/Smuggling • As of August 31, 2005, there were 30 bills introduced in 21 States with 7 approvals. • This legislation was approved in the following States: FL, GA, HI, MD, SD, TN and VT. • US House Bill 3199 regarding The USA Patriot and Terrorism Prevention Reauthorization Act of 2005 has been referred to Conference Committee. This would amend the “threshold quantity for treatment as contraband cigarettes” by striking “60,000 cigarettes” and inserting “10,000 cigarettes.”
Cigarette Fire Safety Standards • As of August 31, 2005, there were 24 bills introduced in 16 States with 1 approval (VT). • Bills that were introduced in CA, CO, DE, NH and OR passed one house of the legislature. • US House Bill 1850, which was last referred to a House Subcommittee, would create the “Cigarette Fire Safety Act of 2005” that would provide safety standards for cigarettes.
Internet/Mail Order Legislation • As of August 31, 2005, there were 27 bills introduced in 17 States with 6 approvals. • Internet/mail order legislation was approved in the following States: IN, MD, MN, NJ, RI (2) TN, and WY. • For LA and NV, both the State House and Senate have passed bills. • US House Bill 2813 was last referred to the House Committee on Government Reform, would amend the Title 39 of the U.S. Code, and prohibit cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own-tobacco from being sent in the mail.
Both cigarette and OTP tax increase legislation is included in this map.
Cigarette Excise Tax Increases • As of August 31, 2005, there were 112 bills introduced in 30 States with 9 approvals. • Of these 9 approvals, 8 states approved increases in the cigarette excise tax rate with the other (ID) rescinding its sunset clause. • Of the more significant increases, KY increased its tax rate from 3¢ to 30¢ per pack and NC increased its tax rate from 5¢ to 30¢ per pack.
Cigarette Excise Tax Increases • ME increased its tax rate from $1.00 to $2.00 per pack. • MN increased its tax rate from $.48 with a sales tax of $.255 per pack and a health impact fee of $.75 per pack to $1.485 per pack. • WA increased its tax rate from $1.425 to $2.025 per pack. • Other increases were enacted in NH (from 52¢ to 80¢ per pack) and OH (55¢ to $1.25 per pack).
Excise Tax Increases on Other Tobacco Products (OTP) • As of August 31, 2005, there were 43 bills introduced in 23 States with 6 approvals. • The following states enacted increases: MN, NH, NC, RI, and WA. KY enacted an OTP excise tax for the first time at the rate of 7.5% of the gross receipts of all other tobacco products except snuff; snuff will be taxed at the rate of 9.5 cents per unit (1.5 ounces). • MN doubled its OTP tax from 35% to 70% of the wholesale sales price.
Excise Tax Increases on Other Tobacco Products (OTP) • NH now subjects smoking tobacco (for pipes) to the OTP tax (19% of the wholesale sales price). • NC imposes a tax at 3% of the OTP’s cost. • RI increased its OTP tax from 30% to 40% of the wholesale price. • WAchanged its tax structure and actually reduced its OTP tax from 124.9% to 75% of the wholesale price.
MSA-Related Legislative Tracking(As of August 31, 2005) Introduced# of StatesApproved# of States MSA Compliance 12 10 6 6 Allocable Share 18 12 9 8 Equity Assessment 12 8 0 0
MSA Compliance Legislation • As of August 31, 2005 there were 12 bills introduced in 10 States, with 6 approvals. The States in which bills were approved were MT, NV, SC, SD, UT and VA. • All of these States (except SD) impose reporting requirements on manufacturers and distributors.
MSA Compliance Legislation • NV and SC enacted prohibitions on stamping agents from affixing stamps on cigarettes of non-compliant manufacturers. • In addition, NV and SC enacted requirements that non-participating manufacturers make quarterly escrow payments.
Allocable share is the percentage that the State receives of the total MSA monies based on actuarial / demographic estimates of its smoking population and the incidence of tobacco-related illnesses among Medicaid recipients back in 1998.
“Equity Assessment” Fee The “equity assessment” is an additional State per pack “tax” assessed on all Non-Participating Manufacturer sales in a given State and collected, paid, administered, and enforced in the same manner as the cigarette excise tax.
Federal Taxable Removals (TTB-PWC)vs.State Taxable Removals (Orze.-Walker)(20.8 billion units in 2004…397bn vs. 377bn)1 bn packs @ 80 cents (wtd avg) State Tax a pack = $800 million lost
A Question …. Federal taxable removals have consistently outnumbered State taxable removals but how much of this is due to tribal sales and how much to underreporting? No one knows for sure. But for 1 billion packs at an average of $1, the weighted average State taxes (excise plus sales tax) per pack, yields a tax revenue loss of $1 billion. Are the tribes selling 20 billion units a year?
The Problem …. How can the Federal government, the State government and the State Attorneys General agree upon the correct number of whose cigarettes owe what tax?
www.tma.org A world of tobacco information at your fingertips. Thank You, ellen@tma.org
