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1 Gerald Prante, What Is Proper Tax Policy for Smokeless Tobacco Products 1 (2006)

handle is hein.taxfoundation/ffgfxz0001 and id is 1 raw text is: r:OuU NDAT10N.
September 22, 2006
What is Proper Tax Policy for Smokeless Tobacco Products?
by Gerald Prante
Fiscal Fact No. 65
While there exist a large literature and extensive policy discussion on the issue of
cigarette taxation, smokeless tobacco has received comparatively little attention. In recent
years, controversy in many state legislatures has erupted over the proper way of taxing
smokeless tobacco. The goal of this Fiscal Fact is to clarify the rationale for excise
taxation in general, and specifically to explain the proper method of taxation of
smokeless tobacco products and how it compares to cigarette taxation.
The Fallacies of Current Tax Policy on Smokeless Tobacco Products
Even though the federal government taxes smokeless tobacco at a per unit rate based
upon weight, most states tax it based upon the sale price. This can be seen in the
following table of the tax rates on smokeless tobacco across the country.
Table 1: Smokeless Tobacco Tax Policy Is Highly Inconsistent Across States
........................................ .................................................. c. . n. p  ....y p.. .a.. ....a  ... .... ..... .... .... ..... .... .... ..... . n.. ....
:State.......Tax Rate on Moist Snuff Tobacco.(MST).Type of Tax
...........................................  . ..       . . . . . .          . .
Alaam                         2cents per typical can'        Per U n it
Alaska                                  75% of wholesale pricei    Ad Valorem::
Arizona                                     13.3 cents per ounce.       Per Unit
.A.. k an sas... ..............................................................   3 2 %  o...... m an u factu rer........ s  p rice... ...   ................... em i
Arkansas                            320% of manufacturer's price'    Ad Valorem:
:California                     46.76 percent of wholesale price-   Ad Valorem:
 .C l ..o..n. ....................................................  4 6................7. .~ c .~ .. .w . .s.a..... ...r.c. ...   ........... A . V a.............
Colorado                            40% of manufacturer's price.    Ad Valorem::
:Connecticut                                 40 cents per ounce'        Per Unit:
Delaware                                 15%o of wholesale price:    Ad Valorem::
Florida            .                     25% of wholesale price     Ad Valorem
:Georgia                                 1000 of wholesale price:    Ad Valorem::
Hawaii                                   40% of wholesale price.     Ad Valorem::
Idaho                                    400% of wholesale price:   Ad Valorem:
.l d a h o ........................................... .....................................................     .......................................... ..................................... o   h l s l   r c  n   a o e ~
Illinois                                 18%o of wholesale price:   Ad Valorem:
i ! o ! .................................................................................................................................................... .8 .o w h o .s a . . . .......................... ...  m
Indiana                                  180% of wholesale price    Ad Valorem:
Iowa                                   22% of wholesale price.   Ad Valorem
Kansas                                  100% of wholesale price:   Ad Valorem:
4:
.....entucky                                  9.5 cents per unt':      Per Unit::

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