HB568: relative to the taxation of tobacco products other than cigarettes.

HB 568-FN-A – AS INTRODUCED

2009 SESSION

09-0701

09/01

HOUSE BILL 568-FN-A

AN ACT relative to the taxation of tobacco products other than cigarettes.

SPONSORS: Rep. Hammond, Hills 3; Rep. Butynski, Ches 4; Rep. Emerton, Hills 7; Rep. Kelley, Hills 26

COMMITTEE: Ways and Means

ANALYSIS

This bill adds cigars and snuff to the definition of tobacco products and increases the tax rate for tobacco products other than cigarettes to a rate which is proportional to the current tobacco tax rate for cigarettes.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

09-0701

09/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Nine

AN ACT relative to the taxation of tobacco products other than cigarettes.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Tobacco Tax; Definition of Tobacco Products. Amend RSA 78:1, XIV to read as follows:

XIV. “Tobacco products” means cigarettes, cigars, loose tobacco, [and] smokeless tobacco, and snuff.

2 Tobacco Tax Imposed on Tobacco Products Other Than Cigarettes. Amend RSA 78:7-c to read as follows:

78:7-c Tax Imposed on Tobacco Products Other Than Cigarettes. A tax upon the retail consumer is hereby imposed on tobacco products other than cigarettes at a rate of [19] 31.59 percent of the wholesale sales price. The tax under this section may be rounded to the nearest cent if the commissioner determines that the amount of tax would not thereby be made materially disproportionate. No such tax is imposed on any transactions, the taxation of which by this state is prohibited by the Constitution of the United States.

3 Applicability. Section 2 of this act shall apply to all persons licensed under RSA 78:2. Such persons shall inventory all taxable tobacco products other than cigarettes in their possession and file a report of such inventory with the department of revenue administration on a form prescribed by the commissioner within 20 days after the effective date of this act. The tax rate effective July 1, 2009 shall apply to such inventory and the difference, if any, in the amount paid previously on such inventory and the current effective rate of tax shall be paid with the inventory form. The inventory form shall be treated as a tax return for the purpose of computing penalties under RSA 21-J.

4 Effective Date. This act shall take effect July 1, 2009.

LBAO

09-0701

01/20/09

HB 568-FN-A - FISCAL NOTE

AN ACT relative to the taxation of tobacco products other than cigarettes.

FISCAL IMPACT:

The Department of Revenue Administration states this bill will increase state revenues by $2,376,582 in FY 2010, $2,193,768 in FY 2011, and by an indeterminable amount in FY 2012 and FY 2013. There will be no fiscal impact on county and local revenues or state, county, and local expenditures.

METHODOLOGY:

The Department of Revenue Administration states this bill increases the tax rate for tobacco products other than cigarettes from 19% to a rate proportional to the tobacco tax rate for cigarettes, at 31.59%. The Department assumes the bill would take effect July 1, 2009 and additional administration cost could be absorbed within the Department’s current operating budget. The Department states this bill will increase state revenues as follows:

FY 2010

FY 2011

Increase in smokeless tobacco tax

$1,194,617

$1,194,617

Cigar and snuff tax

$ 999,151

$ 999,151

Smokeless floor tax @12.59%

$ 99,551

Cigar and snuff tax @ 31.59%

$ 83,263

$2,376,582

$2,193,768

Based on FY 2008 smokeless tobacco tax revenues of $1,802,837, the Department projects smokeless tobacco sales for FY 2008 were $9,488,616. The Department assumes this may used as a proxy for the FY 2010 and FY 2011 tax revenue, taking into account sales elasticity from the rate increase. However, because the Department assumes FY 2008 data may not accurately reflect FY 2012 and 2013 tobacco sales, tax revenue is not projected for these years. Given the new rate, the Department estimates state revenues will increase $1,194,617 in FY 2010 and FY 2011 ($9,488,616 smokeless tobacco sales @ 31.59% = $2,997,454 tax revenue, less $1,802,837 revenue under current rate = $1,194,617). Based on cigar sales statistics in Maine, the Department estimates cigars comprise approximately 25% of all smokeless tobacco sales. Thus, cigar sales are projected to be $3,162,872 ($9,488,616 current smokeless tobacco sales = 75% of $12,651,488 smokeless tobacco sales including cigars, $12,651,488 - $9,488,616 = $3,162,872 cigar sales), and smokeless tax revenue from cigars is estimated to be $999,151 in FY 2010 and FY 2011 ($3,162,872 x 31.59%). The Department includes snuff in this projection.

Store’s smokeless tobacco inventory on the effective date of this bill is subject to a floor tax of 12.59% (percentage point difference of proposed and current tax rate, 31.59% and 19%). The Department assumes current inventory is one-twelfth the total yearly sales, thus floor tax is estimated to increase state revenues by $99,551 in FY 2010 ($9,488,616 smokeless tobacco sales/12 months x 12.59% = $99,551). Current cigar and snuff inventory is subject to the full 31.59%, thus floor tax is estimated to increase state revenues by $83,263 in FY 2010 ($3,162,872 cigar sales/12 months x 31.59%).