HB531: relative to the taxation of tobacco and nicotine products.

HB 531-FN - AS INTRODUCED

2023 SESSION

23-0553

02/10

HOUSE BILL 531-FN

AN ACT relative to the taxation of tobacco and nicotine products.

SPONSORS: Rep. Stringham, Graf. 3; Rep. Schamberg, Merr. 6

COMMITTEE: Commerce and Consumer Affairs

ANALYSIS

This bill directs the commissioner of the department of revenue administration to annually set the tobacco and nicotine tax based on the rates charged by neighboring states, and directs the commissioner to produce a report detailing the uses of such taxes.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

23-0553

02/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Twenty Three

AN ACT relative to the taxation of tobacco and nicotine products.

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

1 Tobacco Tax; Tax Imposed. Amend RSA 78:2 to read as follows:

78:2 Tax Imposed.

I. A tax on all cigarettes and little cigars sold at retail in this state is imposed upon the consumer at the rate [of $1.78] according to paragraph III-a for each package containing 20 cigarettes or little cigars or at a rate proportional to such rate for packages containing other than 20 cigarettes or little cigars.

II.(a) A tax on all other tobacco products sold at retail in this state is imposed on tobacco products other than cigarettes, except electronic cigarettes, at a rate [of 65.03 percent of the wholesale sales price] according to paragraph III-a.

(b) A tax upon electronic cigarettes sold at retail in this state is imposed as follows:

(1) For closed cartridges or containers of liquid or other substances containing nicotine that are not intended to be opened, at a rate [of $0.30] according to paragraph III-a per milliliter on the volume of the liquid or other substance in the cartridge or container as listed by the manufacturer; and

(2) For containers of liquid or other substances containing nicotine that are intended to be opened, at a rate [of 8 percent of the wholesale sales price] according to paragraph III-a.

(c) The tax under this paragraph 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 shall be imposed on premium cigars.

III. The tax shall be paid by the wholesaler who ships or transports tobacco products to retailers in this state, to be sold by those retailers.

III-a. The commissioner shall annually set and publish the tax rate for tobacco and nicotine products under this section for the upcoming fiscal year before January 1. Tax rates shall be a maximum of the lowest rate charged for equivalent products in Massachusetts, Maine, and Vermont, taking into account any secondary or sales tax, and a minimum of 8 percent below the lowest of such rates.

2 Commissioner of Revenue Administration to Produce Report on Tobacco and Nicotine Taxes. The commissioner of the department of revenue administration shall report by July 1, 2024 to the chairs of the house and senate ways and means committees detailing the current required uses of tobacco and nicotine taxes, to include the use of settlement funds from the tobacco industry, and the actual uses of such funds.

3 Effective Date. This act shall take effect July 1, 2023.

LBA

23-0553

1/9/23

HB 531-FN- FISCAL NOTE

AS INTRODUCED

AN ACT relative to the taxation of tobacco and nicotine products.

FISCAL IMPACT: [ X ] State [ ] County [ ] Local [ ] None

Estimated Increase / (Decrease)

STATE:

FY 2023

FY 2024

FY 2025

FY 2026

Appropriation

$0

$0

$0

$0

Revenue

$0

$0

Indeterminable

Indeterminable

Expenditures

$0

$0

$0

$0

Funding Source:

[ X ] General [ X ] Education [ ] Highway [ ] Other

METHODOLOGY:

This bill requires the commissioner of the Department of Revenue Administration to annually set and publish the tax rate for tobacco and nicotine products by January 1 so that they can be applied in the upcoming State fiscal year. As part of establishing the rates, the rates applied by Massachusetts, Maine and Vermont need to be considered and the rates set for New Hampshire shall be a maximum of the lowest rate charged for equivalent products in those states and a minimum of 8 percent below the lowest such rates.

The Department states this bill will have an indeterminable impact on General Fund and Education Trust Fund revenues. If the required rate setting results in an increase in tobacco tax rates, there may be an increase in revenue. However, the Department is not able to predict the impact of the potential tobacco tax rate changes on the sales of tobacco products which may limit any revenue growth. The Department also notes that certain tobacco products are not taxed similarly amongst Massachusetts, Maine, Vermont and New Hampshire, therefore the Department is unable to perform the necessary comparisons to determine the tax rate change on these certain products or state what the potential impact on revenue might be.

The Department is able to provide a limited estimate of the impact on revenues due to the uniform tax treatment of Tobacco Stamps. For this analysis, the Department uses FY 2022 tobacco related data provided on DRA forms and makes no assumption as to the impact of the rate changes on Tobacco Stamp sales.

State

Rate per Pack of 20

State Sales Tax Rate

Effective Rate

Difference from NH

Rank Low- High

Massachusetts

$3.51

6.25%

$3.73

$1.95

3

Vermont

$3.08

6.00%

$3.26

$1.48

2

Maine

$2.00

5.50%

$2.11

$0.33

1

New Hampshire

$1.78

0.00%

$1.78

Based on the Maine rates, the minimum rate for NH would be $1.94 and the maximum would be $2.11. The table below provides an estimate of the impact on revenue.

FY 2022 NH Stamps Sold

NH Revenue (Current Law)

NH Minimum Revenue (Proposed Law)

NH Maximum Revenue (Proposed Law)

Minimum Revenue Impact

Maximum Revenue Impact

Total

113,701,000

$202,388,000

$220,580,000

$239,909,000

$18,192,000

$37,521,000

The Department would need to update all necessary tax forms and electronic management systems to reflect the tax on premium cigars; however, it is not anticipated this will result in any additional administrative costs that could not be absorbed in the Department's operating budget.

AGENCIES CONTACTED:

Department of Revenue Administration