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Tobacco Products Taxes Hiked

The State Board of Equalization will make it a lot more expensive to vape and chew as of July 1, the State BOE announced.

On July 1, the tax on tobacco products other than cigarettes, increased from 27.3 to 65.08 percent of the wholesale cost.

The increase was the result of the passage of Prop. 56 in November 2016, which increased the excise tax on cigarettes and “expanded the definition of “tobacco products” to include little cigars, tobacco and nicotine intended for human consumption, and electronic cigarettes sold in combination with nicotine,” the BOE said in a news release.

State law has the BOE adjust upwards the tobacco tax rate every year when the board meets in April.

“In accordance with Revenue and Taxation Code section 30123(b),” the agency said, “the BOE is required to annually calculate a tax rate on tobacco products that is equivalent to the combined rate of tax imposed on cigarettes [$2.87 per pack of 20, or $0.1435 per cigarette].

“The tobacco products tax is imposed upon the first distribution in California, paid by the licensed tobacco products distributor, and based on their wholesale cost prior to any discounts or trade allowances.”

The fiscal year 2017-18 (which began July 1) Tobacco Products Tax Rate is “based on the wholesale premium brand cigarette price as of March 1, 2017, as published by the Tobacco Merchants Association. The new tobacco products tax rate will stay in effect through June 30, 2018” when it will go up again.

“Other tobacco products include, but are not limited to, cigars, little cigars, smoking tobacco [including shisha], chewing tobacco, snuff, nicotine delivery devices [for example, e-pipes, vape pens, e-hookahs] sold in combination with any liquid or substance containing nicotine, and any products containing, made of, or derived from any amount of tobacco or nicotine that is intended for human consumption.”

However, nicotine delivery devices sold without nicotine are exempt. “This includes any battery, battery charger, carrying case, or other accessory used in the operation of a nicotine delivery device,” the BOE said. “Tobacco products do not include cigarettes or any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes [for example, nicotine patches].”

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