Revision: Feb. 21, 2013, midnight
HB 659-FN-A – AS INTRODUCED
2013 SESSION
09/05
HOUSE BILL 659-FN-A
AN ACT increasing the tobacco tax.
SPONSORS: Rep. Rosenwald, Hills 30; Rep. G. Richardson, Merr 10; Rep. Harding, Graf 13; Rep. Hammond, Hills 24; Rep. Emerson, Ches 11
This bill increases the tobacco tax.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
13-0571
09/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Thirteen
AN ACT increasing the tobacco tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Tobacco Tax Rate Increased. Amend RSA 78:7 to read as follows:
78:7 Tax Imposed. A tax upon the retail consumer is hereby imposed at the rate of [$1.68] $1.88 for each package containing 20 cigarettes or at a rate proportional to such rate for packages containing more or less than 20 cigarettes, on all cigarettes sold at retail in this state. The payment of the tax shall be evidenced by affixing stamps to the smallest packages containing the cigarettes in which such products usually are sold at retail. The word “package” as used in this section shall not include individual cigarettes. No tax is imposed on any transactions, the taxation of which by this state is prohibited by the Constitution of the United States.
2 Tobacco Products Other Than Cigarettes; Tax Rate Increased. 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 48 57.6 percent] percentage rate of the wholesale sales price which is equivalent to the tax rate on cigarettes under RSA 78:7. 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. No such tax shall be imposed on premium cigars.
3 Applicability. Sections 1 and 2 of this act shall apply to all persons licensed under RSA 78:2. Such persons shall inventory all cigarettes and 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, 2013 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 Repeal. 2011, 224:379 through 224:381, relative to contingent tax rate increases of the tobacco tax on cigarettes and other tobacco products based on reporting of tobacco tax revenues, are repealed.
5 Effective Date. This act shall take effect July 1, 2013.
LBAO
13-0571
Revised 02/21/13
HB 659 FISCAL NOTE
AN ACT increasing the tobacco tax.
FISCAL IMPACT:
The Department of Revenue Administration states this bill, as introduced, will increase state revenues by an indeterminable amount in FY 2014 and each fiscal year thereafter. 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 rate of the tobacco tax for each package containing 20 cigarettes and specifies the tobacco tax on tobacco products other than cigarettes shall be set at a percentage equivalent to the tax rate on cigarettes. The Department notes current law dictates tobacco tax rates will increase as of August 1, 2013 for both cigarettes (from $1.68 per package of 20 to $1.78) and other tobacco products (from 48% of the wholesale price to 65.03%) if contingencies set in the Laws of 2011 Chapter 224:381 are not met.
Based on estimated tax stamp sales for FY 2013 of 121,828,800 and absent any subsequent decrease in demand associated with an increase in price, the Department estimates the increase in the per package tax rate from $1.68 to $1.88 per package would result in the following increase in state education trust fund revenues:
Estimated FY 2013 Tax Base |
Tax Rate |
Anticipated Revenue | |
Current Rate |
121,828,800 |
$ 1.68 |
$ 204,672,384 |
Contingent Rate |
121,828,800 |
$ 1.78 |
$ 216,855,264 |
Proposed Rate |
121,828,800 |
$ 1.88 |
$ 229,038,144 |
Difference (Proposed Rate to Current Rate) |
$ 24,365,760 | ||
Difference (Proposed Rate to Contingent Rate) |
$ 12,182,880 | ||
However, the Department notes the increase in the retail price of a package of cigarettes resulting from the proposed legislation could potentially decrease the demand for cigarettes and therefore, reduce the anticipated increase to state education trust fund revenues. Based on an average price elasticity of demand of -45%, the Department estimates the rate increase of 11.9% ($.20/$1.68) would result in a 5.4% decrease in demand (11.9% x -45%) while the contingent rate increase of 5.6% ($.10/$1.78) would result in a 2.5% decrease in demand (5.6% x -45%). When this decrease in demand is factored into the Department’s estimated increase in revenues, the Department’s estimates are reduced as follows:
Estimated FY 2013 Tax Base |
Reduction in Demand |
Revised Tax Base |
Tax Rate |
Anticipated Revenue | |
Current Rate |
121,828,800 |
N/A |
121,828,800 |
$1.68 |
$ 204,672,384 |
Contingent Rate |
121,828,800 |
2.5% |
118,783,080 |
$1.78 |
$ 211,433,882 |
Proposed Rate |
121,828,800 |
5.4% |
115,250,045 |
$1.88 |
$ 216,670,084 |
Difference (Proposed Rate to Current Rate) |
$ 11,997,700 | ||||
Difference (Proposed Rate to Contingent Rate) |
$ 6,761,498 | ||||
This bill also specifies the tobacco tax on tobacco products other than cigarettes shall be set to a percentage equivalent to the tax rate on cigarettes. For the purposes of this fiscal note, the Department is utilizing the average price per package of cigarettes as published by R.J. Reynolds as of 11/29/12 of $4.08. The Department states a tax of $1.88 per package therefore equates to 46% ($1.88/$4.08). Given the current tax rate of 48%, the proposed legislation would reduce the tax rate on other tobacco products by 2%. Based on FY 2012 revenue of $7,200,000, the Department estimates this provision of the proposed legislation will reduce state general fund revenues as follows:
FY 2012 Revenue |
$ 7,200,000 |
Current Rate |
48% |
Estimated Tax Base ($7.2M / 48%) |
$ 15,000,000 |
Contingent Rate |
65.03% |
Estimated Revenue – Contingent Rate |
$ 9,754,500 |
Proposed Rate |
46% |
Estimated Revenue - Proposed Rate |
$ 6,900,000 |
Estimated Reduction in State Revenues (Proposed Rate to Current Rate) |
$ 300,000 |
Estimated Reduction in State Revenues (Proposed Rate to Contingent Rate) |
$ 2,854,500 |
The Department states this bill also requires licensees to inventory tobacco products on hand as of the effective date of this legislation and apply the proposed tax rate to the inventory on hand. The Department estimates this provision of the bill will increase state revenues by an indeterminable amount in FY 2014.