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Bill Detail: HB20-1427

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Title Cigarette Tobacco And Nicotine Products Tax
Status Governor Signed (07/08/2020)
Bill Subjects
  • Fiscal Policy & Taxes
House Sponsors J. McCluskie (D)
Y. Caraveo (D)
Senate Sponsors R. Fields (D)
D. Moreno (D)
House Committee Finance
Senate Committee Finance
Date Introduced 06/11/2020
Description

The bill refers a ballot issue to the voters at the November 2020
general election for the following incremental tax changes beginning
January 1, 2021:
  • To increase the statutory per cigarette tax from one cent to
6.5 cents until July 1, 2024, then to 8 cents until July 1,
2027, and thereafter to 10 cents;
  • To increase the statutory tobacco products tax from 20% of
the manufacturer's list price (MLP) to 30% of MLP until
July 1, 2024, then to 36% of MLP until July 1, 2027, and to
42% thereafter of MLP for tobacco products;
  • To create a tax on nicotine products that is equal to 50% of
MLP until July 1, 2024, then 56% of MLP until July 1,
2027, and thereafter 62% of MLP, which is the same tax as
the total tax levied on tobacco products, including the tax
from Amendment 35, with the increase; and
  • To establish a tax rate for cigarettes, tobacco products, and
nicotine products that are modified risk tobacco products
approved by the United States department of health and
human services that is 50% of the statutory tax rate.
The bill establishes a minimum tax for tobacco products that are
moist snuff that is based on a combined minimum tax between the
statutory tobacco tax and the tax imposed under Amendment 35. If voters
approve the tax, then the state will have the authority to impose these
taxes beginning January 1, 2021, and retain and spend the revenue as a
voter-approved revenue change, and the remainder of the bill takes effect
upon approval.
The cigarette and tobacco products taxes are expanded to include
delivery sales made by a seller outside of the state directly to a consumer,
and the delivery sellers are defined to be wholesalers or distributors. For
any tax increase that takes place after January 1, 2022, an inventory tax
is created on cigarettes that is imposed on all stamped cigarettes and
unaffixed stamps in a wholesaler or wholesale subcontractor's possession
or control at the time of a tax increase.
The bill also establishes a minimum price for cigarettes that is
equal to:
  • $7 for a pack and $70 for a carton until July 1, 2024; and
  • $7.50 for a pack and $75 for a carton on and after July 1,
2024.
There are civil penalties imposed for any person who sells
cigarettes for less than the minimum amount. As part of its annual June
forecast, legislative council staff is required to include an estimate for the
current state fiscal year of the additional sales tax revenue that is
attributable to the minimum price requirement. On June 30 of the fiscal
year, the state treasurer is required to transfer an amount equal to 73% of
the estimate from the general fund to the newly created preschool
programs cash fund, with the other 27% remaining in the general fund for
the distribution to local governments, as required under current law.
The new nicotine products tax is modeled after the tobacco
products tax. Nicotine products are products that contain nicotine and that
are ingested into the body, which at this time is typically through vaping
with an electronic cigarette. The excise tax is levied on the sale, use,
consumption, handling, or distribution of all nicotine products in the state,
and it is imposed on a distributor at the time the product is brought into
the state, made here, or shipped or transported to retailers in the state, or
the wholesaler or distributor makes a delivery sale. If a distributor fails
to pay the tax, then any person or entity in possession of the nicotine
products is liable for the tax.
To be a distributor of nicotine products, a person must have a
license. The license costs $10 per year and requires that the distributor
must have a tax license and comply with all of the laws relating to the
collection of the tax. Distributors are required to file quarterly returns,
and the department of revenue may require electronic fund transfers of
the taxes paid. Licensees are required to maintain certain records, and
retailers are likewise required to maintain records about nicotine products
they purchase from a licensed distributor. The department may share the
names and addresses of persons who purchased nicotine products for
resale with the department of public health and environment and county
and district public health agencies.
To account for the fully phased-in increased taxes per cigarette, the
discount percentage on cigarette stamps that a cigarette wholesaler may
retain for its collection costs is reduced from 4% to .4% and the similar
discount for a tobacco products distributor is reduced from 3.33% to
1.6%. A nicotine products distributor will be permitted to retain 1.1% of
the taxes collected.
The revenue from the new nicotine products tax, the inventory tax,
and the additional cigarette and tobacco products taxes is deposited in the
old age pension fund and then credited to the general fund in accordance
with the state constitution. For fiscal years prior to July 1, 2023, most of
the tax revenue will stay in the general fund, except for an amount the
state treasurer transfers to the 2020 tax holding fund to offset the
decreased revenue from the existing taxes that may result from the
voter-approved rate increases for the tobacco tax cash fund and to
reimburse local governments. Thereafter, the state treasurer will transfer
an amount equal to the total tax revenue from the general fund to the 2020
tax holding fund and then transfer specified amounts to the tobacco tax
cash fund, the tobacco education programs fund, and the general fund and
the remainder after those amounts to the newly created preschool
programs cash fund, from which the general assembly may appropriate
money to a designated department to be used for an array of preschool
education purposes.
The state auditor is required to annually conduct a financial audit
of the use of the new tax revenue.

Committee Reports
with Amendments
Full Text
Full Text of Bill (pdf) (most recent)
Fiscal Notes Fiscal Notes (06/12/2020) (most recent)  
Additional Bill Documents Bill Documents
Including:
  • Past bill versions
  • Past fiscal notes
  • Committee activity and documents
  • Bill History
 
Lobbyists Lobbyists
Audio  
Votes House and Senate Votes
Vote Totals Vote Totals by Party
 
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