KRS § 138.140 — KY Code / Title XI / Chapter 138 / Section 138.140
138.140 Taxation of cigarettes, tobacco products, and vapor products -- Taxes not applicable to reference tobacco products -- Rates -- Liability for and remittance of tax -- Administrative regulations -- General Assembly's recognition of effect of increased tobacco taxes on public health -- Potential reduction of tax on modified risk tobacco product
Status: in_force

138.140 Taxation of cigarettes, tobacco products, and vapor products --

Taxes not applicable to reference tobacco products -- Rates -- Liability for

and remittance of tax -- Administrative regulations -- General Assembly's

recognition of effect of increased tobacco taxes on public health --

Potential reduction of tax on modified risk tobacco product. (Effective

July 1, 2021)

(1) (a) A tax shall be paid on the sale of cigarettes within the state at a

proportionate rate of three cents ($0.03) on each twenty (20) cigarettes.

(b) Effective July 1, 2018, a surtax shall be paid in addition to the tax levied

in paragraph (a) of this subsection at a proportionate rate of one dollar

and six cents ($1.06) on each twenty (20) cigarettes.

(c) A surtax shall be paid in addition to the tax levied in paragraph (a) of this

subsection and in addition to the surtax levied by paragraph (b) of this

subsection, at a proportionate rate of one cent ($0.01) on each twenty

(20) cigarettes. The revenues from this surtax shall be deposited in the

cancer research institutions matching fund created in KRS 164.043.

(d) The surtaxes imposed by paragraphs (b) and (c) of this subsection shall

be paid at the time that the tax imposed by paragraph (a) of this

subsection is paid.

(2) (a) An excise tax is hereby imposed upon every distributor for the privilege of

selling tobacco products in this state at the following rates:

1. Upon snuff at the rate of nineteen cents ($0.19) per each one and

one-half (1-1/2) ounces or portion thereof by net weight sold;

2. Upon chewing tobacco at the rate of:

a. Nineteen cents ($0.19) per each single unit sold;

b. Forty cents ($0.40) per each half-pound unit sold; or

c. Sixty-five cents ($0.65) per each pound unit sold.

If the container, pouch, or package on which the tax is levied

contains more than sixteen (16) ounces by net weight, the rate that

shall be applied to the unit shall equal the sum of sixty-five cents

($0.65) plus nineteen cents ($0.19) for each increment of four (4)

ounces or portion thereof exceeding sixteen (16) ounces sold;

3. Upon tobacco products sold, at the rate of fifteen percent (15) of

the actual price for which the distributor sells tobacco products,

except snuff and chewing tobacco, within the Commonwealth;

4. Upon closed vapor cartridges, one dollar and fifty cents ($1.50) per

cartridge; and

5. Upon open vaping systems, fifteen percent (15) of the actual price

for which the distributor sells:

a. The open vaping system when the actual price includes the

items described in both KRS 138.130(10)(a)1. and 2.; or

b. The liquid solution described in KRS 138.130(10)(a)2. when

the solution is sold separately.

(b) The net weight posted by the manufacturer on the container, pouch, or

package or on the manufacturer's invoice shall be used to calculate the

tax due on snuff or chewing tobacco.

(c) 1. A retailer located in this state shall not purchase tobacco products

for resale to consumers from any person within or outside this state

unless that person is a distributor licensed under KRS 138.195(7)(a)

or the retailer applies for and is granted a retail distributor's license

under KRS 138.195(7)(b) for the privilege of purchasing untax-paid

tobacco products and remitting the tax as provided in this

paragraph.

2. A licensed retail distributor of tobacco products shall be subject to

the excise tax as follows:

a. On purchases of untax-paid snuff, at the same rate levied by

paragraph (a)1. of this subsection;

b. On purchases of untax-paid chewing tobacco, at the same

rates levied by paragraph (a)2. of this subsection;

c. On purchases of untax-paid tobacco products, except snuff

and chewing tobacco, fifteen percent (15) of the total

purchase price as invoiced by the retail distributor's supplier;

d. On purchases of untax-paid closed vapor cartridges, at the

same rate levied by paragraph (a)4. of this subsection; and

e. On purchases of untax-paid open vaping systems, fifteen

percent (15) of the total purchase price as invoiced by the

retail distributor's supplier as described in paragraph (a)5. of

this subsection.

(d) 1. The licensed distributor that first possesses tobacco products or

vapor products for sale to a retailer in this state or for sale to a

person who is not licensed under KRS 138.195(7) shall be the

distributor liable for the tax imposed by this subsection except as

provided in subparagraph 2. of this paragraph.

2. A distributor licensed under KRS 138.195(7)(a) may sell tobacco

products or vapor products to another distributor licensed under

KRS 138.195(7)(a) without payment of the excise tax. In such case,

the purchasing licensed distributor shall be the distributor liable for

the tax.

3. A licensed distributor or licensed retail distributor shall:

a. Identify and display the distributor's or retail distributor's

license number on the invoice to the retailer; and

b. Identify and display the excise tax separately on the invoice to

the retailer. If the excise tax is included as part of the product's

sales price, the licensed distributor or licensed retail distributor

shall list the total excise tax in summary form by tax type with

invoice totals.

4. It shall be presumed that the excise tax has not been paid if the

licensed distributor or licensed retail distributor does not comply with

subparagraph 3. of this paragraph.

(e) No tax shall be imposed on tobacco products or vapor products under

this subsection that are not within the taxing power of this state under the

Commerce Clause of the United States Constitution.

(3) (a) The taxes imposed by subsections (1) and (2) of this section:

1. Shall not apply to reference products; and

2. Shall be paid only once, regardless of the number of times the

cigarettes or tobacco products may be sold.

(b) The taxes imposed by subsection (1)(a) and (b) and subsection (2) of this

section shall be reduced by:

1. Fifty percent (50) on any product as to which a modified risk

tobacco product order is issued under 21 U.S.C. sec. 387k(g)(1); or

2. Twenty-five percent (25) for any product as to which a modified

risk tobacco product order is issued under 21 U.S.C. sec.

387k(g)(2).

(4) A reference product shall carry a marking labeling the contents as a research

cigarette, research vapor product, or a research tobacco product to be used

only for tobacco-health research and experimental purposes and shall not be

offered for sale, sold, or distributed to consumers.

(5) The department may prescribe forms and promulgate administrative

regulations to execute and administer the provisions of this section.

(6) The General Assembly recognizes that increasing taxes on tobacco products

should reduce consumption, and therefore result in healthier lifestyles for

Kentuckians. The relative taxes on tobacco products proposed in this section

reflect the growing data from scientific studies suggesting that although

smokeless tobacco poses some risks, those health risks are significantly less

than the risks posed by other forms of tobacco products. Moreover, the

General Assembly acknowledges that some in the public health community

recognize that tobacco harm reduction should be a complementary public

health strategy regarding tobacco products. Taxing tobacco products according

to relative risk is a rational tax policy and may well serve the public health goal

of reducing smoking-related mortality and morbidity and lowering health care

costs associated with tobacco-related disease.

(7) Any person subject to the taxes imposed under subsections (1) and (2) of this

section that:

(a) Files an application related to a modified risk tobacco product shall report

to the department that an application has been filed within thirty (30) days

of that filing; and

(b) Receives an order authorizing the marketing of a modified risk tobacco

product shall report to the department that an authorizing order has been

received.

(8) Upon receipt of the information required by subsection (7)(b) of this section,

the department shall reduce the tax imposed on the modified risk tobacco

product as required by subsection (3)(b) of this section on the first day of the

calendar month following the expiration of forty-five (45) days following receipt

of the information required by subsection (7)(b) of this section.