Tobacco Tax Equity Act of 2021

To amend the Internal Revenue Code of 1986 to provide tax rate parity among all tobacco products, and for other purposes. 1. Short title This Act may be cited as the Tobacco Tax Equity Act of 2021 2. Increasing excise taxes on cigarettes and establishing excise tax equity among all tobacco product tax rates (a) Tax parity for Roll-Your-Own tobacco Section 5701(g) $24.78 $49.56 (b) Tax parity for pipe tobacco Section 5701(f) $2.8311 cents $49.56 (c) Tax parity for smokeless tobacco (1) Section 5701(e) (A) in paragraph (1), by striking $1.51 $26.84 (B) in paragraph (2), by striking 50.33 cents $10.74 (C) by adding at the end the following: (3) Smokeless tobacco sold in discrete single-use units On discrete single-use units, $100.66 per thousand. . (2) Section 5702(m) of such Code is amended— (A) in paragraph (1), by striking or chewing tobacco , chewing tobacco, or discrete single-use unit (B) in paragraphs (2) and (3), by inserting that is not a discrete single-use unit (C) by adding at the end the following: (4) Discrete single-use unit The term discrete single-use unit (A) is not intended to be smoked; and (B) is in the form of a lozenge, tablet, pill, pouch, dissolvable strip, or other discrete single-use or single-dose unit. . (d) Tax parity for small cigars Paragraph (1) of section 5701(a) $50.33 $100.66 (e) Tax parity for large cigars (1) In general Paragraph (2) of section 5701(a) 52.75 percent $49.56 per pound and a proportionate tax at the like rate on all fractional parts of a pound but not less than 10.066 cents per cigar. (2) Guidance The Secretary of the Treasury, or the Secretary's delegate, may issue guidance regarding the appropriate method for determining the weight of large cigars for purposes of calculating the applicable tax under section 5701(a)(2) (f) Tax parity for Roll-Your-Own tobacco and certain processed tobacco Subsection (o) of section 5702 , and includes processed tobacco that is removed for delivery or delivered to a person other than a person with a permit provided under section 5713, but does not include removals of processed tobacco for exportation wrappers thereof (g) Clarifying tax rate for other tobacco products (1) In general Section 5701 (i) Other tobacco products Any product not otherwise described under this section that has been determined to be a tobacco product by the Food and Drug Administration through its authorities under the Family Smoking Prevention and Tobacco Control Act shall be taxed at a level of tax equivalent to the tax rate for cigarettes on an estimated per use basis as determined by the Secretary. . (2) Establishing per use basis For purposes of section 5701(i) (h) Clarifying definition of tobacco products (1) In general Subsection (c) of section 5702 (c) Tobacco products The term tobacco products (1) cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco, and (2) any other product subject to tax pursuant to section 5701(i). . (2) Conforming amendments Subsection (d) of section 5702 of such Code is amended by striking cigars, cigarettes, smokeless tobacco, pipe tobacco, or roll-your-own tobacco tobacco products (i) Increasing tax on cigarettes (1) Small cigarettes Section 5701(b)(1) of such Code is amended by striking $50.33 $100.66 (2) Large cigarettes Section 5701(b)(2) of such Code is amended by striking $105.69 $211.38 (j) Tax rates adjusted for inflation Section 5701 of such Code, as amended by subsection (g), is amended by adding at the end the following new subsection: (j) Inflation adjustment (1) In general In the case of any calendar year beginning after 2021, the dollar amounts provided under this chapter shall each be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting ‘calendar year 2020’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof. (2) Rounding If any amount as adjusted under paragraph (1) is not a multiple of $0.01, such amount shall be rounded to the next highest multiple of $0.01. . (k) Floor Stocks Taxes (1) Imposition of tax On tobacco products manufactured in or imported into the United States which are removed before any tax increase date and held on such date for sale by any person, there is hereby imposed a tax in an amount equal to the excess of— (A) the tax which would be imposed under section 5701 (B) the prior tax (if any) imposed under section 5701 of such Code on such article. (2) Credit against tax Each person shall be allowed as a credit against the taxes imposed by paragraph (1) an amount equal to $500. Such credit shall not exceed the amount of taxes imposed by paragraph (1) on such date for which such person is liable. (3) Liability for tax and method of payment (A) Liability for tax A person holding tobacco products on any tax increase date to which any tax imposed by paragraph (1) applies shall be liable for such tax. (B) Method of payment The tax imposed by paragraph (1) shall be paid in such manner as the Secretary shall prescribe by regulations. (C) Time for payment The tax imposed by paragraph (1) shall be paid on or before the date that is 120 days after the effective date of the tax rate increase. (4) Articles in foreign trade zones Notwithstanding the Act of June 18, 1934 (commonly known as the Foreign Trade Zone Act, 48 Stat. 998, 19 U.S.C. 81a (A) internal revenue taxes have been determined, or customs duties liquidated, with respect to such article before such date pursuant to a request made under the first proviso of section 3(a) of such Act, or (B) such article is held on such date under the supervision of an officer of the United States Customs and Border Protection of the Department of Homeland Security pursuant to the second proviso of such section 3(a). (5) Definitions For purposes of this subsection— (A) In general Any term used in this subsection which is also used in section 5702 of such Code shall have the same meaning as such term has in such section. (B) Tax increase date The term tax increase date (C) Secretary The term Secretary (6) Controlled groups Rules similar to the rules of section 5061(e)(3) of such Code shall apply for purposes of this subsection. (7) Other laws applicable All provisions of law, including penalties, applicable with respect to the taxes imposed by section 5701 of such Code shall, insofar as applicable and not inconsistent with the provisions of this subsection, apply to the floor stocks taxes imposed by paragraph (1), to the same extent as if such taxes were imposed by such section 5701. The Secretary may treat any person who bore the ultimate burden of the tax imposed by paragraph (1) as the person to whom a credit or refund under such provisions may be allowed or made. (l) Effective dates (1) In general Except as provided in paragraphs (2) through (4), the amendments made by this section shall apply to articles removed (as defined in section 5702(j) (2) Discrete single-use units and processed tobacco The amendments made by subsections (c)(1)(C), (c)(2), and (f) shall apply to articles removed (as defined in section 5702(j) (3) Large cigars The amendments made by subsection (e) shall apply to articles removed after December 31, 2021. (4) Other tobacco products The amendments made by subsection (g)(1) shall apply to products removed after the last day of the month which includes the date that the Secretary of the Treasury (or the Secretary of the Treasury's delegate) issues final regulations establishing the level of tax for such product.

Summary: Tobacco Tax Equity Act of 2021 This bill increases the excise tax on cigarettes and equalizes tax rates among all other tobacco products.