Taxation of Smokeless Tobacco

Smokeless tobacco is taxed at both the federal and state level, and occasionally at the local level, in the United States.

## Federal

The federal portion of smokeless tobacco taxes does not contribute to a significant portion of the retail price, but there is a rate for both moist snuff and chewing tobacco.

* Moist Snuff - $1.51 per pound ($0.113 per 1.2 ounce can)
* Chewing Tobacco - $0.503 per pound ($0.094 per 3 ounce pouch)

## State

At the state level, tax rates are calculated using much different factors; some states use a per ounce rate similar to the federal method, while others use a percentage of the manufacturer's price, a percentage of the wholesale price, or per unit. This makes comparisons between states rather challenging. Cigarettes, on the other hand, use a dollar amount per pack in every state, making it very simple to compare all states' rates of taxation.

*This table is effective and up to date as of October 9, 2019.*

Terminology used:

* Manufacturer's Price (mfr.) - the price charged by the tobacco company to the distributor / wholesaler
* Wholesale Price (whsl.) - the price charged by the distributor / wholesaler to the retailer

### State Analysis

The states with the highest rates for moist snuff as a percentage of either the wholesale or manufacturer price are Massachusetts (210%), Wisconsin (100%), Minnesota (95%), Florida (85%), and Alaska (75%). In comparison, the average rate among states which use the "percentage-of-price" method is 47.8%.

## Local

Counties, cities, or other municipalities at the local level may opt to enact their own tobacco taxes. Usually, this is seen in the form of a cigarette tax and typically is found in the nation's largest cities, but smokeless tobacco is occasionally also included.

For example, the city of Philadelphia, PA levies an additional $0.36 per ounce on smokeless tobacco, in addition to Pennsylvania's statewide excise tax of $0.55 per ounce. By comparison, Philadelphia also imposes a $2.00 per pack cigarette tax in addition to Pennsylvania's $2.60 per pack statewide tax and the federal $1.01 per pack rate.

It can be argued that such disparities between states or even between municipalities within a state can encourage consumers traveling across borders to purchase tobacco products, or visiting areas where the excise tax is not collected at all, such as Indian reservations. This behavior leads to less revenue collected by both the consumer's home state and the home community's retailers. Following Philadelphia's 2014 cigarette tax, the city experienced a 50% decline in tax-paid cigarette sales. Another example is in Illinois, where it was estimated that 17% of all cigarettes consumed in the state are purchased outside the state, in either Indiana or Missouri. Illinois raised their per-pack tax to $2.98 in 2019, which made the combined state / Cook County / Chicago city tax up to $8.17 per pack within the city of Chicago.

## References

1. ↑ https://www.tobaccofreekids.org/assets/factsheets/0354.pdf
2. ↑ https://www.tobaccofreekids.org/assets/factsheets/0169.pdf
3. ↑ https://www.altria.com/About-Altria/Government-Affairs/programs-practices/Legislative-Issues/Pages/Excise-Taxes.aspx
4. ↑ https://www.illinoispolicy.org/illinois-cigarette-tax-to-become-one-of-nations-highest/