These US states noticed tax will increase on tobacco, vapes, and marijuana

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Michael McGrady

On January 1, 2021, notable changes to local tax codes for tobacco, vapes, and marijuana products were made in the following US states.

Arizona: Voters in the state of Arizona voted to approve proposal 207 in the November 2020 election. Prop. 207 creates a legal marijuana recreational and regulatory framework with an appropriate tax structure. The overall implementation of Prop. 207 will take additional months to smooth out the specific tax and regulatory details.

Colorado: Colorado voters approved EE’s proposal to increase the state’s overall tax on tobacco and steam. The first tax round came into effect on January 1 and will continue to increase until 2027. Prop, EE raised the statutory cigarette tax from $ 0.84 to $ 1.94 per pack and set a minimum after-tax cigarette tax floor of $ 7 per pack. There is also an increased tax on other tobacco products, including wholesale and excise taxes on vapes and oral tobacco products. The bill also stipulates that tobacco products approved by the US Food and Drug Administration as “modified risk tobacco products” will only be taxed at half the state tobacco tax.

Georgia: On January 1, the State of Georgia introduced an excise tax on steam products. This tax was enforced in accordance with the enactment of Senate Act 375 in June 2020. The law established a tax structure in which closed vape products are taxed at 5 cents per liquid milliliter, while open-system and other single-use vape products are taxed at a 7 percent of the wholesale price.

Montana: Voters have set a marijuana recreational framework that will begin in 2022. When sales begin, the tax rate is 20 percent of the total retail price. As of January 2021, the possession of recreational marijuana is fully legal.

New Jersey: New Jersey voters approved Public Question 1 in November 2020. This electoral measure will amend the state’s constitution to legalize recreational marijuana from January 1, 2021. In particular, Public Question 1 also measures that the general sales tax rate on recreational activities applies to marijuana sales with a local option for jurisdictions to impose an additional 2 percent sales tax on these products. Excise taxes are prohibited on marijuana purchases at the point of sale in pharmacies. However, taxes are levied on wholesale valuations.

Oregon: Oregon voters implemented measure 108, which imposes a new tax of 65 percent of the wholesale price on all vaping products sold in the state. The measure also increased the state’s cigarette tax from $ 1.33 to $ 3.33 per pack, while doubling the tax cap on cigars from $ 0.50 to $ 1.00 per cigar.

Virginia: Virginia introduced taxes on heated tobacco products like the IQOS system at $ 2.25 per hit. Other laws passed in November 2020 also require e-commerce sellers to also collect sales tax and tobacco excise tax. This went into effect Jan. 1 for non-state sellers selling tobacco products to customers in the state jurisdiction through online purchases.

For better analysis, please contact your local and state finance departments or this recently published analysis by the Tax Foundation on which this article is based.

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