Friday, July 1, is when the California tax rate on tobacco products other than cigarettes will increase from the current rate of 27.3 to 65.08 percent of the wholesale cost. The new tobacco products tax rate will stay in effect through June 30, 2018.
California voters approved Proposition 56, in November 2016. This proposition increased the excise tax rate on cigarettes, and expanded the definition of “tobacco products” to include little cigars, tobacco and nicotine intended for human consumption, and electronic cigarettes sold in combination with nicotine.
The state Board of Equalization adjusts the tobacco tax rate annually during its April meeting. In accordance with Revenue and Taxation Code section 30123(b), the BOE is required to annually calculate a tax rate on tobacco products that is equivalent to the combined rate of tax imposed on cigarettes ($2.87 per pack of 20 or $0.1435 per cigarette).
The tobacco products tax is imposed upon the first distribution in California, paid by the licensed tobacco products distributor, and based on their wholesale cost prior to any discounts or trade allowances. The fiscal year 2017-18 Tobacco Products Tax Rate is based on the wholesale premium brand cigarette price as of March 1, 2017, as published by the Tobacco Merchants Association.
Other tobacco products include, but are not limited to, cigars, little cigars, smoking tobacco (including shisha), chewing tobacco, snuff, nicotine delivery devices (for example, e-pipes, vape pens, e-hookahs) sold in combination with any liquid or substance containing nicotine, and any products containing, made of, or derived from any amount of tobacco or nicotine that is intended for human consumption.
Nicotine delivery devices sold independently, without nicotine, are not subject to the excise tax. This includes any battery, battery charger, carrying case, or other accessory used in the operation of a nicotine delivery device.
“Tobacco products” do not include cigarettes or any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes (for example, nicotine patches).
Morel information regarding the provisions of Prop 56 is available online. For more information regarding cigarette and tobacco products taxes, read the BOE’s Special Notice, visit online Cigarette and Tobacco Products Tax Guide, or call the Customer Service Center at 800-400-7115 (TTY:711) weekdays from 8 a.m. to 5 p.m. except state holidays.