FISCAL NOTE
Date Requested: February 16, 2024
Time Requested: 09:10 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3687 |
Introduced |
HB5535 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to apply an excise tax to e-cigarettes and other heated nicotine products excise tax.
Based on our interpretation, the bill would amend the definitions of “Cigarette” and “E-cigarette” to specifically exclude heated tobacco products and heated nicotine products and the definition of “Other Tobacco Products” to specifically exclude heated tobacco products, heated nicotine products, and (oral/alternative/modern) nicotine products. The bill amends the definition of “Tobacco product” by removing “any other tobacco product” and adding “heated tobacco product”. The bill adds definitions for “Heated tobacco product”, “Heated nicotine product”, “Nicotine product”, and “(Oral/Alternative/Modern) Nicotine Product”. The bill creates a separate tax rate for heated tobacco products and heated nicotine products of 60 cents on each 20 heat sticks or in like ratio on any part thereof. The tax would be effective July 1, 2024.
Currently, heated tobacco products and heated nicotine products are taxed as cigarettes in West Virginia. The current tax rate on cigarettes is $1.20 per pack of 20. Heated tobacco products and heated nicotine products are fairly new to the United States, and currently their use in West Virginia is limited. Globally, the sales of these products are growing rapidly. The health risks associated with cigarettes and chewing tobacco are anticipated to result in increased use of heated tobacco products, especially among young adults.
According to our interpretation, the legislation, if passed, would reduce General Revenue Fund collections by a minimal amount in FY2025 and by increasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2024.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
15,000 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
15,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the bill would amend the definitions of “Cigarette” and “E-cigarette” to specifically exclude heated tobacco products and heated nicotine products and the definition of “Other Tobacco Products” to specifically exclude heated tobacco products, heated nicotine products, and (oral/alternative/modern) nicotine products. The bill amends the definition of “Tobacco product” by removing “any other tobacco product” and adding “heated tobacco product”. The bill adds definitions for “Heated tobacco product”, “Heated nicotine product”, “Nicotine product”, and “(Oral/Alternative/Modern) Nicotine Product”. The bill creates a separate tax rate for heated tobacco products and heated nicotine products of 60 cents on each 20 heat sticks or in like ratio on any part thereof. The tax would be effective July 1, 2024.
Currently, heated tobacco products and heated nicotine products are taxed as cigarettes in West Virginia. The current tax rate on cigarettes is $1.20 per pack of 20. Heated tobacco products and heated nicotine products are fairly new to the United States, and currently their use in West Virginia is limited. Globally, the sales of these products are growing rapidly. The health risks associated with cigarettes and chewing tobacco are anticipated to result in increased use of heated tobacco products, especially among young adults.
According to our interpretation, the legislation, if passed, would reduce General Revenue Fund collections by a minimal amount in FY2025 and by increasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $15,000 in FY2024.
Memorandum
The stated purpose of this bill is to apply an excise tax to e-cigarettes and other heated nicotine products excise tax.
There is a title defect. The title states, in part, “… all relating to applying an excise tax to e-cigarettes and other heated nicotine products from the tobacco excise tax.” There are no changes that make e-cigarettes subject to tax. “E-cigarette liquids” are currently taxed under W. Va. Code §11-17-4b.
Two sections of this bill, W. Va. Code §11-17-3 and §11-17-4b, impose a levy. The definitions are amended, and “heated tobacco products” and “heated nicotine products” are specifically taxed under W. Va. Code §11-17-3. There is already a tax on e-cigarette liquids imposed by W. Va. Code §11-17-4, but there are no changes that would impose a tax on “e-cigarettes,” which are defined differently than “e-cigarette liquids” under W. Va. Code §11-17-4b.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov