FISCAL NOTE
Date Requested: March 24, 2025
Time Requested: 03:20 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 4011 |
Introduced |
SB903 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, West Virginia Division of Tobacco Prevention
Sources of Revenue:
General Fund
Legislation creates:
Increases Revenue From Existing Sources, 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 amend the Tobacco Products Excise Tax Act; repeal discounts on tax stamps; add a definition of “Electronic smoking device”; increase taxes on tobacco products; provide 10 percent of the revenue collected be dedicated to the West Virginia Division of Tobacco Prevention; and repeal §11-17-4a and §11-17-4b.
According to our interpretation, the proposed legislation would increase the tax on cigarettes and other tobacco products, update the definition of other tobacco products, repeal the code section which levied tax on e-cigarette liquid, eliminate the discount for wholesalers of cigarettes and other tobacco products, and allocate 10 percent of the revenue from the excise tax on cigarettes and other tobacco products to the West Virginia Division of Tobacco Prevention.
The bill adds a definition for “Electronic smoking device” and updates the definition of “other tobacco products” or “tobacco products other than cigarettes” to include electronic smoking devices and their components. The bill repeals the tax on e-cigarette liquid; however, these products would effectively be included under the expanded definition of other tobacco products. The current 12 percent excise tax on the wholesale price of other tobacco products is increased to 51 percent. The excise tax on cigarettes is increased from $1.20 to $2.70 on each 20 cigarettes or in like ratio on any part thereof.
The bill also repeals W.Va. Code §11-17-4a which disallowed additional tobacco products taxes by municipalities or other governmental subdivisions. The current language allowing for a 4 percent discount on the purchase of cigarette stamps and the excise tax on other tobacco products is removed. The bill adds language which dedicates 10 percent of the revenue collected on cigarettes and other tobacco products to the West Virginia Division of Tobacco Prevention. The legislation, if passed, would be effective July 1, 2025.
The increase in the cigarette excise tax would increase the average price of a pack of cigarettes in West Virginia to roughly $10.25. This price would be significantly higher than the average price in three neighboring states. The increase in the excise tax rate on other tobacco products, which includes electronic cigarettes, would cause the West Virginia excise tax rate on these products to be significantly higher than rates in most neighboring states. Currently, West Virginia Tobacco Products Tax collections benefit from an outflow of cigarettes, and some other products, to surrounding states with higher taxes. The increase in the cost of tobacco products in West Virginia would cause a decline in usage in the state, a decline in smuggling to higher tax states, and an increase in smuggling from lower tax states.
Per our interpretation, passage of this bill would increase General Revenue Fund collections by up to $95 million in FY2026, by up to $104 million in FY2027 and by decreasing amounts in subsequent fiscal years. The 10 percent dedication of Tobacco Product Tax collections to the West Virginia Division of Tobacco Prevention should generate up to $25 million in FY2026, up to $28 million in FY2027 with decreasing amounts generated in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $29,150 in FY2025 and $47,500 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2025
Increase/Decrease
(use"-") |
2026
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
29,150 |
47,500 |
47,500 |
| Personal Services |
0 |
47,500 |
47,500 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
1,650 |
0 |
0 |
| Other |
27,500 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
95,000,000 |
104,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed legislation would increase the tax on cigarettes and other tobacco products, update the definition of other tobacco products, repeal the code section which levied tax on e-cigarette liquid, eliminate the discount for wholesalers of cigarettes and other tobacco products, and allocate 10 percent of the revenue from the excise tax on cigarettes and other tobacco products to the West Virginia Division of Tobacco Prevention.
The bill adds a definition for “Electronic smoking device” and updates the definition of “other tobacco products” or “tobacco products other than cigarettes” to include electronic smoking devices and their components. The bill repeals the tax on e-cigarette liquid; however, these products would effectively be included under the expanded definition of other tobacco products. The current 12 percent excise tax on the wholesale price of other tobacco products is increased to 51 percent. The excise tax on cigarettes is increased from $1.20 to $2.70 on each 20 cigarettes or in like ratio on any part thereof.
The bill also repeals W.Va. Code §11-17-4a which disallowed additional tobacco products taxes by municipalities or other governmental subdivisions. The current language allowing for a 4 percent discount on the purchase of cigarette stamps and the excise tax on other tobacco products is removed. The bill adds language which dedicates 10 percent of the revenue collected on cigarettes and other tobacco products to the West Virginia Division of Tobacco Prevention. The legislation, if passed, would be effective July 1, 2025.
The increase in the cigarette excise tax would increase the average price of a pack of cigarettes in West Virginia to roughly $10.25. This price would be significantly higher than the average price in three neighboring states. The increase in the excise tax rate on other tobacco products, which includes electronic cigarettes, would cause the West Virginia excise tax rate on these products to be significantly higher than rates in most neighboring states. Currently, West Virginia Tobacco Products Tax collections benefit from an outflow of cigarettes, and some other products, to surrounding states with higher taxes. The increase in the cost of tobacco products in West Virginia would cause a decline in usage in the state, a decline in smuggling to higher tax states, and an increase in smuggling from lower tax states.
Per our interpretation, passage of this bill would increase General Revenue Fund collections by up to $95 million in FY2026, by up to $104 million in FY2027 and by decreasing amounts in subsequent fiscal years. The 10 percent dedication of Tobacco Product Tax collections to the West Virginia Division of Tobacco Prevention should generate up to $25 million in FY2026, up to $28 million in FY2027 with decreasing amounts generated in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $29,150 in FY2025 and $47,500 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to amend the Tobacco Products Excise Tax Act; repeal discounts on tax stamps; add a definition of “Electronic smoking device”; increase taxes on tobacco products; provide 10 percent of the revenue collected be dedicated to the West Virginia Division of Tobacco Prevention; and repeal §11-17-4a and §11-17-4b.
The bill amends W.Va. Code §11-17-3 by increasing the tax rate on cigarettes, effective July 1, 2025, from the current $1.20 per 20 cigarettes to $2.70 per 20 cigarettes. The tax on tobacco products other than cigarettes is increased, effective July 1, 2025, from the current 12 percent of the wholesale price to 51 percent of the wholesale price. These rate changes are made by deleting the current rate and current internal effective date and replacing them with the new rate and date. A better method would be to use a proviso, which would retain the former rate for ease of historical reference.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov