HB 563-FN-A – AS INTRODUCED
2005 SESSION
09/10
HOUSE BILL 563-FN-A
AN ACT increasing the tobacco tax.
SPONSORS: Rep. Butynski, Ches 4; Rep. Pilliod, Belk 5; Rep. Kathleen Taylor, Straf 4
This bill increases the tobacco tax to a rate to be annually determined by the commissioner of the department of revenue administration which is 25 percent less than the lowest combined tobacco tax rate and sales tax rate of a state which is contiguous to New Hampshire. One-half of this increase is designated for the education trust fund and the remainder is designated for the general fund.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
05-0635
09/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Five
AN ACT increasing the tobacco tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Findings and Purpose. The general court finds that increasing the tobacco tax will raise additional state revenue for education, health care services, tobacco prevention and cessation efforts, and other essential services supported by the general fund. Increasing the tobacco tax may also:
I. Prevent some youth from initiating tobacco use.
II. Reduce state expenditures for medicaid and other health care costs for New Hampshire citizens suffering the negative health consequences of tobacco use.
III. Reduce the level of exposure to second-hand smoke for many New Hampshire citizens.
2 Tobacco Tax Increased. Amend RSA 78:7 to read as follows:
78:7 Tax Imposed.
I. A tax upon the retail consumer is hereby imposed at [the] a rate [of 52 cents] to be determined annually by the commissioner pursuant to paragraph II for each package containing 20 cigarettes or at a rate proportional to such rate for packages containing more or less than 20 cigarettes, on all cigarettes sold at retail in this state. The payment of the tax shall be evidenced by affixing stamps to the smallest packages containing the cigarettes in which such products usually are sold at retail. The word “package” as used in this section shall not include individual cigarettes. No tax is imposed on any transactions, the taxation of which by this state is prohibited by the Constitution of the United States.
II. The commissioner shall annually on July 1 establish the rate of the tax to be a rate which is 25 percent less than the combined tobacco tax rate and sales tax rate of the state which is contiguous to New Hampshire and which has the lowest combined tobacco tax rate and sales tax rate.
III. All persons licensed under RSA 78:2 shall inventory all taxable tobacco products in their possession on July 1 of each year and file a report of such inventory with the department of revenue administration on a form prescribed by the commissioner on or before July 20. The tax rate effective on July 1 shall apply to such inventory and the difference, if any, in the amount paid previously on such inventory and the current effective rate of tax shall be paid with the inventory form. The inventory form shall be treated as a tax return for the purpose of computing penalties under RSA 21-J.
3 Distribution of Funds. Amend RSA 78:32 to read as follows:
78:32 Distribution of Funds.
I.(a) The commissioner shall determine the additional amount of revenue produced by any additional tax in excess of 37 cents and less than 53 cents for each package containing 20 cigarettes or at a rate proportional to such rate for packages containing more or less than 20 cigarettes, on all tobacco products sold at retail in this state imposed by RSA 78:7 and shall certify such amount to the state treasurer by October 1 of each year for deposit in the education trust fund established by RSA 198:39.
[II.](b) The commissioner shall make quarterly estimates of the amount of additional revenues that will be produced by such increase in tax rate for the next fiscal year and shall certify such amount to the state treasurer for deposit in the education trust fund established by RSA 198:39. Such estimates shall be certified on June 1, September 1, December 1, and March 1 of each year.
II. The commissioner shall determine the additional amount of revenue produced by any additional tax in excess of 52 cents for each package containing 20 cigarettes or at a rate proportional to such rate for packages containing more or less than 20 cigarettes, on all tobacco products sold at retail in this state imposed by RSA 78:7 and shall certify such amount to the state treasurer by June 30 of each year. The state treasurer shall deposit ˝ of such amount in the education trust fund and ˝ of such amount in the general fund.
4 Effective Date. This act shall take effect July 1, 2005.
LBAO
05-0635
1/28/05
HB 563-FN-A - FISCAL NOTE
AN ACT increasing the tobacco tax.
FISCAL IMPACT:
The Department of Revenue Administration indicates this bill will increase state unrestricted general fund revenue by $26,444,000, increase restricted education trust fund revenues by $26,444,000 and increase state general fund expenditures by an indeterminable amount in FY 2006 and each year thereafter. There is no fiscal impact on county and local revenue or expenditures.
METHODOLOGY:
The Department of Revenue Administration (DRA) states that this bill increases the tobacco tax to a rate to be annually determined by the Commissioner of DRA, which is 25 percent less than the lowest combined tobacco tax rate and sales tax rate of a state contiguous to New Hampshire. This bill also designates one-half of the revenue increase to the education trust fund and the other half to the general fund.
The Department determined that Maine has the lowest combined tobacco tax rate and sales tax of $1.18 per pack (see table below). Using Maine’s combined rate of $1.18 per pack as the base, DRA then calculated that New Hampshire’s new tobacco tax rate would be $.88 per pack ($1.18 x 75%) or a $.36 per pack increase ($.88 - $.52).
The Department then used their tobacco tax increase model dated December 2004, and determined a $.36 increase in the tobacco tax will generate an additional $52,888,000 of revenue; one-half designated to the education trust fund, the other half to the general fund. The Department further assumed no change in contiguous states’ tax rates on tobacco products.
Combined Tobacco & Sales Tax Rates of Surrounding States
Maine Massachusetts Vermont New Hampshire
Tobacco Tax Rate $1.00 $1.51 $1.19 $0.52
Price/Pack $2.50 $2.50 $2.50 $2.50
Pre-Sales Tax Cost $3.50 $4.01 $3.69 $3.02
LBAO
05-0635
1/28/05
Sales Tax Rate $0.05 $0.05 $0.06 $0.00
Sales Tax /Pack $0.18 $0.20 $0.22 $0.00
Total Pack Cost $3.68 $4.21 $3.91 $3.02
Effective Tax Rate $1.18 $1.71 $1.41 $0.52
The Department states this bill will also result in an indeterminable increase in state expenditures for additional administrative audit costs to ensure compliance with the new tax rates.