Increasing taxes on tobacco products has been shown to be one of the most effective means of reducing tobacco use, particularly among youth. However, it is important that all forms of tobacco are taxed at similar rates. Otherwise, tax increases can lead to substitution of one tobacco product for another. In addition, tax increases can be undermined if untaxed purchases are permitted. Therefore, it is important to ensure that taxes are collected on internet tobacco sales and on sales from Native American reservations, and it is also crucial to prevent unlawful cigarette smuggling.
New York State’s cigarette and tobacco taxes are among the highest in the nation. The state cigarette tax is $4.35 per pack (and New York City has an additional $1.50 cigarette tax). The tax on cigars and most other tobacco products is 75% of the wholesale price.
With the increase in tobacco taxes, tax evasion has become a serious issue in New York. Recently, however, both the state and federal governments have recently made significant efforts to address this issue. The federal Prevent All Cigarette Trafficking Act (PACT Act) took effect on June 29, 2010, requiring internet cigarette/tobacco vendors to file with state tax commissioners, ensure that all taxes are paid on the products that they distribute, and adequately verify the age of consumers. New York State also amended its tax law to require the payment of taxes on cigarettes and other tobacco products sold by Native American retailers (although there is an exemption for cigarettes retained for consumption by tribal members). Enforcement of this new law was scheduled to begin on September 1, 2010, but it has been delayed by lawsuits. Click here for updates on the lawsuits.
- For more information about New York State’s tax laws, visit the New York State Department of Taxation and Finance, available at http://www.tax.state.ny.us/.
- For a further explanation of the PACT Act, visit http://www.tobaccofreekids.org/research/factsheets/pdf/0361.pdf.
- For an explanation of how the PACT Act amends the federal Jenkins Act, visit http://www.tax.state.ny.us/pdf/memos/cigarette/m10_7m.pdf.
- For a discussion on the effects of internet sales on kids, see http://www.tobaccofreekids.org/research/factsheets/pdf/0213.pdf.
- For a list of all of the state cigarette excise taxes, see http://www.tobaccofreekids.org/research/factsheets/pdf/0097.pdf.