ASSEMBLY, No. 1815

STATE OF NEW JERSEY

217th LEGISLATURE

PRE-FILED FOR INTRODUCTION IN THE 2016 SESSION

 


 

Sponsored by:

Assemblyman† HERB CONAWAY, JR.

District 7 (Burlington)

 

 

 

 

SYNOPSIS

†††† Increases tobacco products wholesale sales and use tax rates to be on par with tax rate imposed on cigarettes under cigarette tax; dedicates revenue for smoking and tobacco use cessation programs.

CURRENT VERSION OF TEXT

†††† Introduced Pending Technical Review by Legislative Counsel.

††


An Act increasing tax rates under the tobacco products wholesale sales and use tax to be commensurate with the cigarette tax rate, and dedicating revenues from the rate increases for smoking and tobacco use cessation programs, amending and supplementing P.L.1990, c.39 and supplementing Title 26 of the Revised Statutes.

 

†††† Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

†††† 1.††† Section 3 of P.L.1990, c.39 (C.54:40B-3) is amended to read as follows:

†††† 3.††† a. †There is imposed a tax of [30%] 90% upon the wholesale price upon the sale, use or distribution of a tobacco product within this State, except that if the product is moist snuff, the tax shall be imposed as provided in section 3 of P.L.2006, c.37 (C.54:40B-3.1).

†††† b.††† Unless a tobacco product has already been or will be subject to the wholesale sales tax imposed in subsection a. of this section, if a distributor or wholesaler uses a tobacco product within this State, there is imposed upon the distributor or wholesaler a compensating use tax of [30%] 90% measured by the sales price of a similar tobacco product to a distributor, except that if the product is moist snuff, the tax shall be imposed as provided in section 3 of P.L.2006, c.37 (C.54:40B-3.1).

†††† c.†††† Unless a wholesale use tax is due pursuant to subsection b. of this section, if a distributor or wholesaler has not paid the wholesale sales tax imposed in subsection a. of this section upon a sale that is subject to the wholesale sales tax imposed in that subsection a., there is imposed upon the retail dealer or consumer chargeable for the sale a compensating use tax of [30%] 90% of the price paid or charged for the tobacco product, except that if the product is moist snuff, the tax shall be imposed as provided in section 3 of P.L.2006, c.37 (C.54:40B-3.1), which shall be collected in the manner provided in subsection b. of section 5 of this act.

(cf: †P.L.2006, c.37, s.5)

 

†††† 2.††† Section 3 of P.L.2006, c.37 (C.54:40B-3.1) is amended to read as follows:

†††† 3.††† a.† There is imposed a tax upon the sale, use or distribution of moist snuff within this State by a distributor or wholesaler to a retail dealer or consumer at the rate of [$0.75] $2.25 per ounce on the net weight, as listed by the manufacturer, of the moist snuff, and a proportionate rate on all fractional parts of an ounce of the net weight of moist snuff.

†††† b.††† Unless a moist snuff product has already been or will be subject to the wholesale sales tax imposed in subsection a. of this section, if a distributor or wholesaler uses the moist snuff within this State, there is imposed upon the distributor or wholesaler a compensating use tax of [$0.75] $2.25 per ounce on the net weight, as listed by the manufacturer, of the moist snuff, and a proportionate rate on all fractional parts of an ounce of the net weight of moist snuff.

†††† c.†††† Unless a wholesale use tax is due pursuant to subsection b. of this section, if a distributor or wholesaler has not paid the wholesale sales tax imposed in subsection a. of this section upon a sale that is subject to the wholesale sales tax imposed in that subsection a., there is imposed upon the retail dealer or consumer chargeable for the sale a compensating use tax of [$0.75] $2.25 per ounce on the net weight, as listed by the manufacturer, of the moist snuff, and a proportionate rate on all fractional parts of an ounce of the net weight of moist snuff, which shall be collected in the manner provided in subsection b. of section 5 of P.L.1990, c.39 (C.54:40B-5).

(cf:† P.L.2006, c.37, s.3)

 

†††† 3.††† (New section) †a.† Notwithstanding the provisions of section 8 of P.L.1990, c.39 (C.54:40B-8) to the contrary, each distributor and wholesaler under P.L.1990, c.39 (C.54:40B-1 et seq.), shall take a physical inventory of all items of tobacco products and items of moist snuff (including total ounce or ounces, and each fractional part thereof, of the net weight, as listed by the manufacturer, of the moist snuff) in that distributorís or wholesaler's possession at the close of business on the last day of the first month following the date of enactment of P.L.†††† , c.†† (C.††††† ) (pending before the Legislature as this bill) or such other date as the director may prescribe, and shall file a return under oath or certified under the penalties of perjury with the director in such form as the director may prescribe by the twentieth day of the third month following that date of enactment, showing the amount of all items of tobacco products and items of moist snuff (including total ounce or ounces, and each fractional part thereof, of the net weight, as listed by the manufacturer, of the moist snuff) in that distributorís or wholesaler's possession in the State at the close of business prior to the effective date of P.L.††† , c. †††(pending before the Legislature as this bill) and shall at the time of filing that return pay to the director:

†††† (1)†† the tax imposed pursuant to section 1 of P.L.††† , c.†† (C.††††† ) (pending before the Legislature as this bill) that is in excess of any tax already paid pursuant to section 3 of P.L.1990, c.39 (C.54:40B-3) on that item of tobacco product, and

†††† (2)†† the tax imposed pursuant to section 2 of P.L.††† , c.   † (C.        ) (pending before the Legislature as this bill) that is in excess of any tax already paid pursuant to section 3 of P.L.2006, c.37 (C.54:40B-3.1) on that item of moist snuff,

†††† as reflected on that return.

†††† Failure to obtain such forms shall not be an excuse for the failure to make a return containing the information required by the director.

†††† b.††† Each retail dealer shall take a physical inventory of all of tobacco products and items of moist snuff (including total ounce or ounces, and each fractional part thereof, of the net weight, as listed by the manufacturer, of the moist snuff) in that dealerís possession at the close of business on the last day of the first month following the date of enactment of P.L.†††† , c.†† (C.††††† ) (pending before the Legislature as this bill) or such other date as the director may prescribe, and shall file a return under oath or certified under the penalties of perjury with the director in such form as the director may prescribe by the twentieth day of the third month following that date of enactment, showing the amount of all items of tobacco products and items of moist snuff (including total ounce or ounces, and each fractional part thereof, of the net weight, as listed by the manufacturer, of the moist snuff) in that dealerís possession and shall at the time of filing that return pay to the director:

†††† (1)†† the tax imposed pursuant to section 1 of P.L.† ††, c.†† (C.††††† ) (pending before the Legislature as this bill) that is in excess of any tax already paid pursuant to section 3 of P.L.1990, c.39 (C.54:40B-3) on that item of tobacco product, and

†††† (2)†† the tax imposed pursuant to section 2 of P.L.††† , c.   † (C.        ) (pending before the Legislature as this bill) that is in excess of any tax already paid pursuant to section 3 of P.L.2006, c.37 (C.54:40B-3.1) on that item of moist snuff,

†††† as reflected on that return.

†††† Failure to obtain such forms shall not be an excuse for the failure to make a return containing the information required by the director.

 

†††† 4.††† (New section)† There is established in the Department of Health and Senior Services the ďSmoking and Tobacco Use Cessation Fund,Ē which shall be a nonlapsing fund to be credited annually by the State Treasurer with an amount from the General Fund equal to the amount determined by the State Treasurer to be derived from the revenue collected pursuant to the rate increases made in sections 1 and 2 of P.L.††† , c.††† (C.†††††† ) (pending before the Legislature as this bill).

†††† The monies in the fund shall be annually appropriated for use by the department to fund smoking and tobacco use cessation programs in the State.

†††† 5.††† This act shall take effect immediately and apply to tobacco products and moist snuff sold or otherwise disposed of on or after the first day of the second month after the date of enactment.

STATEMENT

 

†††† This bill increases the tax rates under the tobacco products wholesale sales and use tax, imposed on tobacco products other than cigarettes, and upon moist snuff, to be parallel with the current cigarette tax rate, and annually dedicates revenues from the rate increases for smoking and tobacco use cessation programs in the Department of Health and Senior Services.

†††† In recent years, almost every state and the federal government have increased tobacco taxes.† Tobacco tax increases are one of the most effective ways to reduce smoking and other tobacco use, especially among children.† Every 10 percent increase in cigarette prices reduces youth smoking by about seven percent and total cigarette consumption by about four percent.

†††† At both state and federal levels, and within states, there are substantially different methods and rates of tax imposed upon cigarettes and non-cigarette tobacco products.† Different tax burdens are imposed upon users of different tobacco products.† No compelling policy reasons exist for these differences.† However, higher tax rates upon one tobacco product compared to another have been found to influence comparative product pricing, and consumer behavior, in switching from the use of one higher priced product, often also subject to stiffer distribution regulations, to the use of products lower in price and less regulated.† This is especially true for youthful consumers.

†††† Most states that have significantly increased cigarette taxes have not suffered substantial decreases in revenue, and have experienced reductions in the rates of smoking and other tobacco use. Higher tobacco taxes also save money by reducing tobacco-related health care costs, including Medicaid expenses. States have realized even greater health benefits and cost savings by allocating some of the tax revenue to programs that discourage adults and children from smoking and using non-cigarette tobacco products and help smokers and tobacco users quit.

†††† A recent report by the Campaign for Tobacco-Free Kids has noted the tax differences within each state on cigarettes and other tobacco products such as cigars, chewing and other smoking tobacco, and snuff.† The Campaign reports that to deter tobacco use among children, it is important to raise tax rates on all tobacco products to prevent switching to a lower-taxed and lower-priced tobacco product and prevent initiation into these other tobacco products.† This report calculates that a parallel rate of tax in New Jersey for non-cigarette tobacco products, compared to the state tax of $2.70 per cigarette pack (or $0.135 per cigarette), equalizing the state tax burden upon wholesale prices, will require a tripling of the tax rate, increasing from 30% to 90% of the wholesale price of non-cigarette products, and a tripling of the rate of tax per net ounce of moist snuff products, from $0.75 per ounce of net weight to $2.25 per ounce of net weight.

†††† The amount of tax revenue anticipated to be annually collected from the tax rate increases is to be appropriated annually from a dedicated fund established in the Department of Health and Senior Services to fund smoking and tobacco use cessation programs in the State.† State funding for support for tobacco control programs has steadily decreased from $30 million in 2003 to just $1.5 million last year.† Under this bill, the State will increase its efforts to deter tobacco use by making the habit more expensive, and by enhancing its smoking and tobacco use cessation programs, in a win/win battle against lung cancer, New Jersey's No. 1 cancer killer, and other tobacco-related cancers.