On January 1, 2021, the following U.S. states saw noteworthy changes to local tax codes covering tobacco, vapes, and marijuana products.
Arizona: Voters in the state of Arizona voted to approve Proposition 207 during the 2020 November Election. Prop. 207 establishes a legal recreational marijuana industry and regulatory framework with the appropriate taxation structure. The overall implementation of Prop. 207 will take further months to iron out the specific tax and regulatory details.
Colorado: Voters in Colorado approved Proposition EE, which increases the state’s overall tobacco and vape tax. The first round of taxes took effect on January 1, and will further increase through 2027. Prop, EE increased the statutory cigarette tax from $0.84 to $1.94 per pack, further set a minimum after-tax retail price floor for cigarettes at $7 per pack. There is also an increased tax on other tobacco products, including wholesale and further consumption taxes on vapes and oral tobacco products. The bill also establishes a policy to only tax tobacco products that are approved by the U.S. Food and Drug Administration as “modified risk tobacco products” by half the state’s tobacco tax.
Georgia: On January 1, the state of Georgia imposed an excise tax on vapor products. This tax entered forced, per the enactment of Senate Bill 375 in June of 2020. The bill established a tax structure where closed vape products are taxed at 5 cents per fluid millilitre while open-system and other single-use vape products are taxed at a 7 percent rate of the wholesale price.
Montana: Voters established a recreational marijuana framework that will begin in 2022. When sales begin, the tax rate will be 20 percent of the overall retail price. Starting in January of 2021, the possession of recreational marijuana has been legalized entirely.
New Jersey: Voters in New Jersey approved Public Question 1 in November of 2020. This ballot measure amends the state’s constitution to legalize recreational marijuana, starting on January 1, 2021. Public Question 1 also measures, specifically, that the general sales tax rate will apply to recreational marijuana sales with a local option for jurisdictions to levy an additional 2 percent sales tax on these products. Excise taxes are prohibited on marijuana purchases, at the point of sale in dispensaries. However, taxes will be levied on wholesale valuations.
Oregon: Oregon’s voters implemented Measure 108, which imposes a new tax of 65 percent of the wholesale price on all vaping products sold in the state. The measure also raised the state’s cigarette tax from $1.33 to $3.33 per pack while doubling the taxation cap on cigars from $0.50 to $1.00 per cigar.
Virginia: Virginia implemented taxes on heated tobacco products, like the IQOS system, to $2.25 per hit stick. Other legislation that was enacted in November of 2020 also requires e-commerce sellers to collect sales tax and tobacco excise taxes too. This entered into force on January 1 for out-of-state sellers who offer tobacco products through online purchases to customers in the jurisdiction of the state.
For a better analysis, please refer to your local and state revenue departments or this analysis recently published by the Tax Foundation, of which, is the basis for this article.
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