Sacramento – On July 1, 2017, the tax rate on tobacco products other than cigarettes will increase from the current rate of 27.3 to 65.08 percent of the wholesale cost. In November 2016, California voters approved Proposition 56, which increased the excise tax rate on cigarettes, and expanded the definition of “tobacco products” to include little cigars, tobacco and nicotine intended for human consumption, and electronic cigarettes sold in combination with nicotine.
In keeping with California law, the Board of Equalization (BOE) adjusts the tobacco tax rate annually during its April meeting. In accordance with Revenue and Taxation Code section 30123(b), the BOE is required to annually calculate a tax rate on tobacco products that is equivalent to the combined rate of tax imposed on cigarettes ($2.87 per pack of 20, or $0.1435 per cigarette). The tobacco products tax is imposed upon the first distribution in California, paid by the licensed tobacco products distributor, and based on their wholesale cost prior to any discounts or trade allowances. The fiscal year 2017-18 Tobacco Products Tax Rate is based on the wholesale premium brand cigarette price as of March 1, 2017, as published by the Tobacco Merchants Association. The new tobacco products tax rate will stay in effect through June 30, 2018.
Other tobacco products include, but are not limited to, cigars, little cigars, smoking tobacco (including shisha), chewing tobacco, snuff, nicotine delivery devices (for example, e-pipes, vape pens, e-hookahs) sold in combination with any liquid or substance containing nicotine, and any products containing, made of, or derived from any amount of tobacco or nicotine that is intended for human consumption. Nicotine delivery devices sold independently, without nicotine, are not subject to the excise tax. This includes any battery, battery charger, carrying case, or other accessory used in the operation of a nicotine delivery device. “Tobacco products” do not include cigarettes or any product that has been approved by the United States Food and Drug Administration for sale as a tobacco cessation product or for other therapeutic purposes (for example, nicotine patches).
Additional information regarding the provisions of Proposition 56 is available online. For more information regarding cigarette and tobacco products taxes, read our Special Notice, visit our online Cigarette and Tobacco Products Tax Guide, or call the Customer Service Center at 1-800-400-7115 (TTY:711) weekdays from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.
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The five-member California State Board of Equalization (BOE) is a publicly elected tax board that hears business tax appeals, acts as the appellate body for franchise and personal income tax appeals, and serves a significant role in the assessment and administration of property taxes. The BOE collects $60.5 billion annually in taxes and fees, supporting state and local government services. For more information on other taxes and fees in California, visit the California Tax Service Center.
Note: This news release may discuss complex tax laws and concepts. It may not address every situation, and is not considered written advice under Revenue and Taxation Code section 30284. Changes in law or regulations may have occurred since the time this news release was written. If there is a conflict between the text of this news release and the law, decisions will be based upon the law and not this news release. For specific help, please contact the BOE at 1-800-400-7115.