Senators Introduce Federal Legislation to Tax ENDS and Substantially Increase Taxes for Other Tobacco Products

Troutman Pepper

Troutman Pepper

On April 22, Senator Dick Durbin and others introduced the Tobacco Tax Equity Act of 2021 (S. 1314). The bill would establish a federal excise tax for electronic nicotine delivery systems (“ENDS”) and all other tobacco products that are not currently subject to federal tobacco products excise taxes. The bill would also double the tax rates for cigarettes and impose equivalent rates for most other tobacco products.

The bill would do the following:

  • Double the federal excise tax rate for cigarettes
  • Double the federal excise tax rate for roll-your-own tobacco
  • Increase the federal excise tax rate for pipe tobacco by more than 1600%, equating it with roll-your-own tobacco
  • Double the federal excise tax rate on small cigars
  • Substantially increase taxes for premium cigars by changing the tax to a weight-based tax of $49.56 per pound.

The bill would also tax ENDS and all other products that are considered “tobacco products” under the federal Food, Drug and Cosmetic Act – products made or derived from tobacco and intended for human consumption. The Treasury Department would be required to issue regulations, one year after the law’s passage, establishing a tax rate for such products equivalent to the tax rate for cigarettes.

The bill would also impose an automatic escalator for tobacco product tax rates, annually increasing those rates with inflation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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