Increase in the Federal Tobacco Excise Tax for 2002,
and Requirements for Tobacco Manufacturers, Wholesalers, Importers, and
Retailers to Pay a Tobacco Floor Stocks Tax
Washington, DC - The Bureau of Alcohol, Tobacco and Firearms
(ATF) reminds the tobacco industry and interested consumers that there
will be an increase in the Federal excise tax on cigarettes and other
tobacco products on January 1, 2002. The current tax on small cigarettes
(the type usually smoked in this country) is $17 per thousand. On January
1, 2002, that rate will rise to $19.50. The excise tax on other tobacco
products, including large cigarettes, small and large cigars, pipe tobacco,
chewing tobacco, snuff, roll-your-own tobacco, and cigarette papers and
tubes, will also increase on January 1.
The Balanced Budget Act of 1997 (Public Law 105-33, Section 9302) also
imposed a floor stocks tax on all Federally taxpaid or tax determined
cigarettes held for sale on January 1, 2002. The floor stocks tax is the
difference between the previous excise tax rate and the new rate. Since
the new tax rate for small (Class A) cigarettes increases $2.50 per thousand
on January 1, the floor stocks tax will amount to $2.50 per thousand,
or five cents for each pack of twenty.
Although all dealers in cigarettes are required to take inventory of
their cigarette stocks as of January 1, Congress provided dealers with
a credit of up to $500. That means that potential taxpayers would owe
no tax unless they have more than 200,000 cigarettes in their inventories
on the date the tax rate changes. ATF anticipates that only cigarette
manufacturers, wholesalers, importers, and large-volume or chain retailers
will have to file a formal tax return to ATF.
For further information on the tax increase and the floor stocks tax,
contact the ATF National Revenue Center at 1-800-398-2282 or your local
ATF Industry Operations Office. You may also find full information on
these issues under the tobacco programs page of the ATF web site at: www.atf.treas.gov.