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.