Tobacco Firms Exploit Tax Loophole (MSNBC)
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Federal legislation that took effect April 2009 changed the tax rates on tobacco. The tax on roll-your-own tobacco products increased from $1.10 to $24.78 per pound. However, some tobacco companies re-packaged their roll-your-own tobacco, so it falls under the category of pipe tobacco, which has a much lower tax rate. State and federal tax rates on other tobacco products (OTPs) can be raised, to make OTP retail pricing similar to that for cigarettes, to help discourage smokers to quit, rather than switch to less costly OTPs.
Pipe tobacco can be flavored, since flavored OTPs are exempted from the federal Family Smoking Prevention and Tobacco Control Act (FSPTCA). Flavored tobacco is enticing to children and teens, which can use pipe tobacco to roll their own cigarettes. FSPTCA took effect on September 22, 2009, only bans flavored cigarettes, except menthol is still permitted. Click here to read an article about the avoidance of the tax leading to a surge in pipe tobacco sales.