MINNEAPOLIS — The National Association of Tobacco Outlets (NATO) this month launched a new strategy in states where lawmakers are proposing to raise cigarette and tobacco product tax rates, it said in the latest issue of the NATO E-News Bulletin. This strategy focuses on educating lawmakers about the tax windfall that all 50 states will receive due to the passage of the federal Prevent All Cigarette Trafficking Act (also known as the PACT Act), it said.

Currently, states are losing an estimated $1.4 billion a year in state excise taxes and sales taxes on cigarettes and smokeless tobacco products sold over the Internet; however, the regulations under the PACT Act requiring Internet sellers to collect cigarette/smokeless taxes plus sales taxes and remit those taxes to states along with the new regulation prohibiting the delivery of these tobacco products through the U.S. Mail will significantly reduce Internet sales. Without being able to buy these products at a significantly lower price over the Internet, consumers will revert to buying tobacco products at local stores resulting in the tax windfall to states.

Armed with this information, NATO is sending lawmakers in targeted states a letter informing them about the passage of the PACT Act, the amount of tobacco taxes and sales taxes being lost by states, and an estimate of the size of the tax windfall that their respective state may expect to receive. In some cases, the size of the expected tax windfall is estimated to be more than the additional revenue the state might collect if the cigarette and/or smokeless tobacco rates were increased. In other cases, the estimated tax windfall may allow lawmakers to reduce the amount of any proposed tax increase.

So far, NATO has sent letters regarding the imminent PACT Act tax windfall to lawmakers in Kansas (55 cents per pack cigarette tax increase and OTP tax increase from 10% to 40%), Minnesota (taxing little cigars as cigarettes), New Hampshire (20 cents per pack cigarette tax increase), New York ($1 per pack cigarette tax increase), and South Carolina (50 cents per pack cigarette tax increase).

Minneapolis-based NATO is a national retail trade association that focuses exclusively on state and federal tobacco legislative issues and leads the fight for all tobacco interests in the United States