FISCAL NOTE

Date Requested: February 21, 2025
Time Requested: 02:24 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1582 Introduced HB2762
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, Increases Existing Expenses



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government. The stated purpose of this bill is to apply an excise tax to e-cigarettes and other heated nicotine products excise tax. Per our interpretation, the bill would amend the definitions of “Cigarette” and “Tobacco product” to specifically include a “heated cigarette product” as defined. The bill also amends the definitions of “E-Cigarette”, “E-cigarette liquid”, and “Other tobacco product” or “tobacco products other than cigarettes” to specifically exclude a “heated cigarette product” as defined, for tax purposes. However, the bill does not define “heated cigarette product”. It does provide a definition for “heated tobacco product”. Effective on and after July 1, 2025, an excise tax rate is imposed on the sale of heated tobacco products of 60 cents on each 20 cigarettes for heating or in like ratio on any part thereof. Currently, heated tobacco products and heated nicotine products are taxed as cigarettes in West Virginia. The current tax rate on cigarettes is $1.20 per pack of 20. Heated tobacco products and heated nicotine products are fairly new to the United States and currently their use in West Virginia is limited. Globally, the sales of these products are growing rapidly. The health risks associated with cigarettes and chewing tobacco are anticipated to drive the adoption of Heated Tobacco Products, especially among young adults. According to our interpretation, the legislation, if passed, would reduce General Revenue Fund collections by a minimal amount in FY2026 and by increasing amounts in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $18,150 in FY2025.  



Fiscal Note Detail


Effect of Proposal Fiscal Year
2025
Increase/Decrease
(use"-")
2026
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 18,150 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 1,650 0 0
Other 16,500 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years. Per our interpretation, the bill would amend the definitions of “Cigarette” and “Tobacco product” to specifically include a “heated cigarette product” as defined. The bill also amends the definitions of “E-Cigarette”, “E-cigarette liquid”, and “Other tobacco product” or “tobacco products other than cigarettes” to specifically exclude a “heated cigarette product” as defined, for tax purposes. However, the bill does not define “heated cigarette product”. It does provide a definition for “heated tobacco product”. Effective on and after July 1, 2025, an excise tax rate is imposed on the sale of heated tobacco products of 60 cents on each 20 cigarettes for heating or in like ratio on any part thereof. Currently, heated tobacco products and heated nicotine products are taxed as cigarettes in West Virginia. The current tax rate on cigarettes is $1.20 per pack of 20. Heated tobacco products and heated nicotine products are fairly new to the United States and currently their use in West Virginia is limited. Globally, the sales of these products are growing rapidly. The health risks associated with cigarettes and chewing tobacco are anticipated to drive the adoption of Heated Tobacco Products, especially among young adults. According to our interpretation, the legislation, if passed, would reduce General Revenue Fund collections by a minimal amount in FY2026 and by increasing amounts in subsequent fiscal years. Additional administrative costs incurred by the State Tax Department would be $18,150 in FY2025.



Memorandum


Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form. The stated purpose of this bill is to apply an excise tax to e-cigarettes and other heated nicotine products excise tax. There is a title defect as well as internally inconsistent language. The bill’s title is defective in that it states that the bill relates to “applying an excise tax to e-cigarettes and other heated nicotine products from the tobacco excise tax.” Not only does the title not make any sense on its face; the bill itself does not apply an excise tax to e-cigarettes, and neither the new language of the bill nor the existing language of the amended code sections address “heated nicotine products” at all. The bill amends W.Va. Code §11-17-2 by expressly including a “heated cigarette product” in the definition of “cigarette,” but specifies that “heated cigarette product is “defined herein. However, neither the bill nor the existing code provides a definition for “heated cigarette product;” rather, the bill provides a definition for “heated tobacco product.” The same inaccurate reference is included in several other sections of the bill.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: radfiscal@wv.gov