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Amends 26 U.S.C. 5701 to change multiple tobacco product excise tax rates (including roll-your-own, pipe tobacco, smokeless tobacco, small and large cigars, and cigarettes), redesignate an existing subsection, insert a new nicotine tax subsection, and add an inflation adjustment subsection.
Amends 26 U.S.C. 5702 to modify definitions and add new definitions relevant to the taxation changes, including adding definitions for 'taxable nicotine' and 'manufacturer of taxable nicotine', adding 'discrete single-use unit' to applicable definitions, and striking subsection (l).
Raises and aligns federal excise tax rates on a broad set of tobacco and nicotine products and creates a new federal excise tax on extracted or synthesized nicotine used in vaping products. It defines new product categories for tax purposes, sets rules for taxing inventory held when rates increase (a floor stocks tax), and assigns the Treasury Secretary and the HHS Secretary authority to issue guidance, regulations, and limited exceptions for implementation. The changes are implemented on phased effective dates specified in the text and impose new compliance, reporting, and collection requirements on manufacturers, importers, distributors, and retailers; they also are likely to raise retail prices and federal revenue while affecting public-health and market dynamics for nicotine products.
Increase the per-unit tax rate applied to roll-your-own tobacco by replacing the prior rate with $49.56.
Increase the per-unit tax rate applied to pipe tobacco by replacing the prior rate with $49.56.
Amend smokeless tobacco taxes: (A) replace an existing numeric amount in paragraph (1) with 6.84; (B) replace an existing numeric amount in paragraph (2) with 0.74; and (C) add a new paragraph imposing a tax of $100.66 per 1,000 units on smokeless tobacco sold in discrete single‑use units.
Add a definition of “discrete single-use unit” to section 5702: a product containing, made from, or derived from tobacco or nicotine that is not intended to be smoked and is in the form of a lozenge, tablet, pill, pouch, dissolvable strip, or other discrete single‑use or single‑dose unit.
Amend small cigar tax language by striking “$50.33” and inserting new text as provided in the amendment.
Primary affected parties are manufacturers, importers, distributors, and retailers of tobacco and nicotine products and consumers of those products. Manufacturers and importers must reclassify products under new statutory definitions, calculate and remit higher excise taxes, and account for any floor stocks tax on inventories held when rates increase. Distributors and retailers will need to track taxable inventory at the effective dates, change pricing and invoicing systems, and comply with new reporting rules. Consumers likely face higher retail prices, which could reduce consumption (a public-health intent) but also shift demand toward lower-taxed or illicit products. Federal agencies (Treasury and HHS) will incur implementation and enforcement responsibilities—issuing regulations, guidance, and administering collections—creating administrative workload and potentially requiring additional enforcement resources. Small retailers and independent vape shops may face disproportionate transitional burdens from inventory taxes and compliance costs. Overall, the law is likely to increase federal excise revenue, change market incentives for product design and distribution, and create compliance and enforcement challenges during phased implementation.
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Read twice and referred to the Committee on Finance. (text: CR S1462-1463)
Introduced March 3, 2025 by Richard Joseph Durbin · Last progress March 3, 2025
Read twice and referred to the Committee on Finance. (text: CR S1462-1463)
Introduced in Senate