Sponsors (3)
The bill lowers and clarifies federal tax treatment for waterpipe tobacco—reducing prices and regulatory uncertainty for industry and consumers—at the cost of higher public‑health risk from potentially increased consumption and lower federal excise revenue, plus transition costs for businesses.
Consumers of waterpipe (hookah/shisha) tobacco will likely pay lower retail prices because the bill applies a lower per‑pound excise tax to waterpipe tobacco.
Manufacturers and importers will have clearer guidance because the bill clarifies the definition of 'waterpipe tobacco,' reducing uncertainty about tax treatment.
Users of waterpipe tobacco and the broader public face higher health risks because a lower excise tax could increase consumption of waterpipe tobacco and related tobacco harms.
Taxpayers and federal budgets will receive less revenue because taxing waterpipe tobacco at a lower rate will likely reduce federal excise receipts.
Manufacturers and importers will incur compliance costs because they must change labeling, accounting, and tax‑reporting systems to reflect the new category.
Based on analysis of 2 sections of legislative text.
Creates a new excise tax category for waterpipe (hookah) tobacco and taxes it at $0.5662 per pound instead of the pipe tobacco rate.
Introduced July 15, 2025 by Darrell Issa · Last progress July 15, 2025
Creates a new federal excise tax category for waterpipe (hookah) tobacco and taxes it at a lower per‑pound rate than existing pipe tobacco. The change adds a statutory definition of “waterpipe tobacco” (including hookah, shisha, maassel, narghile, argileh) to the Internal Revenue Code and applies the new rate to tobacco manufactured or imported after enactment. The bill leaves the pipe tobacco rate unchanged at $2.8311 per pound and sets the waterpipe tobacco rate at $0.5662 per pound (both prorated for fractional pounds). It directs the tax code amendment by adding the new definition to 26 U.S.C. §5702 and makes the rate effective on products produced or imported after the law takes effect.