Sponsors (3)
The bill lowers the federal excise tax burden and clarifies the legal definition for waterpipe tobacco—benefiting manufacturers and possibly consumers—while trading off reduced federal revenue and increased public‑health risks plus some transition compliance costs.
Manufacturers and importers of waterpipe (hookah) tobacco pay a lower federal excise tax per pound, reducing costs for small tobacco businesses and potentially improving their margins or competitiveness.
The law creates a clear statutory definition of 'waterpipe tobacco', giving producers and the IRS greater certainty about classification and tax treatment and simplifying tax administration and compliance decisions.
Consumers of hookah products may see modestly lower retail prices if producers pass along some of the lower tax burden, making these products slightly more affordable.
Lowering the excise tax rate for waterpipe tobacco makes these products more affordable and could increase consumption, raising public-health risks tied to tobacco use for users and communities.
Taxing waterpipe tobacco at a lower rate reduces federal excise revenue per pound compared with taxing it as pipe tobacco, potentially decreasing federal tax receipts.
Implementing the new classification will impose one-time compliance costs on manufacturers and importers (relabeling, reclassification, paperwork) and administrative work for the IRS during transition.
Based on analysis of 2 sections of legislative text.
Creates a separate federal excise tax rate and definition for waterpipe (hookah/shisha) tobacco, taxed at $0.5662/lb vs $2.8311/lb for other pipe tobacco.
Official title: To amend the Internal Revenue Code of 1986 to establish a tax for waterpipe tobacco, and for other purposes.
Introduced July 15, 2025 by Darrell Issa · Last progress July 15, 2025
Creates a separate federal excise tax category and lower per‑pound rate for waterpipe (hookah/shisha) tobacco than for other pipe tobacco, and defines “waterpipe tobacco.” The new rate applies to tobacco manufactured or imported after the law takes effect.