Cigarette Tax Hike – One Year Later

Tennessee tripled its cigarette tax last year, but revenue from the tax only recently began to fall in line with projections.

The tax on a pack of cigarettes went up from 20 to 62 cents last July.

State Revenue Commissioner Reagan Farr says in 2007 the old tax netted 127 million dollars.

While numbers for the last fiscal year aren’t complete, Farr says the new tax will probably net just over 300 million.

That’s well below the projected 347 million.

Farr says cigarette wholesalers undercut the tax last summer by stockpiling tax stamps at the lower rate.

Cigarette retailers pay the tax up front by buying stamps they place on the cartons.

Many anticipated the rate hike and stocked more than a year’s supply of stamps before the tax tripled last July.

Farr says they’ll run out of the stamps soon though.

“We think that the stockpiling issue is slowly working its way through the system. Our hope is that it’s fully worked its way through the system by fiscal year ‘09.”

Farr says this past May the state’s actual revenue from the tax came close to its projections for the first time.