Federal Excise Tax Increase and Floor Stocks Tax

The Act increases the Federal excise tax on all tobacco products and cigarette papers and cigarette tubes, effective April 1, 2009.  In addition, the Act imposes a floor stocks tax on all tobacco products (except large cigars), cigarette papers and cigarette tubes held for sale on April 1, 2009.  A floor stocks tax is a one-time excise tax placed on a commodity undergoing a tax increase.  The amount of the floor stocks tax is equal to the difference between the new tax rate and the one just previous to it.  Any person who holds tobacco products (except large cigars), cigarette papers, or cigarette tubes is liable for the floor stocks tax on April 1, 2009.  This includes, for example, wholesalers and retail dealers, as well as manufacturers and importers who are holding taxpaid or tax determined products.  Each person is allowed a credit against the tax of $500.  Liability for the floor stocks tax must be established by inventory and the tax must be paid on or before August 1, 2009.  As noted above, more information related to the floor stocks tax will follow.  The tax rates in effect on April 1, 2009, and just previous to the increase, as well as the floor stocks tax, are shown in the table below.  

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