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Act 246 increases the excise tax on cigarettes from 5 cents per cigarette to:
Act 246 became effective on July 1, 2002.
The tax is collected by the Department of Taxation (Department) when cigarette and tobacco wholesalers and dealers purchase cigarette tax stamps and place the stamps on cigarette packs prior to distribution. The current cigarette tax stamps are green; new yellow tax stamps will be issued to implement the increase in the tax rate.1
Impact on Consumers
Consumers will see cigarette packs with green stamps and cigarette packs with yellow stamps. It is legal for retailers to sell cigarette packs with the green stamps on or after October 1, 2002.
Impact on Retailers
Retailers must sell cigarette packs with either green stamps or the new yellow stamps affixed.
Retailers may sell cigarette packs stamped with the current green tax stamps if: (1) the retailers have the cigarette packs in their inventory on or after October 1, 2002; or (2) the cigarette packs were received from licensed wholesalers and dealers on or after October 1, 2002. Retailers may have to explain to consumers the reason for the different colored stamps.
Act 246 does not require retailers, who purchase cigarettes from licensed wholesalers and dealers, to collect the increase in cigarette taxes on October 1, 2002, as the tax is imposed on wholesalers and dealers. Retailers may pass on the additional tax to consumers when wholesalers and dealers pass on the additional tax to the retailers.
Impact on wholesalers and dealers
Act 246 requires every wholesaler and dealer to pay a tax of 6 cents per cigarette for each cigarette sold, used, or possessed on October 1, 2002.
Yellow stamps will be sold beginning on October 1, 2002, to implement the new tax rate. In order to avoid wholesalers and dealers returning unused green stamps and cigarette packs with green stamps, the Department will require a Form M-107 (floor stock return) from all wholesalers and dealers. The purpose of the floor stock return is to collect the difference in price between the green stamp (current stamp) and yellow stamp (new stamp) for every unused or affixed stamp in the wholesalers and dealersí ending inventory on September 30, 2002.
Once the floor stock return has been filed and the difference in the tax has been paid, the green stamps may be used until depleted. Wholesalers and dealers, therefore, may affix green stamps to cigarette packs after October 1, 2002.
The stamp fee imposed under section 245-26, HRS, 2 and the discount provided under section 245-22, HRS, 3 will be applicable to the difference in the tax reported on the floor stock return.
The yellow stamps will be available for purchase on October 1, 2002. The price of a roll from October 1, 2002, will be: $1.2156 * 15,000 = $18,234.
Wholesalers and dealers purchasing stamps on a deferred payment plan may increase the amount of their deferred payment purchases by 20%. No increase in bond coverage is necessary for the October 1, 2002, rate increase.
The Department will be revising the cigarette and tobacco tax forms in accordance with Act 246.
Current forms and other tax information are available at the Departmentís website at: www.hawaii.gov/tax. On Oahu, forms may be ordered by calling the Departmentís Forms Request Line at: 587-7572. Persons who are not calling from Oahu, may call: 1-800-222-7572 (toll-free) to receive forms by mail or by fax.