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AN ACT relating to taxation. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 138.140 is amended to read as follows: 3
(1) (a) A tax shall be paid on the sale of cigarettes within the state at a proportionate 4
rate of three cents ($0.03) on each twenty (20) cigarettes. 5
(b) 1. Effective July 1, 2018, through July 31, 2022, a surtax shall be paid in 6
addition to the tax levied in paragraph (a) of this subsection at a 7
proportionate rate of one dollar and six cents ($1.06) on each twenty 8
(20) cigarettes; and 9
2. Effective August 1, 2022, a surtax shall be paid in addition to the tax 10
levied in paragraph (a) of this subsection at a proportionate rate of 11
seven dollars and six cents ($7.06) on each twenty (20) cigarettes. 12
(c) A surtax shall be paid in addition to the tax levied in paragraph (a) of this 13
subsection and in addition to the surtax levied by paragraph (b) of this 14
subsection, at a proportionate rate of one cent ($0.01) on each twenty (20) 15
cigarettes. The revenues from this surtax shall be deposited in the cancer 16
research institutions matching fund created in KRS 164.043. 17
(d) The surtaxes imposed by paragraphs (b) and (c) of this subsection shall be 18
paid at the time that the tax imposed by paragraph (a) of this subsection is 19
paid. 20
(2) (a) An excise tax is hereby imposed upon every distributor for the privilege of 21
selling tobacco products in this state at the following rates: 22
1. a. Prior to August 1, 2022, upon snuff at the rate of nineteen cents 23
($0.19) per each one and one-half (1-1/2) ounces or portion thereof 24
by net weight sold; and 25
b. On or after August 1, 2022, upon snuff at the rate of six dollars 26
and nineteen cents ($6.19) per each one and one-half (1-1/2) 27 UNOFFICIAL COPY 22 RS BR 461
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ounces or portion thereof by net weight sold; 1
2. a. Prior to August 1, 2022, upon chewing tobacco at the rate of: 2
i.[a.] Nineteen cents ($0.19) per each single unit sold; 3
ii.[b.] Forty cents ($0.40) per each half-pound unit sold; or 4
iii.[c.] Sixty-five cents ($0.65) per each pound unit sold. 5
If the container, pouch, or package on which the tax is levied contains 6
more than sixteen (16) ounces by net weight, the rate that shall be 7
applied to the unit shall equal the sum of sixty-five cents ($0.65) plus 8
nineteen cents ($0.19) for each increment of four (4) ounces or portion 9
thereof exceeding sixteen (16) ounces sold; 10
b. On or after August 1, 2022, upon chewing tobacco at the rate of: 11
i. Six dollars and nineteen cents ($6.19) per each single unit 12
sold; 13
ii. Thirteen dollars and three cents ($13.03) per each half-14
pound unit sold; or 15
iii. Twenty-one dollars and seventeen cents ($21.17) per each 16
pound unit sold. 17
If the container, pouch, or package on which the tax is 18
levied contains more than sixteen (16) ounces by net 19
weight, the rate that shall be applied to the unit shall equal 20
the sum of twenty-one dollars and seventeen cents ($21.17) 21
plus six dollars and nineteen cents ($6.19) for each 22
increment of four (4) ounces or portion thereof exceeding 23
sixteen (16) ounces sold; and 24
3. a. Prior to August 1, 2022, upon tobacco products sold, at the rate of 25
fifteen percent (15%) of the actual price for which the distributor 26
sells tobacco products, except snuff and chewing tobacco, within 27 UNOFFICIAL COPY 22 RS BR 461
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the Commonwealth; and 1
b. On or after August 1, 2022, upon tobacco products sold at the 2
rate of eighty-five percent (85%) of the actual price for which the 3
distributor sells tobacco products, except snuff and chewing 4
tobacco, within the Commonwealth; 5
4. a. Prior to August 1, 2022, upon closed vapor cartridges, one dollar 6
and fifty cents ($1.50) per cartridge; and 7
b. On or after August 1, 2022, upon closed vapor cartridges, seven 8
dollars and fifty cents ($7.50) per cartridge; and 9
5. a. Prior to August 1, 2022, upon open vaping systems, fifteen 10
percent (15%) of the actual price for which the distributor sells: 11
i.[a.] The open vaping system when the actual price includes the 12
items described in both KRS 138.130(10)(a)1. and 2.; or 13
ii.[b.] The liquid solution described in KRS 138.130(10)(a)2. when 14
the solution is sold separately; and 15
b. On or after August 1, 2022, upon open vaping systems, eighty-16
five percent (85%) of the actual price for which the distributor 17
sells: 18
i. The open vaping system when the actual price includes the 19
items described in both KRS 138.130(10)(a)1. and 2., or 20
ii. The liquid solution described in KRS 138.130(10)(a)2. 21
when the solution is sold separately. 22
(b) The net weight posted by the manufacturer on the container, pouch, or 23
package or on the manufacturer's invoice shall be used to calculate the tax due 24
on snuff or chewing tobacco. 25
(c) 1. A retailer located in this state shall not purchase tobacco products for 26
resale to consumers from any person within or outside this state unless 27 UNOFFICIAL COPY 22 RS BR 461
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that person is a distributor licensed under KRS 138.195(7)(a) or the 1
retailer applies for and is granted a retail distributor's license under KRS 2
138.195(7)(b) for the privilege of purchasing untax-paid tobacco 3
products and remitting the tax as provided in this paragraph. 4
2. A licensed retail distributor of tobacco products shall be subject to the 5
excise tax as follows: 6
a. On purchases of untax-paid snuff, at the same rate levied by 7
paragraph (a)1. of this subsection; 8
b. On purchases of untax-paid chewing tobacco, at the same rates 9
levied by paragraph (a)2. of this subsection; 10
c. On purchases of untax-paid tobacco products, except snuff and 11
chewing tobacco, at the same rate levied by paragraph (a)3. of 12
this subsection[fifteen percent (15%) of the total purchase price as 13
invoiced by the retail distributor's supplier]; 14
d. On purchases of untax-paid closed vapor cartridges, at the same 15
rate levied by paragraph (a)4. of this subsection; and 16
e. On purchases of untax-paid open vaping systems, at the same rate 17
as levied by paragraph (a)5. of this subsection[fifteen percent 18
(15%) of the total purchase price as invoiced by the retail 19
distributor's supplier as described in paragraph (a)5. of this 20
subsection]. 21
(d) 1. The licensed distributor that first possesses tobacco products or vapor 22
products for sale to a retailer in this state or for sale to a person who is 23
not licensed under KRS 138.195(7) shall be the distributor liable for the 24
tax imposed by this subsection except as provided in subparagraph 2. of 25
this paragraph. 26
2. A distributor licensed under KRS 138.195(7)(a) may sell tobacco 27 UNOFFICIAL COPY 22 RS BR 461
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products or vapor products to another distributor licensed under KRS 1
138.195(7)(a) without payment of the excise tax. In such case, the 2
purchasing licensed distributor shall be the distributor liable for the tax. 3
3. A licensed distributor or licensed retail distributor shall: 4
a. Identify and display the distributor's or retail distributor's license 5
number on the invoice to the retailer; and 6
b. Identify and display the excise tax separately on the invoice to the 7
retailer. If the excise tax is included as part of the product's sales 8
price, the licensed distributor or licensed retail distributor shall list 9
the total excise tax in summary form by tax type with invoice 10
totals. 11
4. It shall be presumed that the excise tax has not been paid if the licensed 12
distributor or licensed retail distributor does not comply with 13
subparagraph 3. of this paragraph. 14
(e) No tax shall be imposed on tobacco products or vapor products under this 15
subsection that are not within the taxing power of this state under the 16
Commerce Clause of the United States Constitution. 17
(3) (a) The taxes imposed by subsections (1) and (2) of this section: 18
1. Shall not apply to reference products; and 19
2. Shall be paid only once, regardless of the number of times the cigarettes 20
or tobacco products may be sold. 21
(b) The taxes imposed by subsection (1)(a) and (b) and subsection (2) of this 22
section shall be reduced by: 23
1. Fifty percent (50%) on any product as to which a modified risk tobacco 24
product order is issued under 21 U.S.C. sec. 387k(g)(1); or 25
2. Twenty-five percent (25%) for any product as to which a modified risk 26
tobacco product order is issued under 21 U.S.C. sec. 387k(g)(2). 27 UNOFFICIAL COPY 22 RS BR 461
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(4) A reference product shall carry a marking labeling the contents as a research 1
cigarette, research vapor product, or a research tobacco product to be used only for 2
tobacco-health research and experimental purposes and shall not be offered for sale, 3
sold, or distributed to consumers. 4
(5) The department may prescribe forms and promulgate administrative regulations to 5
execute and administer the provisions of this section. 6
(6) The General Assembly recognizes that increasing taxes on tobacco products should 7
reduce consumption, and therefore result in healthier lifestyles for Kentuckians. The 8
relative taxes on tobacco products proposed in this section reflect the growing data 9
from scientific studies suggesting that although smokeless tobacco poses some 10
risks, those health risks are significantly less than the risks posed by other forms of 11
tobacco products. Moreover, the General Assembly acknowledges that some in the 12
public health community recognize that tobacco harm reduction should be a 13
complementary public health strategy regarding tobacco products. Taxing tobacco 14
products according to relative risk is a rational tax policy and may well serve the 15
public health goal of reducing smoking-related mortality and morbidity and 16
lowering health care costs associated with tobacco-related disease. 17
(7) Any person subject to the taxes imposed under subsections (1) and (2) of this 18
section that: 19
(a) Files an application related to a modified risk tobacco product shall report to 20
the department that an application has been filed within thirty (30) days of that 21
filing; and 22
(b) Receives an order authorizing the marketing of a modified risk tobacco 23
product shall report to the department that an authorizing order has been 24
received. 25
(8) Upon receipt of the information required by subsection (7)(b) of this section, the 26
department shall reduce the tax imposed on the modified risk tobacco product as 27 UNOFFICIAL COPY 22 RS BR 461
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required by subsection (3)(b) of this section on the first day of the calendar month 1
following the expiration of forty-five (45) days following receipt of the information 2
required by subsection (7)(b) of this section. 3
Section 2. KRS 138.143 is amended to read as follows: 4
(1) Every retailer, sub-jobber, resident wholesaler, nonresident wholesaler, and 5
unclassified acquirer shall: 6
(a) Take a physical inventory of all cigarettes in packages bearing Kentucky tax 7
stamps, and all unaffixed Kentucky cigarette tax stamps possessed by them or 8
in their control at 11:59 p.m. on July 31, 2022[June 30, 2018]. Inventory of 9
cigarettes in vending machines may be accomplished by: 10
1. Taking an actual physical inventory; 11
2. Estimating the cigarettes in vending machines by reporting one-half 12
(1/2) of the normal fill capacity of the machines, as reflected in 13
individual inventory records maintained for vending machines; or 14
3. Using a combination of the methods prescribed in subparagraphs 1. and 15
2. of this paragraph; 16
(b) File a return with the department on or before August 10, 2022[July 10, 17
2018], showing the entire wholesale and retail inventories of cigarettes in 18
packages bearing Kentucky tax stamps, and all unaffixed Kentucky cigarette 19
tax stamps possessed by them or in their control at 11:59 p.m. on July 31, 20
2022[June 30, 2018]; and 21
(c) Pay a floor stock tax at a proportionate rate equal to six dollars ($6)[fifty cents 22
($0.50)] on each twenty (20) cigarettes in packages bearing a Kentucky tax 23
stamp and unaffixed Kentucky tax stamps in their possession or control at 24
11:59 p.m. on July 31, 2022[June 30, 2018]. 25
(2) Every retailer and sub-jobber shall: 26
(a) 1. Take a physical inventory of all units of snuff possessed by them or in 27 UNOFFICIAL COPY 22 RS BR 461
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their control at 11:59 p.m. on July 31, 2022[March 31, 2009]; 1
2. File a return with the department on or before August 10, 2022[April 10, 2
2009], showing the entire inventory of snuff possessed by them or in 3
their control at 11:59 p.m. on July 31, 2022[March 31, 2009]; and 4
3. Pay a floor stock tax for each unit of snuff in their possession or 5
control at 11:59 p.m. on July 31, 2022, at a proportionate rate equal to 6
six dollars ($6)[nine and one-half cents ($0.095)] per each one and 7
one-half (1-1/2) ounces or portion thereof[on each unit of snuff in their 8
possession or control at 11:59 p.m. on March 31, 2009]; [and] 9
(b) 1. Take a physical inventory of all units of chewing tobacco possessed by 10
them or in their control at 11:59 p.m. on July 31, 2022; 11
2. File a return with the department on or before August 10, 2022, 12
showing the entire inventory of chewing tobacco possessed by them or 13
in their control at 11:59 p.m. on July 31, 2022; and 14
3. Pay a floor stock tax for each unit of chewing tobacco in their 15
possession or control at 11:59 p.m. on July 31, 2022, at proportionate 16
rates equal to the following: 17
a. Six dollars ($6) on each single unit; 18
b. Twelve dollars and sixty-three cents ($12.63) on each half-pound 19
unit; 20
c. Twenty dollars and fifty-two cents ($20.52) on each pound unit 21
of chewing tobacco; and 22
if the container, pouch, or package on which the tax is levied 23
contains more than sixteen (16) ounces by net weight, the rate 24
that shall be applied to the unit shall be equal to the sum of 25
twenty dollars and fifty-two cents ($20.52) plus six dollars 26
($6.00) for each increment of four (4) ounces or portion thereof 27 UNOFFICIAL COPY 22 RS BR 461
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exceeding sixteen (16) ounces sold; 1
(c) 1. a. Take a physical inventory of all vapor products possessed by 2
them or in their control at 11:59 p.m. on July 31, 2022; 3
b. File a return with the department on or before August 10, 2022, 4
showing the entire inventories of vapor products possessed by 5
them or in their control at 11:59 p.m. on July 31, 2022; and 6
c. i. Pay a floor stock tax on closed vapor cartridges at a 7
proportionate rate equal to six dollars ($6) per cartridge in 8
their possession or control at 11:59 p.m. on July 31, 2022; 9
and 10
ii. Pay a floor stock tax on open vapor systems at a 11
proportionate rate equal to seventy percent (70%) of the 12
purchase price for each open vapor system in their 13
possession or control on July 31, 2022. 14
2. a. As used in this paragraph, "purchase price" means the actual 15
amount paid for the open vapor system subject to the tax 16
imposed by this subsection. 17
b. If the retailer or sub-jobber cannot determine the actual amount 18
paid for each open vapor system, the retailer or sub-jobber may 19
use the amount per unit paid as reflected on the most recent 20
invoice received prior to August 1, 2022, for the same category of 21
vapor product. 22
c. To prevent double taxation, if the invoice used by the retailer or 23
sub-jobber to determine the purchase price of the vapor product 24
does not separately state the tax paid by the wholesale, the 25
retailer or sub-jobber may reduce the amount paid per unit by 26
fifteen percent (15%); and 27 UNOFFICIAL COPY 22 RS BR 461
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(d)[(b)] 1. a. Take a physical inventory of all other tobacco products 1
possessed by them or in their control at 11:59 p.m. on July 31, 2
2022[March 31, 2009]; 3
b. File a return with the department on or before August 10, 4
2022[April 10, 2009], showing the entire inventories of other 5
tobacco products possessed by them or in their control at 11:59 6
p.m. on July 31, 2022[March 31, 2009]; and 7
c. Pay a floor stock tax at a proportionate rate equal to seventy 8
percent (70%)[seven and one-half percent (7.5%)] on the purchase 9
price of other tobacco products in their possession or control at 10
11:59 p.m. on July 31, 2022[March 31, 2009]. 11
2. a. As used in this paragraph, "purchase price" means the actual 12
amount paid for the other tobacco products subject to the tax 13
imposed by this paragraph. 14
b. If the retailer or sub-jobber cannot determine the actual amount 15
paid for each item of other tobacco product, the retailer or sub-16
jobber may use as the purchase price the amount per unit paid as 17
reflected on the most recent invoice received prior to August 1, 18
2022[April 1, 2009], for the same category of other tobacco 19
product. 20
c. To prevent double taxation, if the invoice used by the retailer or 21
sub-jobber to determine the purchase price of the other tobacco 22
product does not separately state the tax paid by the wholesaler, 23
the retailer or sub-jobber may reduce the amount paid per unit by 24
fifteen percent (15%)[seven and one-half percent (7.5%)]. 25
(3) (a) The taxes imposed by this section may be paid in three (3) installments. The 26
first installment, in an amount equal to at least one-third (1/3) of the total 27 UNOFFICIAL COPY 22 RS BR 461
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amount due, shall be remitted with the return provided by the department on 1
or before August 10, 2022[July 10, 2018]. The second installment, in an 2
amount that brings the total amount paid to at least two-thirds (2/3) of the total 3
amount due, shall be remitted on or before September 10, 2022[August 10, 4
2018]. The third installment, in an amount equal to the remaining balance, 5
shall be remitted on or before October 10, 2022[September 10, 2018]. 6
(b) Interest shall not be imposed against any outstanding installment payment not 7
yet due from any retailer, sub-jobber, resident wholesaler, nonresident 8
wholesaler, or unclassified acquirer who files the return and makes payments 9
as required under this section. 10
(c) Any retailer, sub-jobber, resident wholesaler, nonresident wholesaler, or 11
unclassified acquirer who fails to file a return or make a payment on or before 12
the dates provided in this section shall, in addition to the tax, pay interest at 13
the tax interest rate as defined in KRS 131.010(6) from the date on which the 14
return was required to be filed. 15
Section 3. Section 1 of this Act takes effect August 1, 2022. 16