How are cigarettes taxed?

Question

I went to the gas station and bought newport 100s for a friend. They were 4.07 a pack. I saw online the current Ohio cigarette tax was 1.25. I paid with a five dollar bill and recieved 67 or 68 cents in change! When I did the math (4.33/4.07) The ratio comes out to the SALES tax, not the 1.25 cig tax.

So my question is who pays these state cig taxes? Vendors/suppliers/wholesalers or the customer? I swear the Newport sign said it was 4.07 a pack.

Answer 1

Heavily! Federal, State and Local taxes are applied to each sale.  The actual cost of a pack of cigarettes is somewhere around $.50, the rest is transportation and tax.

Answer 2

Additional info:  if you buy cigarettes online state tax won't be included - you still need to pay it, you report your purchases to your state and pay the tax.  Some states have started to strictly enforce this and people have been shocked to get a large bill from the state.

Answer 3

The cigarette tax is usually included in the shelf price of the smokes, though some vendors show it separately on the receipt so that you know how much in total tax you are paying.  Sales taxes are levied on the shelf price, so you pay sales tax on the smokes AND on the cigarette tax!  You paid 26¢ in sales tax, which works out to about 6.4% in sales tax.  That's about right for many parts of Ohio.

Although the cigarette tax is normally collected from the state-licensed distributor, they pass it directly down the supply chain so the buyer ultimately pays the tax.