The federal government levies a tax on tobacco products with the aim of raising revenue and promoting the social goal of discouraging smoking. Each individual state also charges a tax on tobacco products. The federal excise tax on tobacco products is based on the size of the tobacco product and whether the product is a cigarette, a cigar, chewing or pipe tobacco or snuff.
Cigarette Taxes
The rate on large cigarettes is $105.69 per 1,000 units, or $2.11 for a pack of twenty cigarettes. Small cigarettes are taxed at a rate of $50.33 per 1,000 units, or $1.01 for a pack of twenty cigarettes.
Cigar Taxes
Small cigars are taxed at the same rate as small cigarettes: $50.33 per 1,000 units or $1.01 for a pack of twenty cigars. Large cigars are taxed at a much higher rate of 52.75 percent of the actual sales price, as long as the tax does not exceed $402.60 per 1,000 units. A pack of large cigars is taxed at a maximum rate of $0.40 per pack.
State Taxes
States also charge a tax on tobacco products, with New York having the highest tax at $4.35 per pack of 20 cigarettes. The lowest tax rate is Virginia's, at $0.30 per pack. Twenty-four states use part of the revenue from tobacco taxes to fund anti-smoking programs.
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