You asked for available information on the effect of the recently enacted cigarette tax increase on cigarette consumption and revenues. This report updates an earlier OLR Report (2002-R-0539).

TAX STRUCTURE

Legislation adopted earlier this year (PA 02-01) increases the cigarette tax by 61¢ for packages of 20 cigarettes and $ . 7625 for packages of 25, starting April 3, 2002. The total tax on a package of 20 is now $ 1. 11 and $ 1. 3875 for a 25-cigarette pack.

All Connecticut cigarette dealers and distributors had to pay the new tax on the cigarettes in their inventory ("floor tax") at the close of business on April 2, 2002. The Department of Revenue Services (DRS) made a "floor tax stamp" available starting March 20, 2002. Cigarette dealers and distributors had to attach these stamps to their inventory already stamped at the lower rate. Beginning April 3, 2002, a red $ . 61 floor tax stamp had to be affixed to all packs (including those in cartons) in inventory that only had a yellow $ . 50 tax stamp affixed to them. Stamps are now available in denominations of $ 1. 11 and $ 1. 3875 to reflect the tax increase.

Cigarette manufactures, wholesalers, and large-scale cigarette retailers (those operating five or more retail outlets or 25 or more cigarette vending machines) are licensed as "distributors. " All other sellers are considered "dealers. "

UPDATED CIGARETTE TAX REVENUES

The most recent figures from DRS (see Tables 1 and 2 below) indicate that while the total number of cigarette stamps (each stamp equals a pack of cigarettes) has decreased, tax revenues have increased.

TABLE 1: CIGARETTE TAX

REVENUE COMPARISON (July-September 2001/2002)

Source: Connecticut DRS

TABLE 2: CIGARETTE STAMPS

SOLD COMPARISON (April-July 2001/2002)

Source: Connecticut DRS

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