IQOS USA: Regulation & Taxation

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April 2024

PMI achieved a favorable tax scheme for IQOS in Mississippi. The Mississippi Governor signed the amendment to the Tobacco Tax Law1:

– levying an excise tax of 1.25 cents per heated tobacco stick ($0.25 per pack – much lower than previously foreseen)

– expanding the definition of the term “tobacco” to include heated tobacco products

– defining the term “heated tobacco product”

– excluding heated tobacco products from being taxed as cigarette under the relevant provisions.

The amendments will take effect July 1, 2024.

March 2024

Mississippi would impose an excise tax on electronic smoking devices under a bill (SB2211)2 introduced in the state Senate. Amending the Mississippi Code of 1972, the Bill defined electronic smoking device as:

“any device that can be used to deliver aerosolized or vaporized nicotine to the person inhaling from the device…including any component, part or accessory of such a device, whether or not sold separately, and includes any substance intended to be aerosolized or vaporized during the use of the device…not including any battery or battery charger when sold separately

E-smoking devices will be taxed at 15% of the manufacturer’s list price (similar to all tobacco products, except cigarettes). Both vapes and heated tobacco products are included in the scope of the amendment. IQOS device tax will come in addition to the $0.68 per pack (of 20) tax for the IQOS heatsticks.

Feburary 2024

Old Friends x New Foes: As the IQOS US launch gets closer, Philip Morris International and Altria lobbyists are putting up a ferocious fight. In Virginia, where a bill for heated tobacco taxation is going through the legislative process, PMI opposes the proposed bill3 – claiming that it would put them at a competitive disadvantage. Altria supports the Bill although stating that they did not request or ask for it.

The bill classifies IQOS sticks as cigarette (“paper-wrapped sticks of tobacco”) for tax purposes while setting a lower tax rate: 2.25 cents per stick versus 3 cents on a cigarette. If IQOS sticks are not classified as cigarette, some claim that MSA participants could argue that the State is out of compliance and withhold settlement payment ($140Mn in 2023) – which is based on the number of cigarettes sold.

On the other hand, PMI lobbyists disagree with the MSA claim and state that the Bill puts PMI at a competitive disadvantage as Altria is developing a product that heats capsules of tobacco instead of paper-wrapped tobacco sticks.

September 2023

PMI strengthens its lobbying firepower in the USA ahead of the long-awaited IQOS launch. According to an exclusive Reuters’ review4, PMI registered new lobbyists in at least 19 US states this year and plans to add some in four more in the next two weeks. As a result, PMI’s overall lobbying efforts will span states where the vast majority of smokers and the US population reside. Until this year, PMI’s lobbying activities in the USA had been negligible.

State-level lobbying registers reveal that lobbying activity would focus on heated tobacco products in at least three states: Georgia, Colorado and Oregon. Elsewhere, the filings referenced broader topics including tobacco policy, taxation and business, and commerce. Moreover, the publicly available lobbying registries showed that PMI hired more than a dozen firms or individuals, some with high-level connections in states such as Florida, Illinois and Pennsylvania.

References:

  1. Mississippi Governor Signs Law Levying Excise Tax on Heated Tobacco Products (bloombergtax.com) ↩︎
  2. https://billstatus.ls.state.ms.us/documents/2024/html/SB/2200-2299/SB2211IN.htm ↩︎
  3. Philip Morris Int’l: Tax on cigarette alternative is unfair (richmond.com) ↩︎
  4. https://www.reuters.com/business/retail-consumer/pmi-hires-us-lobbyists-key-iqos-launch-nears-2023-09-27 ↩︎

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