May 2026: South Carolina Raises Tax on Heated Tobacco Products
South Carolina has approved a significant increase in the state excise tax on heated tobacco sticks, raising the rate from ¢1.425 mills to ¢2.1375 per heated tobacco stick under amendments to Section 12-21-620 of the state tax code. The new rate will take effect on October 1, 2026, following enactment of H.B. 4303 on May 19, 2026.
The measure continues South Carolina’s broader effort to establish a dedicated tax framework for heated tobacco products (HTPs). Earlier versions of the legislation had introduced a lower tax tier for these products compared with conventional cigarettes, which are taxed at ¢57 cents per pack (¢2.85 per stick). Under the revised structure, heated tobacco remains taxed below combustible cigarettes but at a materially higher level than initially proposed.
State fiscal analysts previously estimated that taxation of heated tobacco products could generate more than $7 million annually for the General Fund, although they also warned that growing consumer migration from cigarettes to lower-taxed alternatives could eventually reduce traditional cigarette tax revenues.
April 2026: Alabama Clarifies Tobacco Tax Rates, Introduces Explicit Treatment for Heated Tobacco
The Alabama Department of Revenue has updated its published tobacco tax schedule, providing clearer and more structured guidance across product categories. While the update is administrative rather than legislative, it is notable for explicitly incorporating heated tobacco products (HTPs) into the tax framework and consolidating rates across categories.
Under the revised schedule, cigarettes remain taxed at $0.675 per pack of 20. Heated tobacco products are now explicitly taxed at $0.017 per stick, equivalent to $0.34 per pack of 20, positioning them at a lower rate than conventional cigarettes. This marks a key clarification, as HTPs were previously not as clearly defined within Alabama’s excise structure. For other categories, little cigars are taxed at $0.04 per 10 cigars, while large cigars continue to be taxed at 4% of the wholesale price. Smokeless tobacco remains subject to an ad valorem tax of 4% of the wholesale price, and smoking tobacco (including pipe tobacco) is also taxed at 4% of wholesale value.
The primary change in this update is the formal inclusion and clear per-unit taxation of heated tobacco products, aligning them structurally with cigarettes but maintaining a reduced rate. In addition, the revised schedule improves transparency by consolidating all product categories into a single, accessible rate table. Overall, the move does not introduce new taxes or increase existing rates but enhances regulatory clarity – particularly for next-generation products – while reinforcing Alabama’s differentiated approach to tobacco taxation.
March 2026: South Carolina Advances Nicotine Tax Overhaul Amid IQOS Market Prospects
South Carolina lawmakers have moved forward with a revision of the state’s nicotine and tobacco tax code that would introduce new taxes on vaping products while significantly lowering the tax burden on heated tobacco products, such as the tobacco sticks used with IQOS devices.
Under the proposal advanced by a Senate panel, vaping liquid would be taxed at 5 cents per millilitre, establishing a tax where none previously existed, since most e‑cigarettes and other electronic nicotine delivery systems (ENDS) have been subject only to sales tax. Meanwhile, heated tobacco products would be taxed at roughly half the rate of traditional cigarettes – 28.5 cents per pack of 20 sticks compared with the current 57 cents for cigarettes – reflecting a deliberate policy distinction between product types.
The reduced tax category targeted by the bill encompasses devices like IQOS, a heated tobacco system developed by Philip Morris International. These products heat tobacco sticks to create a nicotine aerosol rather than burning them, and the U.S. Food and Drug Administration (FDA) has previously authorized heated tobacco systems for sale under the premarket tobacco product application pathway and granted modified risk status in certain circumstances.
Although IQOS and similar heated tobacco products are not currently sold in South Carolina, previous limited test sales were halted due to a U.S. ITC import ban. The revised tax structure anticipates their eventual market entry following expected regulatory actions by the FDA. The proposed tax adjustments are designed to encourage the legal introduction and sales of these lower‑taxed electronic tobacco devices once authorization and distribution expand.
Public health advocates have raised concerns about the harms of all nicotine products and emphasized that reduced taxes do not equate to reduced health risks, while supporters argue that differential taxation can reflect relative risk profiles and promote harm‑reduction options for adult smokers.
In summary, South Carolina’s nicotine tax code revision would:
– Create a specific excise tax on vapes and ENDS, generating new revenue and aligning the state with broader trends in nicotine product taxation.
– Cut the tax rate on heated tobacco products in half compared with combustible cigarettes, in anticipation of their market availability following pending FDA authorization and product launches.
Together, these changes reflect both fiscal policy recalibration and regulatory anticipation of evolving nicotine product landscapes in the U.S. market.
January 2026: Florida Bill Advances to Cut Tax Burden on Heated Tobacco Products
Florida lawmakers are advancing a bill that would establish a separate tax category for heated tobacco products, treating them more like vaping products instead of traditional cigarettes. Under current law, heated tobacco products are taxed under the same framework as cigarettes and other tobacco products, which imposes an excise tax of 25 % of the wholesale price plus a 60 % surcharge — effectively an 85 % total tax on the wholesale value. In contrast, Florida does not currently impose a specific state excise tax on vaping products, meaning e-cigarettes and similar vapor products are not subject to the same wholesale excise or surcharge tax that cigarettes and other tobacco products face. The proposed legislation would exclude heated tobacco items from the higher cigarette/tobacco tax schedule and align their tax treatment with the currently nonexistent tax on vapes. The measure has passed an initial Senate committee and is progressing through the legislative process, with a companion bill also under consideration in the House.
June 2025: IQOS Alabama
The Alabama Department of Revenue (DOR) announced that effective November 1, 2025, a state excise tax of $0.017 per stick and $0.34 per pack of 20 sticks will be imposed on heated tobacco sticks. County and municipal tax rates will be half the existing local taxes imposed on cigarettes. Regular cigarettes are taxed at $0.68 for a pack of 20 in Alabama.
September 2024: PMI is on a mission to influence the social opinion and put pressure on the (next) US Administration & Legislators ahead of the US Presidential election and deeming IQOS US launch (and amid ZYN troubles)
Philip Morris International (PMI)’s US affiliate issued the findings of the “US National Landscape Survey” conducted by RG Strategies and Peak Insights (on behalf of PMI) and concluded that ”US voters broadly support a new approach to tobacco regulation”1. Survey findings mostly serve the ultimate goal to have the US FDA rules & restrictions on new nicotine products relaxed and we expect the “friendly” US media outlets to cover the study. Before listing the main findings of the survey, it is worthwhile to underline the skills and connections that PMI has successfully built in the domain of “Communications & External Engagement” as part of its (organizational) transformation journey to smoke-free products.
According to the PMI’s public statement, there is widespread dissatisfaction with the FDA’s job performance when it comes to regulating the tobacco industry and new nicotine-containing products, with strong majorities of respondents (likely voters) expressing support for FDA reform:
– 50% of the respondents believe the FDA has made little to no progress helping Americans live healthier lives
– 67% say the FDA has not been focused on the most important public health priorities for the country
– 68% believe American smokers should have access to a range of better, smoke-free nicotine-containing alternatives to cigarettes
– 74% agree that real reform of the agency is needed to ensure it is focused on developing policies which will help Americans live longer, healthier lives.
PMI also claims that voters continue to support reform when it comes to the issue of federal tobacco regulation:
– 68% of the respondents agree that a new approach is needed to reduce smoking rates because simply adding more taxes and restrictions to cigarettes will not be enough to discourage smokers
– Only 50% are aware that the FDA is responsible for regulating new nicotine-containing products in the US and, when informed that e-cigarettes and nicotine pouches were not on the market when the FDA began regulating tobacco products in 2009, 7 in 10 likely voters agree that reform of the agency is needed so the FDA can regulate these products appropriately
– 54% agree that one way to reduce smoking rates is to adopt policies that encourage smokers to switch to FDA-authorized noncombustible alternatives which offer a better choice compared to smoking
– 68% agree that American smokers should have access to a wide range of better, smoke-free nicotine-containing alternatives to cigarettes to help them abandon cigarettes for good
– 65% agree that products which have been authorized by the FDA as having modified-risk potential (such as IQOS) compared to smoking should be taxed lower than cigarettes to encourage switching but still taxed high enough to discourage use by youth and non-smokers
– 57% agree that FDA-authorized smoke-free alternative products should be available in a wide range of flavors to help encourage adult smokers to use these products instead of cigarettes.
September 2024: IQOS Nevada
Representatives from Philip Morris International (PMI) and Tri-Strategies, the Nevada-based government affairs firm working with PMI, are pitching IQOS to the Nevada state lawmakers as a better alternative for smokers2. PMI’s lobbying efforts focus on achieving a legislation that taxes IQOS sticks at a lower rate than traditional cigarettes.
Although it may be assumed that, similar to vapes, IQOS sticks would be considered as an OTP (Other Tobacco Product) according to the Nevada tax policy and taxed at 30% the wholesale price, heated tobacco sticks are classified as cigarette (“a rolled stick of tobacco”) by the US FDA and most tax codes. Thereby, it is critical for PMI to have a specific tax class defined for IQOS sticks. In Nevada, cigarettes are taxed at $1.80 per pack.
April 2024: IQOS Mississippi
Philip Morris International (PMI) achieved a favorable tax scheme for IQOS in Mississippi. The Mississippi Governor signed the amendment to the Tobacco Tax Law3:
– 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 plans to tax vapes and heated tobacco devices
Mississippi would impose an excise tax on electronic smoking devices under a bill (SB2211)4 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.
February 2024: PMI and Altria lobbyists put up a ferocious fight
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 bill5 – 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: IQOS Georgia, IQOS Colorado, IQOS Oregon
PMI strengthens its lobbying firepower in the USA ahead of the long-awaited IQOS launch. According to an exclusive Reuters’ review6, 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.
Further Readings:
References:
- https://www.pmi.com/us/voters-support-reforming-the-FDA ↩︎
- https://missoulacurrent.com/tobacco-giant-nevada/ ↩︎
- Mississippi Governor Signs Law Levying Excise Tax on Heated Tobacco Products (bloombergtax.com) ↩︎
- https://billstatus.ls.state.ms.us/documents/2024/html/SB/2200-2299/SB2211IN.htm ↩︎
- Philip Morris Int’l: Tax on cigarette alternative is unfair (richmond.com) ↩︎
- https://www.reuters.com/business/retail-consumer/pmi-hires-us-lobbyists-key-iqos-launch-nears-2023-09-27 ↩︎
