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House Research home > Minnesota Government in Brief > Government Finance
The tax is imposed on sales of cigarettes and tobacco products (cigars, pipe tobacco, chewing tobacco, snuff, etc.). The tax on cigarettes is imposed on a per unit base (i.e., per cigarette). The tobacco products tax is a percentage of the wholesale price.
Health Impact Fee: The 2005 Legislature enacted a health impact fee equal to 75 cents per pack on cigarettes and 35 percent of the wholesale price of tobacco products. This fee is imposed and collected in the same manner as the cigarette excise tax and the tobacco products tax. Combining the Minnesota's excise tax and fee, the burden equals $1.23 per pack and 70 percent of the wholesale price of tobacco products.
Nonsettlement Cigarette Fee: A special cigarette fee of 35 cents/pack applies to "nonsettlement cigarettes." These are cigarettes produced by manufacturers other than the major companies that settled the liability lawsuits filed by the state or companies that voluntarily elect to participate and make annual payments (as approved by the attorney general). This fee was enacted by the 2003 Legislature. By its terms, it was intended to compensate the state for costs attributable to the use of these cigarettes (similar to what settling companies are paying) and to deter youth smoking. The Minnesota Supreme Court upheld the constitutionality of the fee in a 2006 decision; the U.S. Supreme Court declined to review the case. Collections under this fee are not included in the collection numbers listed below. This fee yielded $2.7 million in fiscal year 2011.
The cigarette tax is collected and enforced through a stamp mechanism. Each pack of cigarettes is required to be stamped with a tax stamp. Cigarette distributors apply these stamps with heat applied stamp machines, approved by the Commissioner of Revenue.
Revenues from the tobacco products tax are deposited in the general fund. Cigarette tax revenues of $22.25 million/year go to fund the Academic Health Center, $8.55 million/year to the medical education and research account, and the rest to the state general fund. The health impact fee revenues (estimated to be $202.8 million for fiscal year 2011) are deposited in a health impact fund and are transferred to the general fund after the commissioner of human services certifies that state health programs have incurred tobacco-related costs equal to fee revenues.
For more information, see the House Research publication Cigarette and Tobacco Excise Taxes.
Originally published January 2011. Fiscal year 2011 data are from
Minnesota Management and Budget, November 2010 forecast. Other data are from the Department of
Revenue, unless otherwise noted.