Legislation To Increase Minimum Margin On Cigarette Sales Included In PA Fiscal Code Bill

October 9, 2023

Last week, the State House passed amendment to the Fiscal Code as part of the ongoing state budget process. The Fiscal Code essentially has provisions that authorize the spending for programs adopted in the General Budget bill. In many occasions over the years, the Fiscal Code has been used to circumvent the regular legislative Committee process. The Fiscal Code bill passed last week included provisions that (if enacted) would significantly increase over the next several years the retailer and stamping agent margins required under the Unfair Cigarette Sales Act.

The language in the bill is as follows:

Section 234-A.  Presumed Cost of Doing Business By Retailer.–The presumed cost of doing business by a retailer making the sale shall be the following per centum:

  1. Prior to January 1, 2024, seven per centum.
  2. Beginning January 1, 2024, through December 31, 2024, nine per centum.
  3. Beginning January 1, 2025, through December 31, 2025, ten per centum.
  4. Beginning January 1, 2026, eleven per centum.
  5. Beginning January 1, 2027, and thereafter, twelve per centum.

Section 235-A.  Presumed Cost of Doing Business By Stamping Agent.–The presumed cost of doing business by a stamping agent making the sale shall be the following per centum:

  1. Prior to January 1, 2024, one and seven tenths per centum.
  2. Beginning January 1, 2024, through December 31, 2024, two per centum.
  3. January 1, 2025, and thereafter, two and one-half per centum.

Section 236-A.  Presumed Cost of Doing Business By Wholesaler.–The presumed cost of doing business by a wholesaler making the sale shall be the following per centum:

  1. Prior to January 1, 2024, four per centum.
  2. Beginning January 1, 2024, through December 31, 2024, six per centum.
  3. Beginning January 1, 2025, and thereafter, seven per centum.

This concept was introduced by Senator Flynn (Senate Bill 837) in that body earlier this year. The legislation faces opposition from tobacco companies and some other interested parties in the distribution chain who cite the increased cost to consumers that would result in negatively impacting sales.

The bill would still need to be passed in the Senate. The general Fiscal Bill in its current form faces an uncertain future.  The overall language has not been agreed to by either the Senate or Governor. In addition, relations between Senate Republicans, House Democrats and the Governor have been quite strained recent weeks. Both House and Senate are in recess this week and will be returning into session October 16.