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Governor Signs Bill After Legislature Passes Tax Hike on Tobacco and Alcohol

02.13.2009

On Friday the 13th, the 2009 General Assembly approved House Bill 144 (“H.B. 144”), and Governor Steve Beshear immediately signed it into law. H.B. 144 raises the tax on cigarettes, tobacco and alcohol as part of a plan to address the Commonwealth’s $456 million revenue shortfall. This occurred amidst the backdrop of beer trucks circling the Capitol Building and bourbon manufacturers pouring Kentucky “brown” onto the front steps of the Capitol in protest.

Effective April 1st, H.B. 144 increases the cigarette tax from 30 cents to 60 cents per pack. It doubles existing taxes on snuff, cigars and other tobacco products. H.B. 144 also increases the excise tax imposed upon on all wholesalers of other tobacco products from the rate of seven and one-half percent (7.5%) to fifteen percent (15%) of the gross receipts of wholesale sales made within Kentucky and increases the tax imposed upon wholesalers of snuff from nine and one-half cents ($0.095) to nineteen cents ($0.19) per unit.

In addition, H.B. 144 applies the six percent (6%) sales tax to beer, wine and liquor sales in retail stores. Previously, the only alcohol sales subject to sales tax were those sold by-the-drink.

These new taxes have been reportedly estimated to generate $50 million in new revenue before the end of this fiscal year and nearly $159 million by 2010.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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