Legislation enacted in 2020 that authorizes all counties to impose cigarette taxes at a rate of up to 40 cents per pack, beginning July 1, 2021, directed the formation of a workgroup by the Department of Taxation to examine modernizing the process of cigarette tax collection. Representatives of the Virginia Wholesalers and Distributors Association (VWDA) have long advocated for streamlining the process of collection and enforcement of cigarette taxes and have expressed concerns about the complexity of applying the current system, which involves the use of tax stamps to document the payment of state and local taxes, to the 93 counties that will be able to exercise this new authority in July.
The Department held initial conversations with interested stakeholders over the summer, and hosted a virtual meeting of all stakeholders in mid-October to discuss potential options. At the mid-October meeting, VWDA representatives advocated for a requirement that counties seeking to impose a cigarette tax join a regional tax board, similar to what exists in northern Virginia with the Northern Virginia Cigarette Tax Board, which provides tax stamps to wholesalers and collects and distributes cigarette tax revenues to its member jurisdictions. While VACo does not support mandating participation in a regional board, responses to a survey of county administrators that VACo conducted over the summer indicate that some counties are interested in exploring regional collaboration as a way to share enforcement costs among multiple jurisdictions. The workgroup’s final report was issued last week and is available at this link; among its findings is a recommendation that local governments and other interested parties work together to make the local taxation of cigarettes as efficient as possible.
VACo hosted an online workshop on November 5 for county administrators and other county staff and officials to allow an opportunity to discuss implementation of the new authority. York County’s Deputy County Administrator, Vivian McGettigan, presented information on how the county developed its revenue estimates. King George County Administrator Neiman Young, Rockbridge County Administrator Spencer Suter, and Wythe County Administrator Stephen Bear discussed the status of implementation efforts in their respective counties. The Administrator of the Northern Virginia Cigarette Tax Board, Deborah Cannon, provided an overview of her Board’s role in collection and enforcement of cigarette taxes for its 19 member jurisdictions in Northern Virginia, including how the Board allocates costs among its members. Materials from the meeting will be shared with county administrators and VACo stands ready to assist its members in working through implementation issues.
VACo Contact: Katie Boyle