Several Omaha City Council members have introduced an ordinance to adopt an "occupational privilege tax" on tobacco retailers that will equal 7% of the gross receipts from the "sale of tobacco products and any pipe or other device intended for use in consuming tobacco products."
The ordinance defines tobacco products as cigarettes, cigars, roll-your-own tobacco, snuff, chewing tobacco, any nicotine delivery device providing for the ingestion of nicotine into the body and anything containing tobacco suitable for chewing, smoking in a pipe or inhaling.
The proposed occupational tax would be earmarked to raise revenue to support city government functions, including dedicating $35 million over a ten-year period to help fund the building of a $370 million cancer center at the University of Nebraska located in Omaha; however, Nebraska Governor David Heineman stated publicly last week that he signed a funding bill passed by the state legislature to provide a $50 million state commitment to the project and that the University of Nebraska was to raise all of the other capital from private sources rather than seeking out other tax revenue.
This proposed occupation tax of 7% on cigarettes would add about 35 cents to the cost of a pack of 20 cigarettes. Currently, the Nebraska state cigarette tax is 64 cents per pack. Likewise, the price of smokeless tobacco, cigars, roll-your-own tobacco and all other tobacco products would increase by 7% as well. In addition, the definition of "tobacco products" under the ordinance would encompass electronic cigarettes making the 7% occupational tax applicable to these kinds of products as well.
An economic analysis of this proposed 7% occupational tax estimates that both cigarette and OTP product sales would decline by about 20% if this new tax were to be enacted. Most of this estimated sales decline that would be experienced by retailers located in Omaha would likely be due to customers traveling and purchasing these tobacco products outside of the Omaha city limits on in lower tax states like Missouri and Kansas. Besides losing tobacco product sales, Omaha retailers would also experience the loss of sales of other ancillary goods that consumers purchase when shopping for tobacco products.
Tobacco retailers with stores located in Omaha may want to consider contacting the Omaha City Council members and let them know their opinion about this proposed 7% tax on tobacco products. The names, telephone numbers and e-mail addresses of the Omaha city council members are listed below: