Omaha Seeks 7% Occupation Tax On Tobacco Products

The Omaha, Neb. City Council is introducing an ordinance today that if adopted would require an “occupational privilege tax” on tobacco retailers equal to 7% of the gross receipts from the sale of tobacco products, including any pipe or other device intended for use in consuming tobacco products, the National Association of Tobacco Outlets (NATO) reported. 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 10-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. The price of smokeless tobacco, cigars, roll-your-own tobacco and all other tobacco products, including electronic cigarettes, would increase by 7% as well. An economic analysis of this proposed 7% occupational tax estimates that both cigarette and other tobacco product (OTP) sales would decline by about 20% if this new tax went into effect.

Omaha retailers would experience this sales decline likely due to customers traveling and purchasing these tobacco products outside the Omaha city limits in lower tax states, such as Missouri and Kansas. Besides losing tobacco product sales, Omaha retailers would also see a decline in sales of other ancillary goods that consumers purchase when shopping for tobacco products.