Cigarettes are taxed at the corporate, federal, state, and local levels. The cigarette manufacturer pays taxes assessed at the corporate level, including corporate income taxes, property taxes, payroll taxes, etc. Then there are the taxes paid by the wholesalers, the retailers, the warehouses, and the taxes embodied in the products the manufacturer uses to make the cigarettes.
In addition to the cigarette tax, cigarettes are generally also subject to sales or use tax. Typically, a tax is imposed when a distributor receives cigarettes for the purpose of making a first sale in a state. A stamp must be affixed to each package. This is evidence that state tax has been paid. Persons who possess untaxed cigarettes may be assessed a penalty.
