INCREASE TOBACCO PRODUCTS TAX

SB0121

SENATE BILL 121

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Martin Hickey

AN ACT

RELATING TO TAXATION; INCREASING THE RATE OF THE TOBACCO
PRODUCTS TAX; AMENDING DEFINITIONS IN THE TOBACCO PRODUCTS TAX
ACT; DISTRIBUTING THE REVENUE FROM THE INCREASE IN THE TOBACCO
PRODUCTS TAX TO A NEW NICOTINE USE PREVENTION AND CONTROL FUND.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
[
NEW MATERIAL
] NICOTINE USE PREVENTION AND
CONTROL FUND.--The "nicotine use prevention and control fund"
is created in the state treasury. The fund consists of
appropriations, donations, interest from investment of the fund
and other money distributed to the fund. The fund shall be
administered by the department of health, and money in the fund
is subject to appropriation by the legislature to provide funds
to that department to, in collaboration with the public
education department and the higher education department,
develop programs, educational materials and social and
traditional media advertising on nicotine use prevention and
control for persons five to twenty-five years of age.
Disbursements from the fund shall be made by warrant of the
secretary of finance and administration pursuant to vouchers
signed by the secretary of health or the secretary's designee.
Any unexpended balance remaining at the end of a fiscal year
shall revert to the general fund.

SECTION 2.
A new section of the Tax Administration Act is
enacted to read:

"[
NEW MATERIAL
] DISTRIBUTION--TOBACCO PRODUCTS TAX--
NICOTINE USE PREVENTION AND CONTROL FUND.--A distribution
pursuant to Section 7-1-6.1 NMSA 1978 shall be made to the
nicotine use prevention and control fund in an amount equal to
thirty-five percent of the net receipts attributable to the
tobacco products tax."

SECTION 3.
Section 7-12A-2 NMSA 1978 (being Laws 1986,
Chapter 112, Section 3, as amended) is amended to read:

"7-12A-2. DEFINITIONS.--As used in the Tobacco Products
Tax Act:

A. "department" means the taxation and revenue
department, the secretary or any employee of the department
exercising authority lawfully delegated to that employee by the
secretary;

B. "cigar" means a roll for smoking made wholly or
in part of tobacco and weighing greater than four and one-half
pounds per thousand;

C. "distribute" means to sell or to give;

D. "closed system cartridge" means a single-use,
pre-filled disposable cartridge containing five milliliters or
less of e-liquid for use in an e-cigarette;

E. "e-cigarette" means [
any electronic oral device,
whether composed of a heating element and battery or an
electronic circuit, that provides a vapor of nicotine or any
other substance the use or inhalation of which simulates
smoking and includes any such device, or any part thereof,
whether manufactured, distributed, marketed or sold as an
e-cigarette, e-cigar, e-pipe or any other product, name or
descriptor. "E-cigarette" does not include any product
regulated as a drug or device by the United States food and
drug administration under the Federal Food, Drug, and Cosmetic
Act
]
a device that can be used to deliver aerosolized or
vaporized nicotine to the person inhaling from the device and
includes any component, part or accessory of such a device that
is used during the operation of the device but does not include
a battery or battery charger
;

F. "e-liquid" means liquid or other substance
intended for use in an e-cigarette [
not including any substance
containing cannabis or oil derived from cannabis
];

G. "engaging in business" means carrying on or
causing to be carried on any activity with the purpose of
direct or indirect benefit;

H. "first purchaser" means a person engaging in
business in New Mexico that manufactures tobacco products or
that purchases or receives on consignment tobacco products from
any person outside of New Mexico, which tobacco products are to
be distributed in New Mexico in the ordinary course of
business;

I. "little cigar" means a roll for smoking made
wholly or in part of tobacco, using an integrated cellulose
acetate or other similar filter, and weighing not more than
four and one-half pounds per thousand;

J. "nicotine" means a form of the chemical
nicotine, including any salt or complex, regardless of whether
the chemical is naturally or synthetically derived, and
includes nicotinic alkaloids and nicotine analogs;

[
J.
]
K.
"person" means any individual, estate,
trust, receiver, cooperative association, club, corporation,
company, firm, partnership, joint venture, syndicate, limited
liability company, limited liability partnership, other
association or gas, water or electric utility owned or operated
by a county or municipality or other entity of the state;
"person" also means, to the extent permitted by law, a federal,
state or other governmental unit or subdivision or an agency,
department or instrumentality;

[
K. "product value" means the amount paid, net of
any discounts taken and allowed, for tobacco products or, in
the case of tobacco products received on consignment, the value
of the tobacco products received or, in the case of tobacco
products manufactured and sold in New Mexico, the proceeds from
the sale by the manufacturer of the tobacco products; and
]

L. "tobacco product":

(1)
means:

[
(1) any
]
(a) a
product, other than
cigarettes, [
cigars and little cigars
] made from or containing
tobacco
or nicotine, whether natural or synthetic, that is
intended for human consumption or is likely to be consumed,
whether smoked, heated, chewed, absorbed, dissolved or inhaled
;

[
(2)
]
(b)
e-liquid;

[
(3)
]
(c)
e-cigarettes; and

[
(4)
]
(d)
closed system cartridges;
and

(2) does not mean a product regulated as a
drug or device by the United States food and drug
administration pursuant to the Federal Food, Drug, and Cosmetic
Act; and

M. "wholesale price" means the amount paid, net of
any discounts taken and allowed, for tobacco products or, in
the case of tobacco products received on consignment, the value
of the tobacco products received or, in the case of tobacco
products manufactured and sold in New Mexico, the proceeds from
the sale by the manufacturer of the tobacco products
."

SECTION 4.
Section 7-12A-3 NMSA 1978 (being Laws 1986,
Chapter 112, Section 4, as amended) is amended to read:

"7-12A-3. IMPOSITION AND RATES OF TAX--REDUCTION OF RATE
FOR CERTAIN TOBACCO PRODUCTS--DENOMINATION AS "TOBACCO PRODUCTS
TAX"--DATE PAYMENT OF TAX DUE.--

A. For the manufacture or acquisition of tobacco
products in New Mexico [
not including cigars, little cigars, e-liquid, e-cigarettes or closed system cartridges
] to be
distributed in the ordinary course of business and for the
consumption of tobacco products in New Mexico, there is imposed
an excise tax at the rate of [
twenty five
]
forty
percent of the
[
product value
]
wholesale price
of the tobacco products;

provided that for the following tobacco products, the rate
shall be:

(1) for cigars, twenty-five percent, not to
exceed fifty cents ($.50) per cigar; and

(2) for little cigars, the rate equal to the
rate imposed on cigarettes pursuant to Section 7-12-3 NMSA
1978
.

[
B. For the manufacture or acquisition of cigars in
New Mexico to be distributed in the ordinary course of business
and for the consumption of cigars in New Mexico, there is
imposed an excise tax at a rate equal to twenty-five percent of
the product value of the cigar, not to exceed fifty cents
($.50) per cigar.

C. For the manufacture or acquisition of little
cigars in New Mexico to be distributed in the ordinary course
of business and for the consumption of little cigars in New
Mexico, there is imposed an excise tax at a rate equal to the
rate imposed on cigarettes pursuant to Section 7-12-3 NMSA 1978
per package of little cigars.

D. For the manufacture or acquisition of e-liquid
in New Mexico to be distributed in the ordinary course of
business and for the consumption of e-liquid in New Mexico,
there is imposed an excise tax at a rate equal to twelve and
one-half percent of the product value of the e-liquid.

E. For the manufacture or acquisition of closed
system cartridges in New Mexico to be distributed in the
ordinary course of business, there is imposed an excise tax at
a rate of fifty cents ($.50) per closed system cartridge.

H.
]
B.
The taxes imposed by this section may be
referred to as the "tobacco products tax".

[
I.
]
C.
The tobacco products tax shall be paid by
the first purchaser on or before the twenty-fifth day of the
month following the month in which the taxable event occurs."

SECTION 5.
Section 7-12A-4 NMSA 1978 (being Laws 1986,
Chapter 112, Section 5, as amended) is amended to read:

"7-12A-4. EXEMPTION--TOBACCO PRODUCTS TAX.--

A. Exempted from the tobacco products tax is the
[
product value
]
wholesale price
of tobacco products sold:

(1) to or by the United States or any agency
or instrumentality thereof;

(2) to the governing body or any enrolled
tribal member licensed by the governing body of an Indian
nation, tribe or pueblo to be distributed on the reservation or
pueblo grant of that Indian nation, tribe or pueblo; or

(3)
to
the state of New Mexico or any
political subdivision thereof.

B. As used in this section, the term "agency or
instrumentality" does not include persons who are agents or
instrumentalities of the United States for a particular purpose
or only when acting in a particular capacity or corporate
agencies or instrumentalities."

SECTION 6.
Section 7-12A-5 NMSA 1978 (being Laws 1986,
Chapter 112, Section 6) is amended to read:

"7-12A-5. DEDUCTION--INTERSTATE SALES.--The [
product
value
]
wholesale price
of tobacco products sold and shipped or
given and shipped to a person in another state may be deducted
from the [
product value
]
wholesale price
subject to the tax
imposed by the Tobacco Products Tax Act; provided that the
department may require the person to submit proof satisfactory
to the department that the tobacco products have been sold and
shipped or given and shipped to a person in another state."

SECTION 7.
EFFECTIVE DATE.--The effective date of the
provisions of this act is July 1, 2026.

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