Isle of Wight’s Board of Supervisors must vote no later than February on whether to impose a county cigarette tax if the county wishes to begin collecting the resulting revenue by July 1, 2021.

That’s according to Commissioner of the Revenue Gerald Gwaltney, who estimates it would take at least two to three months for the county to make the arrangements for the design and manufacture the stamps that would need to be affixed to locally sold cigarette packs.

With the exception of two counties in Northern Virginia, the authority to impose a local cigarette tax in Virginia has historically been restricted to cities and towns. Earlier this year, the state legislature passed Senate Bill 588, which expands this authority to any county in Virginia effective July 1 — the same day Isle of Wight’s 2021-2022 fiscal year will start.

Per the new law, county cigarette taxes are capped at 2 cents per cigarette or 40 cents per pack. The town of Smithfield and the city of Franklin, by comparison, have each set their tax rates at 50 cents per pack, while the town of Windsor is at 30 cents. The city of Suffolk is at 75 cents per pack, and Newport News, 85 cents.

Should Isle of Wight decide to impose its own cigarette tax, there are three options for implementing that decision. Tobacco wholesalers are lobbying for the state Department of Taxation to take over the process of selling stamps, collecting each counties’ tax and remitting payments to localities similar to how sales tax is currently handled.

“The wholesalers are currently dealing with 30 some cities and probably 50-60 some towns with cigarette tax,” Gwaltney said. “They felt that by adding another 90-some localities, being the counties … that would put a burden on the wholesalers.”

If local taxes were handled at the state level, he explained, when wholesalers buy their state tax stamps, they would be able to pay the local tax at the same time.

The Virginia Association of Counties, however, which has been lobbying for years for the state to grant counties equity with cities and towns in taxing authority, wants localities to have the option of enforcing the tax at the local level. Using this option, each county’s commissioner of the revenue or treasurer’s office would administer the tax much like the way cities and towns currently do.

A third option, which 19 localities in Northern Virginia use, is to create a regional cigarette board to enforce the tax. This board would be responsible for hiring an administrator and field inspectors, and then remitting the collected taxes back to member localities. If modeled off the Northern Virginia board, each participating locality would fund the board on a pro-rata basis based on the number of cigarette purchases in each locality.

If Isle of Wight were to take on the responsibility of administering a cigarette tax on its own, Gwaltney estimates a $2,900 one-time expense to design the county’s stamps, plus roughly $12,000 to create Isle of Wight’s first round of inventory stamps, and $500 to create forms. Another $500 would go toward a retailer informational effort. While a staffing cost is yet to be determined, Gwaltney estimated this would be “less than a half person” in terms of personnel.

Assuming Isle of Wight adopts the maximum 40 cents allowed, the resulting tax revenue is estimated at just under $300,000, based on an anticipated 739,648 packs of cigarettes being sold each year. That’s just counting the unincorporated parts of the county. The county’s tax would not be imposed on top of existing town taxes for purchases in Smithfield or Windsor unless those town’s councils specifically authorize double taxation.

“If an ordinance is adopted in February … that would give time to contract with the stamp vendor,” Gwaltney said. There’s currently only one cigarette stamp vendor serving Virginia, and “they have about a two- to three-month lag currently from the time you place an order to the time they do the artwork and deliver stamps. If you’ve got 90 other counties wanting to adopt that, then where you fall in the queue would depend on how soon you would get your stamps.”

Smithfield District Supervisor Dick Grice asked what happens to the existing inventory tobacco retailers purchased from wholesalers prior to July 1.

“The stamps come in a 15,000-stamp roll,” Gwaltney said. “It would make it impossible for a small mom-and-pop to purchase that much.”

“Some localities will sell very small sheets of stamps,” for such businesses, he added, or the wholesaler could exchange stamped packs for unstamped inventory that has not sold by July 1.

The resulting revenue from the tax wouldn’t necessarily need to go toward public health initiatives, though that is a possibility.

“We’ve got the free health clinic, for example, that we fund,” said Board Chairman Joel Acree. “I’m not going ahead and speaking for earmarking things, but with that being health-related, my understanding was the tax was kind of intended not just to make revenue but to deter people from smoking cigarettes.”