Premium US Cigar Taxes by State

[El Presidente]

https://taxfoundation.org/data/all/state/premium-cigar-taxes-by-state-2024/

Premium Cigar Taxes by State, 2024

November 7, 20244 min readBy: Adam Hoffer, Jacob Macumber-Rosin

Over 500 million premium cigars were sold in the United States in 2023. With each sale comes a complex tax landscape.

All large cigars are subject to a federal tax of 52.75 percent, capped at $0.4026 per cigar. Large cigars and premium cigars are also subject to state-level excise taxes of varying rates and structures. Premium cigars are a subset of large cigars that are handmade entirely from tobacco. Several states levy a different tax on premium cigars than other large cigars or have a specific cap on the tax levied on premium cigars. Tax treatment of the various types of cigars varies significantly across states and across product types.

Taxes are levied on tobacco products both to discourage consumption of tobacco products and to generate revenues to address public health effects associated with their use. Large cigars, especially premium cigars, tend to be used in a different social context than cigarettes and for different reasons. Dangers associated with cigars depend primarily on the level of exposure—in cigars per day and inhalation level. Frequent cigar smokers may experience worse health effects than cigarette smokers, but casual cigar users may experience significantly lower risk of negative health effects.

Some states levy an ad quantum tax per cigar and other states levy percentage ad valorem taxes on wholesale or retail prices. To make the rates comparable across states, we calculated the tax that would be charged on a cigar that retails for $11.79 and is sold wholesale for $5.90.

 

Utah levies the highest tax of 86 percent, followed by New York and Colorado at 75 percent and 56 percent, respectively. Florida, Pennsylvania, and New Hampshire have exempted premium cigars from an excise tax entirely, with the next lowest taxes levied by Texas and Alabama at $0.01 and $0.04 per cigar. States with high-rate, uncapped ad valorem taxes tend to levy significantly higher taxes, especially on premium cigars which tend to be more expensive than standard large cigars.

Maryland and New Hampshire levy significantly lower taxes on premium cigars than other large cigars. Minnesota, Montana, Nevada, and Ohio only cap the tax levied on premium cigars, leaving the tax on other large cigars uncapped. Nevada has also established a floor for the per cigar tax at $0.30.

Seventeen states capped the tax levied on each premium cigar. Most states cap the excise tax at $0.50 per cigar. Other states set the cap as high as $4 per cigar in Vermont or as low as $0.30 per cigar in North Carolina.

Capping the ad valorem tax on each cigar helps prevent the revenue volatility that excise taxes tend to generate, as fluctuations in market prices will have less influence on revenues collected. Price-based taxes do not directly target the actual harm-causing elements of the products, but placing a cap on the tax means that most cigars, above a certain value, will effectively experience a specific tax per cigar of the capped rate.

Taxes levied on cigars with low prices are price-based, keeping them low to reflect the low prices. Conversely, taxes on cigars with high prices are capped to a specific tax per cigar, more directly targeting the harm-causing element of tobacco in each cigar. Higher-priced tobacco leaves and more finely crafted cigars do not have significantly greater negative externalities, so significantly higher taxes from a price-based tax would be excessive. This helps avoid imposing an undue burden on both particularly low-priced and especially high-priced cigars.

Premium cigar sales experienced a significant increase in 2021 and have continued to grow since. As more people consume this type of tobacco product, the impact that these taxes have on the public grows—as does the revenue potential. Structuring premium cigar taxes to effectively generate necessary revenues to address the public health effects of tobacco smoking, without imposing an excessive burden on consumers or producers, is an increasingly important consideration as this sector of the tobacco market continues to grow.

 

State Premium Cigar Taxes

Total Tax Levied on Premium Cigars across States in $ per cigar, as of October 2024

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State	Total Tax Levied on a Sample Premium Cigar ($/Cigar)	Rate
Alabama	$ 0.041	$0.0405
Alaska	$ 4.421	75% of wholesale
Arizona	$ 0.218	$0.218
Arkansas	$ 0.618	68% of wholesale (not to exceed $0.50/cigar + 2% of manufacturer's invoiced selling price)
California	$ 3.120	52.92% of wholesale
Colorado	$ 3.301	56% of wholesale
Connecticut	$ 0.500	50% of wholesale (not to exceed $0.50/cigar)
Delaware	$ 1.769	30% of wholesale
District of Columbia	$ 4.185	71% of wholesale
Florida	$ -	No Tax
Georgia	$ 1.356	23% of wholesale
Hawaii	$ 2.948	50% of wholesale
Idaho	$ 0.500	40% of wholesale (not to exceed $0.50/cigar)
Illinois	$ 2.122	36% of wholesale
Indiana	$ 1.000	24% of wholesale (not to exceed $1/cigar)
Iowa	$ 0.500	50% of wholesale (not to exceed $0.50/cigar)
Kansas	$ 0.590	10% of wholesale
Kentucky	$ 1.769	15% of retail
Louisiana	$ 1.179	20% of wholesale
Maine	$ 2.535	43% of wholesale
Maryland	$ 0.884	15% of wholesale
Massachusetts	$ 2.358	40% of wholesale
Michigan	$ 0.500	32% of wholesale (not to exceed $0.50/cigar)
Minnesota	$ 0.500	95% of wholesale (not to exceed $0.50/cigar)
Mississippi	$ 0.884	15% of wholesale
Missouri	$ 0.590	10% of wholesale
Montana	$ 0.350	50% of wholesale (not to exceed $0.35/cigar)
Nebraska	$ 1.179	20% of wholesale
Nevada	$ 0.500	30% of wholesale (not to exceed $0.50/cigar)
New Hampshire	$ -	No Tax
New Jersey	$ 1.769	30% of wholesale
New Mexico	$ 0.500	25% of wholesale (not to exceed $0.50/cigar)
New York	$ 4.421	75% of wholesale
North Carolina	$ 0.300	12.8% of wholesale (not to exceed $0.30/cigar)
North Dakota	$ 1.651	28% of wholesale
Ohio	$ 0.640	17% of wholesale (not to exceed $0.64/cigar)
Oklahoma	$ 0.120	$0.12
Oregon	$ 1.000	65% of wholesale (not to exceed $1.00/cigar)
Pennsylvania	$ -	No Tax
Rhode Island	$ 0.500	80% of wholesale (not to exceed $0.50/cigar)
South Carolina	$ 0.295	5% of wholesale
South Dakota	$ 2.063	35% of wholesale
Tennessee	$ 0.389	6.6% of wholesale
Texas	$ 0.011	$0.011
Utah	$ 5.070	86% of wholesale
Vermont	$ 2.000	92% of wholesale (not to exceed $2/cigar or $4/cigar if the wholesale cost is greater than $10)
Virginia	$ 1.179	20% of wholesale
Washington	$ 0.650	95% of wholesale (not to exceed $0.65/cigar)
West Virginia	$ 0.707	12% of wholesale
Wisconsin	$ 0.500	71% of wholesale (not to exceed $0.50/cigar)
Wyoming	$ 1.179	20% of wholesale

Notes: Taxes calculated using a sample premium cigar that retails for $11.79 and is sold wholesale for $5.90.
Sources: Bloomberg Tax, Cigar Association of America, State Statutes

[habanohal]

I just know In Illinois, for example, I order Non- Cubans from Switzerland. It's cheaper.

[PirelliCndms]

I think that taxing some goods higher than other goods for the "Public Safety" is a joke. Excise taxes are understandable, but that's not what they are anymore. Now they are "to help the people". It's no secret that US Cigarettes are poison, I get trying to minimize the impact of cancer and other illnesses. My neighbor smokes cigarettes, but he buys locally grown tobacco, dries and shreds it himself to avoid taxes and the harmful additives to cigarettes. Virginia taxes are insane, you pay a premium state tax and because I buy my NC's from a Brick and Mortar there is another 10% on top of it for an "area tobacco tax" I'll take a picture of my next receipt. It is insane.

[BrightonCorgi]

I would've lost the bet on Pennsylvania.

[BrightonCorgi]

33 minutes ago, PirelliCndms said:

...It's no secret that US Cigarettes are poison, I get trying to minimize the impact of cancer and other illnesses...

So are the dyes in our food, but not many are concerned.

[rabidraccoon]

Well here in Texas there is a low tobacco tax but we have a pretty high sales tax (on average between localities it's 8.2%) so I don't buy cigars here. Pennsylvania followed by Florida is where I stock up on cigars.

[PirelliCndms]

9 hours ago, BrightonCorgi said:

So are the dyes in our food, but not many are concerned.

Food dyes, carbohydrates, the war on saturated fats, aspartame, and high fructose corn syrup.


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[raggie]

This must be why so many people move to Florida!

[MrBirdman]

On 11/11/2024 at 9:18 AM, BrightonCorgi said:

I would've lost the bet on Pennsylvania.

Never underestimate corruption in Pa politics. Blunts and Swisher Sweets are made here. They also help fund the Phillies payroll, so to the zero people here smoking them, thank you from the City of Brotherly Love!