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Premium Cigar Taxes by State, 2024

4 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 taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. 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 taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. 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
StateTotal 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

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