New York to Tax Little Cigars

The price on little cigars in New York is about to skyrocket. With the passing of the 2008-2009 $121.7 billion state budget on Wednesday, New York has instituted a new tax on "little cigars."

To do this, the state government redefined its terms. Little cigars will now be defined as cigarettes. Previously, little cigars came under the definition of tobacco products, where premium cigars are classified, and were taxed at 37 percent of the wholesale price. The cigarette tax approved in the state budget is being raised from $1.50 per pack to $2.75 per pack -- making it the highest cigarette tax in the country, just ahead of neighboring New Jersey. This increase will now also apply to little cigars.

The new state tax law conforms to the federal tax law, which does distinguish between cigars and cigarettes by citing the differences in wrapping materials, i.e. cigarettes are rolled in paper, not tobacco. However, the federal law also states that any "roll of tobacco" wrapped in a substance containing tobacco and packaged similar to cigarettes is considered to be a cigarette. According to the state government, little cigars fit this description and are "indistinguishable from cigarettes."

Most little cigars are made by machine using a mixture of chopped tobacco and flavorings, and some have filters, such as the one shown in a photograph supplied by the attorneys general, in the corresponding picture, comparing some little cigars to cigarettes and larger cigars.

The New York state government is expecting the tax hike to generate $3.6 million in revenue from 2008 to 2009. The increase will take effect on July 1.

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