A bill recently introduced in New Jersey is proposing an overhaul of the entire tobacco tax structure in the state, and it would mean higher taxes for most cigars if passed.
Assembly Bill 1579 was introduced in the state’s legislature on January 9 by Rep. Herbert Conaway, who has filed similar anti-tobacco measures in the past several years. The bill seeks to change the state’s cigar tax structure from a wholesale method to a per-unit tax of $2.70 for all large cigars.
Currently, New Jersey’s tax is 30 percent of a cigar’s wholesale price. In simplified terms, a cigar that sells for $10 carries a $5 wholesale price, meaning the New Jersey state tax would be $1.50, excluding federal taxes. If the new bill were to pass, that $10 cigar would carry a $2.70 state tax. In other words, cigars that sell for $18 dollars or less would carry higher taxes, while more expensive cigars would actually be taxed less if the bill were to become law.
“There are a few cigars where [the new tax structure] is beneficial, but for the vast majority of cigars, it’s bad,” said Matt Dogali, senior director of state legislative affairs for the International Premium Cigar and Pipe Retailers association.
Bill 1579 would also alter the definition of a cigar to mean “any roll of tobacco for smoking that is: wrapped in leaf tobacco, or any other substance or material containing tobacco; offered to, or purchased by, consumers with or without a mouthpiece, tip or filter for smoking; and, sold by the distributor or wholesaler to the retail dealer or consumer for a pre-tax sales price of more than $2 per cigar.”
Additionally, the bill seeks to establish a new tobacco license for stores wishing to sell tobacco products, including premium cigars. If the bill were to become law, a retail tobacco shop would be required to pay $350 per year to receive a tobacco license. Each license holder would also be required to file a $10,000 bond with the state in the event that any illicit activity occurred.
“This bill is a political move and [the license language] is really a deterrent to opening a new cigar store,” said Dogali.
In an email sent out by the Cigar Association of America last week, the lobbying organization called the bill an “extremely harmful piece of legislation.”
Dogali, however, is confident that the bill will die before it hits the governor’s desk. “Retailers in New Jersey are very aware of the bill and they do a great job communicating to the Assembly that it would be detrimental to the state’s premium cigar industry,” he said.
This article first appeared in the January 23, 2018 issue of Cigar Insider.