No Cigar Tax Relief In New York State Budget

No Cigar Tax Relief In New York State Budget
Photo/Jeff Harris

New York Gov. Andrew Cuomo announced yesterday that his 2018 state budget has been passed, but to the disappointment of premium cigar smokers, it was missing the 45-cent flat tax on cigars he had proposed.

The flat tax would have saved Empire State cigar smokers money, as the $153.1 billion budget originally included a proposal to replace the current tax rate on large and premium cigars with a 45-cent flat tax. However, the flat tax was dropped before the budget was ratified last week.

Officially, the tax rate for cigars in New York State is 75 percent of the wholesale price, but thanks to an "adjustment ratio" clause that was enacted in 2013, retailers have the option to calculate based on the wholesale price, which amounts to an effective 28.5 percent tax rate using the "adjustment ratio" formula.

Under current taxes, a $10 cigar with a $5 wholesale price carries a $1.40 state excise tax. Had the flat tax been included in Cuomo's budget, it would have knocked the state tax on a premium cigar down to only 45 cents.