Cigar smokers in “The First State” may be getting a tax break in the future. The Delaware House Revenue & Finance Committee voted yesterday to advance S.B. 131, a bill that will cut the state tax on premium cigars in half, from 30 percent of the wholesale price to 15 percent.
Now that the bill has overwhelmingly passed the Finance Committee (by a vote of 10-2 with one abstention), it has to go to the House Appropriations Committee before reaching the Assembly floor.
The bill was introduced on May 10, 2021 by Democrat State Senator Laura Sturgeon. It applies solely to premium cigars, defined in the legislation as:
- Made entirely of tobacco, including the wrapper, binder, and filler
- Hand rolled
- Contains no filter, tip, or any mouthpiece consisting of material other than tobacco, or any additional flavoring
The bill aims to make Delaware’s premium cigar tax rate competitive with the tax rates of its surrounding states. Maryland’s tax on premium cigars is 15 percent of the wholesale tax, Pennsylvania doesn’t have any tobacco tax at all, and New Jersey has a tax rate of 30 percent.
According to the official fiscal note, the tax reduction is estimated to cost the state of Delaware $627,200 in annual revenue for the year 2023.
“This is a unique opportunity to address a source of assistance for small businesses and their patrons that are based in Delaware,” said Joshua Habursky, deputy executive director for the Premium Cigar Association, in his testimony before the committee.
“S.B. 131 is a pro small business bill that the Premium Cigar Association strongly endorses.”