Cigar retailers in Colorado lost a tax credit that helped them compete with out-of-state sellers on Friday, when Gov. John Hickenlooper vetoed a piece of legislation that allowed them to claim a refund of the state’s tobacco tax when making sales to individuals outside the state.
Retailers had been enjoying the ability to claim a refund of the state’s 40 percent tax on cigars and other tobacco products, excluding cigarettes, thanks to a piece of legislation passed in 2015. House Bill 15-1301 was passed with the intent to avoid double state excise taxation and to remove a barrier to Colorado businesses selling tobacco products other than cigarettes online to out-of-state consumers.
While Colorado is not home to many online cigar retailers, it is where Smoker Friendly is headquartered, and after the bill’s passage, the company moved its online operations from Nebraska to Colorado, according to a report by The Denver Post.
However, that bill contained language that would make the refund expire on Sept. 1, 2018, which prompted the creation of Senate Bill 17-139. That bill would have extended the refund for three more years, and it gained the approval of both chambers of the state legislature, with the House voting 56-8 and the Senate concurring with a 33-1 vote.
But when it arrived on the governor’s desk, he issued his first veto of the legislative session, saying he was unpersuaded that the credit created any significant economic impact or moved jobs to Colorado. “In 2016, Colorado tobacco distributors claimed only $11,200 in tax credits on $28,000 in out-of-state sales to consumers,” the governor wrote in his veto. “While well intentioned by the sponsors, the total of these credits are too low to even support a single worker in this industry.”
He went on to assert that cigar smoking is not a safer alternative to cigarettes and cited a study by the U.S. Centers for Disease Control and Prevention that claimed that cigar use among high school students is higher than the national rate among adults, while chastising “cheaper, candy-flavored cigars” for being attractive to youth and turn them into lifelong smokers. He called high tobacco taxes such as the one in Colorado an effective public health tool and allowing the tax credit harms the state’s ability to educate the public on risks associated with tobacco use.
The governor added that providing the tax credit for tobacco retailers violated the belief in tax uniformity and equity, saying that alcohol, marijuana, tobacco, and fuels are all subject to excise taxes yet none of the others receive such a credit.