Bills Seek to More than Double Tennessee’s Tax on Cigars

Last week, identical bills were introduced in the Tennessee General Assembly that would increase the taxes on cigars from 6.6 percent to 17 percent of the wholesale price.

Rep. Bo Mitchell, D-Nashville, introduced H.B. 1438 in the Tennessee House of Representatives, while  Sen. Heidi Campbell, D-Nashville, introduced S.B. 1522 in the Tennessee Senate. The proposed legislation would increase the taxes for all “other tobacco products,” of which cigars are included, to 17 percent. halfwheel estimates that a cigar with an MSRP of $9.50 retails for around $10.13 before sales tax in Tennessee. That would increase to $11.12 if the proposed legislation were passed. In addition, the bills would increase the tax on cigarettes from 3 cents per cigarette to 8.35 cents per cigarette.

The tobacco tax increases are introduced to offset an elimination of a 4 percent sales tax on food items, which is also included in the bills.

While these two bills were introduced last week, the proposed legislation is not new. In 2020, Mitchell and Sen. Sara Kyle, D-Memphis, proposed the same legislation, which did not pass.

If the new version were to pass the Tennessee General Assembly—which is dominated by Republicans—and were signed by Gov. Bill Lee, also a Republican, it would go into effect on July 1, 2023.