California Cigar Tax Rate Increasing in July

Every year, the tax rate for other tobacco products—including cigars— in California changes. This year, it will be increasing by more than 10 percent.

Effective, July 1, 2021, the new tax rate will be 63.49 percent of the wholesale price of cigars, up from the current rate of 56.93 percent. The tax rate is set based on the “equivalent to the combined rate of tax imposed on cigarettes” established by the California State Board of Equalization. The tax rate on cigarettes has remained the same, but the state adjusts the tax rates for other tobacco products.

While the increase compared to the status quo is significant, it puts the rate in line with the rate used in 2018-2019.

• Effective July 1, 2017 — 65.08 percent
• Effective July 1, 2018 — 62.78 percent
• Effective July 1, 2019 — 59.27 percent
• Effective July 1, 2020 — 56.93 percent
• Effective July 1, 2021 — 63.49 percent

The tax rates in California are not as simple as they are in most states because California allows cigar companies to charge retailers a “factory price” and then use that as the tax basis.