California’s Cigar Tax to Decrease on July 1

The California Department of Tax and Fee Administration (CDTFA) delivered some good news for cigar smokers this week, announcing that the tax rate on premium cigars will be decreasing on July 1.

It’s not a sizable decrease, and it keeps the state with one of the highest cigar tax rates in the country. But on July 1, the tax rate will be decreasing from 61.74 percent of the wholesale price to 56.32 percent.

In real-world terms for a cigar with an MSRP of $9.50, that means the price at the register before sales taxes are added will go from $15.37 to $14.85, by halfwheel estimates. Retailers ultimately determine how they factor in the taxes, so prices may vary a bit by store.

This marks the second straight year that the tax rate has declined, as the rate was at 63.49 percent on July 1, 2021. The rate gets adjusted on an annual basis, as the CDTFA annually determines the tobacco products tax rate, which is equivalent to the combined rate of the taxes imposed on cigarettes. The calculation of the rate is based on the wholesale cigarette prices reported to the CDTFA as of March 1 each year, and is effective during the next fiscal year, which runs from July 1 through June 30. The tobacco products tax rate is calculated by dividing the tax rate imposed on cigarettes by the average wholesale cost of cigarettes.

Cigarette taxes will remain the same, at $0.1434 per cigarette and $2.87 per pack of 20 cigarettes, the same rate that has been in place since April 1, 2017.