The latest in a series of planned increases to Colorado’s tobacco tax went into effect today, as the tax rate jumped from 50 percent of the wholesale price to 56 percent.
In real-world terms, for a cigar with an MSRP of $9.50, the price at the register goes from $14.25 to $14.82 by halfwheel estimates and before any additional sales taxes are added.
The increases were approved by 67.6 percent of those who voted in a ballot proposition during the November 2020 election. At the time of the election, the state’s tobacco tax rate had been 40 percent of the wholesale price of a cigar, but the proposition caused it to increase by 50 percent on Jan. 1, 2021. Another increase will go into effect on July 1, 2027, when the rate increases to 62 percent of the wholesale price, bringing that $9.50 cigar to $15.39 by halfwheel estimates.
Colorado now has the fourth-highest tobacco tax in the country, trailing Utah, Alaska, and New York. Prior to today, California had been the fourth-highest, but its tax rate decreased from 56.32 percent of the wholesale cost to 52.92 percent as part of the state’s annual tobacco tax equalization.
Colorado’s Proposition EE also included language that would prevent residents from saving some money by shopping online, as it requires out-of-state sellers to charge Colorado’s tax rate.
Several other tobacco and tobacco-related products saw their tax rates increase as well. The tax on cigarettes went from $1.94 per pack to $2.24, and there is now a minimum price of $7.50 per pack. E-cigarettes, which had been untaxed prior to the passage of the proposition, are now taxed at the same rate as cigars, meaning the tax on them also increased from 50 percent to 56 percent.