Delaware Bill That Would Cut State Tax Rate in Half Clears House Committee

Yesterday, Delaware’s House Committee on Revenue & Finance approved S.B. 131 by 10-2, a bill that would cut the state’s tax rate for “premium cigars” from its current 30 percent to 15 percent.

The bill uses a different definition for “premium cigars” than the ones used by FDA, though it appears to have the same intent. Per S.B. 131, “premium cigars” would be defined as:

• a. The cigar, including the filler, wrapper, and binder, is made of 100% leaf tobacco.
• b. The cigar is hand rolled.
• c. The cigar contains no filter or tip, or any mouthpiece consisting of a material other than tobacco, or any additional flavoring.

The purpose of the bill is to make Delaware’s cigar prices more competitive with neighboring states. In the bill’s synopsis, it mentions that Maryland’s tax rate on cigars is 15 percent, while Pennsylvania has no tax on premium cigars.

Per halfwheel estimates, a cigar with an MSRP of $9.50 likely has a price tag of $12.35 due to the state’s 30 percent tax and normal retail mark-ups. That price should be around $10.93 with a 15 percent tax.

Last June, Delaware’s Senate passed S.B. 131, meaning the bill just needs approval in the Delaware House of Representatives before it heads to Gov. John Carney’s desk.

If passed, it would go into effect on Oct. 1.

A press release from the Premium Cigar Association—an industry trade group—highlighted the efforts of Pat Singh of Cigar Sessions in Middletown, Steve Zengel of Los Caidos and the Delaware Independent Retail Stores Association for their work in promoting the legislation.