Maine Cigar Tax Hike Defeated for Now, Avoids Most Expensive Tax in the U.S.

Maine’s cigar tax will remain at its current level, at least for now.

The Maine House of Representatives Committee on Taxation refused to advance H.P. 1039 for the 2021 legislative session, meaning a massive cigar tax hike will not take effect this year. If passed, H.P. 1039 would have doubled the state’s tax on cigarettes from $2 per pack of 20 to $4. Because of a 2019 bill that passed, the doubling of the state’s cigarette tax would mean that the tax on other tobacco products—which includes cigars—would double from its current 43 percent of the wholesale price to 86 percent of the wholesale price.

Currently, a cigar with an MSRP of $9.50 likely costs $13.59 before sales tax in Maine. If H.P. 1039 passed, that price would jump to $17.67 before sales tax per halfwheel estimates. Prior to Jan. 1, 2020, Maine’s tax rate on cigars was 20 percent of the wholesale price.

At the proposed rate of 86 percent of the wholesale price without a tax cap, Maine’s tax rate would be tied with Utah for the highest in the country.

While the bill did not advance this session, it’s not officially dead. The Committee on Taxation approved a carryover, a process that allows for discussion of the bill to resume next year.

The Premium Cigar Association specifically recognized Ken Nagle of Cigaret Shopper, a chain of 22 Maine-based stores, who fought against the bill.