New Mexico Cigar Tax Cap Removed, Taxes Going Up

Yesterday, New Mexico’s 2023 regular session came to a close. As part of the end of the session, legislators passed H.B. 547, which makes a long list of changes to taxes in New Mexico. Included on that list is one that will cost New Mexico’s cigar smokers.

The bill removes the existing 50-cent cap on cigar taxes, meaning that cigars will be charged the state’s existing excise tax rate for other tobacco products of 25 percent. Any cigar with an MSRP of $4 or more will pay more taxes than before. For some context, a cigar with an MSRP of $9.50 would have previously been assessed the 50-cent maximum for cigars; going forward that same cigar will be assessed $1.19 in excise taxes.

New Mexico charges a different tax rate for “little cigars,” which are defined as cigars that weigh less than 4.5 pounds per thousand cigars.

Gregory Conley, director of legislative and external affairs for the American Vapor Manufacturers, outlined how these tax changes came to be:

Thursday night, the Senate considered a major tax package that had already passed the House, HB 547. The Senate stripped the House language and adopted its own language. You can guess where this is going.

The tax changes from HB 124 / SB 235 were added almost verbatim, EXCEPT in… https://t.co/FnHQPMsYyP

— Gregory Conley (@GregTHR) March 18, 2023

H.B. 547 cleared both the New Mexico House and Senate. Gov. Michelle Lujan Grisham, a Democrat, has until April 7 to veto or pocket veto legislation passed in the most recent session. If signed into law, the new tax rate will take effect July 1, 2023.