North Carolina Cigar Tax Cap Signed Into Law

Beginning July 1, 2022, cigar shoppers in North Carolina will likely begin to see lower prices for the cigars they buy.

Last night, Gov. Roy Cooper signed S.B. 105, North Carolina’s budget bill, into law. It includes changes to how cigars are taxed in the state, notably capping the tax at no more than 30 cents per cigar. The state’s tax rate of 12.8 percent of the wholesale price remains in effect, but the maximum amount paid will be 30 cents.

This means that cigars with an MSRP of $4.70 or more should see their final prices reduced as the taxes paid on each cigar will decrease.

For example, a cigar with an MSRP of $9.50 likely retails for around $10.72 before sales tax under North Carolina’s current laws. With the new change, the price will be reduced to $10.10 before sales tax per halfwheel estimates. The more expensive the cigar, the greater the savings will likely be.

“On behalf of the community tobacconists throughout North Carolina, we want to commend and thank the leadership of Senator Todd Johnson, support of the legislature and final action by the Governor, making this tax cap possible,” said Craig Cass of Tinder Box of the Carolinas, in a press release produced by the Premium Cigar Association. “This measure will allow our small businesses to better compete, while allowing patrons to ‘shop at home’ for premium handmade cigars.”

While the prices paid in-store should be lower assuming the retailer passes on the savings to consumers, it’s not all good news for consumers.

The bill also included language that will require out-of-state retailers to pay taxes on products it sells to consumers living in North Carolina. In addition, those stores will need to acquire a license—a nominal cost of $10—but they will also be required to pay the 12.8 percent tax for cigars sold to consumers in North Carolina. This means cigars purchased online or through catalogs and shipped to customers in North Carolina will likely increase in price once the law takes effect next July.

Previous estimates from North Carolina indicated that the state expected the changes to generate an additional $3.7 million per year in tax revenue.