Proposed 40 Percent Cigar Tax in Pennsylvania

Last year, S.B. 1292 was introduced in the Pennsylvania legislature. The proposed legislation would have increased the excise tax sold on cigars in Pennsylvania from nothing to 3.6 cents per cigar. It was a relatively small increase, exempted all mail order sales and was defeated, as so many cigar tax increases have been in Pennsylvania.

But now there’s a much more serious proposal from a much more serious opponent.

The 2015 budget proposed by Gov. Tom Wolf includes a new tax rate of 40 percent of the wholesale price of cigars. It would not only make cigars in Pennsylvania amongst the most expensive in the nation—Colorado and Idaho have a 40 percent wholesale tax—but it would drastically change the way cigars are sold nationwide.

Pennsylvania is one of four places where is not an excise tax on cigars—the others being Florida, New Hampshire and Washington D.C. It’s no coincidence that three states are home to some of the largest mail order retailers in the country, with Cigars International, Famous Smoke Shop and Holt’s—three of the largest retailers in the country—calling the commonwealth home.

If a 40 percent tax became law, there’s little doubt that these businesses would move, likely to Florida, where most of the other larger cigar retail operations are based.

The new taxes would go into effect on Oct. 1, but whether the cigar provision passes remains in doubt as Pennsylvania has historically been in a cigar-friendly state, largely due to the amount of jobs that come from its massive cigar retailing industry.