Tobacco Tax Change Proposed in New Jersey

Legislators in New Jersey will once again consider a significant change to the tobacco tax this session, as a bill has been introduced that would change the tax on cigars from a rate to 30 percent of the wholesale price to a specific per-unit rate of $2.70 per cigar, among other changes.

For a cigar with an MSRP of $9.50, the bill would raise the price at the register from $12.35 to $14.90 by halfwheel estimates. It would effectively be an increase in the tax for cigars with an MSRP up to $18, which represents the bulk of offerings in most retail humidors.

A. 1579 was introduced on Jan. 9 by Assemblyman Herb Conaway Jr., D-Burlington, and it seeks to make a number of changes to the current tobacco tax structure. While it would raise the tax on tobacco products from 30 to 68 percent of the wholesale price, it also creates new definitions for cigars and cigarillos, and adds retail pricing criteria for them as well as little cigars, single-dose smokeless tobacco products, and pipe and smoking tobacco.

According to the bill, a cigar is defined as “any roll of tobacco for smoking that is: wrapped in leaf tobacco, or any other substance or material containing tobacco; offered to, or purchased by, consumers with or without a mouthpiece, tip, or filter for smoking; and, sold by the distributor or wholesaler to the retail dealer or consumer for a pre-tax sales price of more than $2.00 per cigar.”

That definition excludes little cigars and cigarillos, the latter of which is defined as “any roll of tobacco for smoking that is: wrapped in leaf tobacco, or any other substance or material containing tobacco; offered to, or purchased by, consumers with or without a mouthpiece, tip, or filter for smoking; and, sold by the distributor or wholesaler to the retail dealer or consumer for a pre-tax sales price of not more than $2.00 per cigarillo.”

The effective difference between the two is the price; cigars are priced over $2, cigarillos are priced under $2.

Cigarillos would be subject to a tax of 54 cents each instead of the percentage rate, while little cigars and single-dose smokeless tobacco products would be taxed at 13.5 cents each in place of the 30 percent rate. Pipe and smoking tobacco would be taxed at a flat rate of $4.15 per ounce, while snuff would increase from 75 cents per ounce to $2.25 per ounce.

To top it off, the bill includes a floor tax and new licensure and reporting requirements for both manufacturers and distributors.

In an advisory sent to its members, the Cigar Association of America an “extremely harmful piece of legislation” and pledged its commitment to defeat the bill, which has been referred to Assembly Health and Senior Services Committee and is awaiting further action.