An obscure provision in the state Senate tax package that would change the excise tax on cigars has a supporter in Sen. Todd Johnson, a member of the chamber’s Finance Committee and a cigar store owner.
The provision would cap the excise tax on individual cigars at 30 cents and expand the tax to online cigar purchases.
North Carolina current has a 12.85% tax on cigars with no cap. According to the bill’s supporting documents, the proposed change would “phase out the tax on amounts paid by a dealer in excess of $2.35 per cigar,” with the impact landing on more expensive “premium or hand-rolled, cigars,” rather than less expensive, machine-made cigars that are “unlikely to hit the cap.”
Think cigar lounges versus gas stations.
Even with the cap, the change is expected to bring in more state revenue because taxes would apply to cigars bought online. In the next fiscal year, the cigar tax would generate an additional $3.7 million; in five years, it would bring in an additional $12.4 million, according to the fiscal analysis accompanying the bill.