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New York State Excludes Cigar Tax From 2019 Executive Budge

April 5th, 2018

In a move that has cigar smokers in New York State breathing a sigh of relief, the State’s Executive Budget for 2018-19 did not include language that would have significantly raised taxes on cigars. With lawmakers able to cut a deal less than 24 hours before the April 1 deadline, had the original version of the budget made it to Gov. Cuomo’s desk, it would have removed the current “industry standard adjustment ratio” of 28.5%, and driven it up to 75%.

The industry standard adjustment ratio, which was passed in December 2013, permits tobacco retailers to calculate the wholesale price themselves on the basis that an “established price or manufacturer’s invoice price is not available.” As it stands now, the official New York State rate is 75% of the wholesale price, but the adjustment ratio brings the rate down to a more sustainable 28.5%. For example, a $10 cigar with a wholesale price of $5 would currently have an excise tax of $1.43, while at the full 75% rate, it would carry a tax of $3.75.

So, it’s a good news/bad news split. The industry standard adjustment ratio remains unchanged, but so does the official 75% rate. Fortunately, the language in the original 2018-19 budget proposal regarding wholesale tobacco prices didn’t make it into the final version. However, should the next State budget find a way to remove the adjustment ratio, it could spell retail disaster for New York cigar stores and consumers. Add to that, bill 1544-B passed last year by the New York City Committee on Health, which levied a 10% excise tax on cigars, so cigar smokers in all five of the City’s boroughs would be looking at a total of 85% excise tax on their primos.