Marketing Cigars in Tough Times

Despite the SCHIP tobacco taxes that hit on April 1, 2009, cigar sales continue to persevere. The federal taxes on large cigars rose from 20.719% of the wholesale price with a tax cap of 4.875 cents per cigar to 52.75% of the wholesale price with a tax cap of 40.26 cents per cigar. The tax on little cigars jumped from four cents per pack to $1.0066 per pack, the same tax placed on cigarettes.

David Dill, vice president of sales and marketing for Gate Petroleum, Jacksonville, Fla., which operates 225 service stations with convenience stores in six southern states, said the increased tax rate hasn’t slowed sales. “Our cigar sales are up calendar year to calendar year about 7% for the category,” he said.

What’s more, even with the increase in price on little cigars, at around $2.19 they still are quite a bit less than a pack of cigarettes, and some customers are switching to the cheaper option.

Dill also has noticed increased interest in smaller cigars. “I think those probably are cigarette smokers moving over, so it seems to be the new trend—moving to the smaller cigars,” he said. 

While the majority of Dill’s customers are young males ages 21-34, he credits the recent female influence on the category for uptick in cigarillos and smaller cigars. Dill also noted that Black & Mild continues to have a loyal following with Gate Petroleum customers.

 

STATE TAX RATE
Alabama 4.05 cents per cigar
Alaska 75% of the wholesale price
Arizona 22 cents per cigar
Arkansas 68% of the manufacturers price
California 41.1% of the cost to the distributor
Colorado 40% of the manufacturer’s price
Connecticut 27.5% of the wholesale price
Delaware 15% of the wholesale price
Florida None
Georgia 23% of the wholesale price
Hawaii 50% of the wholesale price
Idaho 40% of the wholesale price
Illinois 18% of the wholesale price
Indiana 24% of the wholesale price
Iowa 50% of the wholesale price (capped at 50 cents per cigar)
Kansas 10% of the wholesale price
Kentucky 15% of the wholesale price
Louisiana 20% of the invoiced price
Maine 20% of the wholesale price
Maryland 15% of the wholesale price
Massachusetts 30% of the wholesale price
Michigan 32% of the wholesale price
Minnesota 70% of the wholesale price
Mississippi 15% of the manufacturer’s list price
Missouri 10% of the manufacturer’s list price
Montana 50% of the wholesale price
Nebraska 20% of the wholesale price
Nevada 30% of the wholesale price
New Hampshire 48.6% of the wholesale price (excludes premium cigars)
New Jersey 30% of the wholesale price
New Mexico 25% of the manufacturer’s  price
New York 46% of the wholesale price
North Carolina 12.8% of the wholesale price
North Dakota 28% of the wholesale price
Ohio 17% of the wholesale price
Oklahoma 12 cents per cigar)
Oregon 65% of the wholesale price (capped at 50 cents per cigar)
Pennsylvania Little cigards taxed as cigarettes
Rhode Island 80% of the wholesale price (capped at 50 cents per cigar)
South Carolina 5% of the wholesale price
South Dakota 35% of the wholesale price
Tennessee 6.6% of the wholesale price
Texas 1.1 cents per cigar
Utah 35% of the manufacturer’s price
Vermont 92% of the wholesale price
Virginia 10% of the wholesale price
Washington 75% of the wholesale price (capped at 50 cents per cigar)
West Virginia 7% of the wholesale price
Wisconsin 71% of the wholesale price (capped at 50 cents per cigar)
Wyoming 20% of the wholesale price
Washington D.C.  12% of gross receipts for cigarsretailing at less than $2 each
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