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.

 

STATETAX RATE
Alabama4.05 cents per cigar
Alaska75% of the wholesale price
Arizona22 cents per cigar
Arkansas68% of the manufacturers price
California41.1% of the cost to the distributor
Colorado40% of the manufacturer’s price
Connecticut27.5% of the wholesale price
Delaware15% of the wholesale price
FloridaNone
Georgia23% of the wholesale price
Hawaii50% of the wholesale price
Idaho40% of the wholesale price
Illinois18% of the wholesale price
Indiana24% of the wholesale price
Iowa50% of the wholesale price (capped at 50 cents per cigar)
Kansas10% of the wholesale price
Kentucky15% of the wholesale price
Louisiana20% of the invoiced price
Maine20% of the wholesale price
Maryland15% of the wholesale price
Massachusetts30% of the wholesale price
Michigan32% of the wholesale price
Minnesota70% of the wholesale price
Mississippi15% of the manufacturer’s list price
Missouri10% of the manufacturer’s list price
Montana50% of the wholesale price
Nebraska20% of the wholesale price
Nevada30% of the wholesale price
New Hampshire48.6% of the wholesale price (excludes premium cigars)
New Jersey30% of the wholesale price
New Mexico25% of the manufacturer’s  price
New York46% of the wholesale price
North Carolina12.8% of the wholesale price
North Dakota28% of the wholesale price
Ohio17% of the wholesale price
Oklahoma12 cents per cigar)
Oregon65% of the wholesale price (capped at 50 cents per cigar)
PennsylvaniaLittle cigards taxed as cigarettes
Rhode Island80% of the wholesale price (capped at 50 cents per cigar)
South Carolina5% of the wholesale price
South Dakota35% of the wholesale price
Tennessee6.6% of the wholesale price
Texas1.1 cents per cigar
Utah35% of the manufacturer’s price
Vermont92% of the wholesale price
Virginia10% of the wholesale price
Washington75% of the wholesale price (capped at 50 cents per cigar)
West Virginia7% of the wholesale price
Wisconsin71% of the wholesale price (capped at 50 cents per cigar)
Wyoming20% of the wholesale price
Washington D.C. 12% of gross receipts for cigarsretailing at less than $2 each
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