The Tale of 50 States With 50 Differing Cigar Tax Laws
The United States is a nation of 50 states, out of those 50 states we have 50 differing rules and tax laws surrounding Tobacco but more importantly a differing set of rules for Cigars.
It is a hodgepodge of rules and regulations that stemmed from 50 differing tax authorities, state congresses and various entities that created nothing less than a monster in terms of what is taxed, what is not taxed and how it is taxed.
Some states tax by weight, others tax by a formula of retail to wholesale price percentage, some states roughly double the cost of the cigars in pure taxes whereas others don’t tax at all (such as Pennsylvania). There are many instances (such as individuals that live near state borders) that see dramatic price changes for the same product literally feet away from each other due to our wild tax laws. Other examples that have a similar problem would be gas stations, where one gas station charges 20% less than the other only a mile away because one is physically located in State A and the other is located in State B where gas taxes are much higher.
How did this come to be?
When these states joined the United States, they ceded some rights to the Federal Government, and retained other rights. Technically all states within the USA are sovereign. The rights they retained include state level taxation.
Because of that right, every state decided to create their own level of taxation (or non-taxation) on cigars as well as everything else.
Based upon a whim of every state legislator they strategically or in most cases (non-strategically) created higher or lower taxes on Cigars based on what their immediate line of thought was. If they wanted to “go after” all tobacco products they would jack the tax rate up, at the same time the neighboring state was looking to attract jobs and dropped the taxes. Overtime you wind up with a tax sheet that is roughly the size of a full fledged novel if you were to build physical cigar stores in all 50 states.
In California the taxes are X taxed by Z measurement whereas in New York the taxes are Y taxed by B measurement. This continues until every single state with their own unique taxation system is fulfilled.
Some localities do similar things, such as adding additional taxes on top of the taxes you paid to the state, making it even more confusing.
The end result is that you will pay more or less depending on where you buy your cigars.
States rights would be violated if the federal government stepped in, so that raises issues regarding a federal “just pass a law” solution to the problem.
What would you propose if you had a magic button to press? Remember, all the solutions presented really cannot come from the Federal Government and most likely will have to work between states.