Relates to the tax on certain tobacco products

BILL NUMBER:S8459

Title of bill

An act to amend the tax law, in relation to the tax on certain tobacco products

Purpose

This bill caps the state imposed tax on cigars at $1.00 per cigar. The current tax rate of 75% with no dollar limit is so onerous that it is almost a certainty that many of those small business owners whose livelihood depends upon the sale of specialty cigars will disappear from this state. At a minimum, the price advantage this burdensome tax provides to neighboring state merchants can only result in massive reductions in the number of cigars hard working New York establishments currently sell, and may have an adverse effect on state revenue estimates. To remain competitive, and to provide the state with a stream of revenue it can depend upon, it is only fair to impose a reasonable tax on consumers who purchase cigars in this state, allowing the state to continue collecting revenue and establish ourselves as more competitive to surrounding states in the cigar market.

Summary of provisions

Section 1 and 2 of the bill amend section 471-c of the tax law to cap the tax on cigars at $1.00.

Section 3 of the bill provides that the bill takes effect immediately upon approval and signature by the Governor.

Existing law

Existing law provides for a 75% of wholesale price tax on cigars, with no maximum as to dollar amount.

Statement of support

This bill will add a one-dollar cap to the tax on cigars the State of New York. This will allow retailers to once again become competitive with our neighboring states, which with the recent tax increases over the past years have resulted in decreased revenue to the retail sellers, and adversely affected the business climate in New York for persons wishing to engage in the business of tobacco sales. The average wholesale price for a cigar in New York State is fifty-three cents. These cigars make up over ninety percent of the market within the state. The average cigar for cigars which may be identified as premium cigars, makes up ten percent of the market in New York State and those cigars sell for a price of two-dollars and fifty-one cents. Under the current straight 75% tax rate, the businesses specializing in the sale of cigars to adult consumers who are willing to contribute to the economy of this state by paying a premium for a special product are unfortunately suffering the negative consequences of the recent enactments. By placing a one-dollar cap on that tax, this bill will allow sellers of cigars in this state to once again maintain a competitive market vis-a-vis our neighboring states and allow those who have already committed a great deal of capital and personal effort in the business of tobacco selling to grow and continue to provide a source of revenue to the coffers of this state in our state.

Fiscal implications

TBD

Effective date

This act shall take effect on the same date and in the same manner as part D of chapter 134 of the laws of 2010 amending the tax law relating to the cigarette tax rate and sales of cigarettes

to Indian nations or tribes and relating to the tax on tobacco products, snuff and little cigars, takes effect.