Michigan Caps Premium Cigar Tax

Tax rate intended to help retailers compete against online sellers goes into effect

Arlan Meekhof

LANSING, Mich. -- Legislation sponsored by state Senator Arlan Meekhof (R) and signed into law by Governor Rick Snyder (R) in early October allows state tobacco dealers to compete with online companies by capping the sales tax on a premium cigar at 50 cents, beginning Nov. 1, 2012.

Effective Nov. 1, the tax rate on premium cigars in the state of Michigan has changed. Cigars that cost $1.5625 or more each will be taxed at a rate of 50 cents per cigar. Cigars that cost less than $1.5625 each will continue to be taxed at 32% of the wholesale price of the cigars.

The change in Michigan law also means that modifications must be made to the manufacturer, wholesaler and unclassified acquirer tax returns for the tax periods beginning Nov. 1, according to a state Department of Treasury notice.

This change in Michigan law also requires a retailer who is licensed as an unclassified acquirer--a retail importer of tobacco products other than cigarettes--to post a sign visible to the public inside the retail establishment that informs purchasers of cigars through catalog sales or internet sales of their responsibility to pay all applicable unpaid state taxes on those cigars. This requirement also takes effect Nov. 1, the notice said.

Michigan is now the eighth state to adopt a tax cap of some sort on premium cigars, joining Oregon, Washington, Rhode Island, Wisconsin, Iowa, Connecticut and Vermont, said a report by Cigar Aficionado.