Rep. Hall Proposal Clears the Air on Michigan’s Cigar Tax Conundrum
There’s a bill headed to the Michigan State House that has cigar shop owners holding their breath. Without it, shops like Battle Creek’s Corona Smoke Shop might not be able to hang on. A 2012 law placed a 50-cent cap on the sale of premium cigars to help reign in out-of-control taxes that would hurt small businesses that sell them. The cap is set to expire on Oct. 1st. 63rd District State Rep. Matt Hall (R-Marshall) sponsored a bill to make that cap permanent. House Bill 4485 was approved by the House Tax Policy Committee and is headed to the full house.
Amanda Phebus, owner of Corona Smoke Shop at 275 West Columbia in Battle Creek remembers the days before the cap. “I’ve been in the business for 22 years, and the tax on cigars just kept creeping up every year,” said Phebus. In 1992, the tax was capped at a steady fifty cents. “On top of that, our suppliers also increase prices every year, so it can be hard to compete with some of the online companies.”
“Without a cap, the tax will increase to 32 percent, which means an increase of three or four dollars per cigar. People will likely start shopping for these products elsewhere,” said Hall, who chairs the committee. “Governor Whitmer and her administration shut cigar lounges down in response to COVID-19 and many are struggling to get by. Now that we have fought in the Legislature for them to resume some level of activity, it makes no sense to hit them with a huge tax increase on their products.”
Phebus operates cigar shops in Battle Creek, Jackson, Albion, Eaton Rapids and will be opening one soon in Williamston. “Without that cap, it will hurt small brick and mortar businesses like ours in Michigan. Buying online definitely hurts us, and we’d have no prayer of competing if the current cap is allowed to expire. It’s hard enough to compete now.”
Hall noted premium cigar sales increased in the state in 2012 when the cap was originally put in place, and the proposal will allow Michigan shops and lounges to be competitive. According to testimony when the legislation was in committee, tax revenue also increased 30 percent after the cap was implemented.