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Senators consider capping premium-cigar excise tax to help brick-and-mortar retailers
Summary
LB 212 would cap the 20% ad valorem excise tax on premium cigars at $0.50 per cigar to help Nebraska cigar shops compete with online sellers; proponents said the change would level the playing field and could boost in‑state sales, while senators questioned the bill’s $500,000 fiscal note and the logistics of collecting tax on remote sales.
Senator Dave Wardekamper introduced LB 212 to the Revenue Committee, proposing a $0.50-per-cigar cap on the current 20% ad valorem excise tax for premium cigars. Under the sponsor’s description, the bill would leave the 20% rate in place but limit the tax liability to $0.50 on any cigar for which 20% of the price would exceed that cap.
Wardekamper told senators the measure is intended to help Nebraska brick-and-mortar tobacconists and cigar lounges compete with online sellers and neighboring states with lower or capped cigar taxes. "This proposed cap is a proven policy solution that has been adopted in 15 states across the country," he said, and he cited Iowa and Michigan as examples. The sponsor and industry witnesses stressed the change applies only to premium cigars and does not alter taxes on cigarettes or other tobacco products.
Proponents from the industry and local retailers described the bill as a "shop local" measure. Tony Goins, co-owner of the Capital Cigar Lounge, summarized the argument: "I mean, that's what it comes down to. It's a shop local bill." Industry witnesses and the Cigar Association of America told the committee they expect state revenue might recover dynamically if consumers return to in-state shops, and some states that enacted caps later saw increased local sales.
Committee members probed the fiscal and administrative implications. The committee’s fiscal estimate shown in the hearing record was approximately $500,000 in projected revenue loss under a static model; proponents disputed the static assumption and argued a dynamic effect could offset the loss. Senators asked whether the state could instead require online and out-of-state sellers to collect the tax; witnesses said enforcing remote-operator collection is technically feasible but more administratively complex and that doing so could require licensing, registration and Department of Revenue resources.
Questions also addressed the consumer market: the sponsor said the cap would affect higher-priced premium cigars (for example, the cap applies where a cigar’s price exceeds $2.50); witnesses and senators noted that many premium cigars sell substantially above that price and that local shops also provide in-store services and controlled retail environments that make underage purchase harder.
No immediate committee vote was taken. The sponsor said he was willing to work with members and the Department of Revenue on implementation language and possible amendments to ensure online sellers are treated equitably. The written record for the hearing included one proponent letter and five opponent letters.
