June 4, 2021

New Bills Include Language Addressing Tax Concerns for Online Cigar Businesses

Home | Politics | New Bills Include Language Addressing Tax Concerns for Online Cigar Businesses

Tax Challenge Resolved Through Work of Lobbyists

Sometimes it’s the minor details in a bill that can have a major impact. In the case of Old Line Government Affairs’ client The Cigar Association of America, the language in existing law had a significant impact on a very important element that all businesses face — taxes. Of issue: the language in these bills would adjust the way tax is calculated, not to raise or diminish it, and allow businesses to more accurately predict their finances.

Old Line Government Affairs advocated for adjusted language in SB 883 and HB 1324 – Tobacco Tax and Sales and Use Tax – Out-of-State Sales of Premium Cigars and Pipe Tobacco and Tobacco Smoking Devices, which recently became law. Legislation passed in 2019 required online cigar companies to estimate and pay taxes in the exact same way as brick and mortar establishments, despite significant differences in how products are purchased. Traditionally, large quantities might be purchased at one time at a trade show. However, online companies typically make purchases on a rolling basis, with fluctuating prices. The fluctuating price made it very difficult for an online company to calculate and predict what taxes it would owe.

In 2020, language in the Joint Chairman’s budget report recognized the issue and directed the Comptroller’s office to study the impacts and report back to the Legislature. An issue that was happening all across the country, online cigar companies retained tax expertise on how to structure the most precise language for legislation. The resulting corrected language in SB 883 and HB 1324 gives online cigar companies a fair and more accurate way to calculate their taxes. Maryland is the first state to enact such language, creating a model for other states in the U.S. to follow.

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