Small, filtered cigars making big inroads in Iowa tobacco sales

Filtered cigars that resemble cigarettes in appearance, if not taste, are fast gaining appeal with smokers struggling under budgets strained by tobacco tax hikes.

For $1.28, shoppers at the Cigarette Outlet, 1404 First Ave. NE, could pick up a pack of 20 Wrangler brand filtered cigars last week, one of several brands available.

The filtered cigars come in a 20-pack about the size of a cigarette package, and are similar in appearance. But they cost $2.48-per-pack less than one of the more popular budget cigarette brands, Hy-Val. They're priced a stunning $4.30-per-pack less than Marlboro, one of the mainstay cigarette brands after tax.

“These (filtered cigars) have blown up in the last six or seven months,” said Andrew Beaupre, manager of the Cigarette Oulet on First Avenue. ”I mean, they're $1.27! “Who's not willing to try something new for $1.27 with what they're paying for cigarettes?”

The price difference between the filtered cigars and cigarettes wasn't always so wide. It began recently as the tobacco industry responded to tax hikes that took place to fund the State Children's Health Insurance Program (SCHIP) that was signed into law in February 2009.

Realizing that sales would be hurt by the higher taxes, some manufacturers increased the weight of their small cigars by adding more tobacco, according to Darryl Jayson, vice president of the Tobacco Merchants Association.

By getting the weight above the 3-pounds-of-tobacco-per 1,000 cigars level, manufacturers could get their cigars reclassified from the higher-taxed small cigar category to the lower-taxed regular cigar category, Jayson said.

It's a big difference. Cigars that contain three pounds of tobacco per thousand are taxed the “little cigar” rate of $1 per pack by the federal government and $1.36 per pack by the State of Iowa.

The federal tax on big cigars is only 50 percent of the product price and the Iowa tax is 50 percent of the product price. That was a considerable drop for a product that costs less than $1 per pack.

Beaupre predicts that the government will soon act to close down the cigar classification loophole that the filtered cigar makers have used. It's already starting in some states, according to Dawn Johnson, cigarette and tobacco tax examiner for the Iowa Department of Revenue.

“Because they're so much cheaper, a lot of states are looking at going after the filtered cigars,” Johnson said.

Filtered cigars aren't without health concerns, Jayson said, but they are made with cigar tobacco, a different plant with a much stronger taste.

“Cigars aren't inhaled,” Jayson said. “You keep it in your mouth.”