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Tax deductions every cigar lounge owner should know about.

Writer's picture: Plymouth WrightPlymouth Wright

Updated: Jan 21

Running a cigar lounge is more than just creating a luxurious space for enthusiasts; it’s also a business with unique financial challenges and opportunities. Understanding the tax deductions available to you can significantly reduce your tax burden and improve profitability.



Here are the key deductions every cigar lounge owner should know about:


1. Cost of Goods Sold (COGS)


Your inventory of cigars, tobacco, accessories, and other retail items is central to your business. The cost of acquiring these goods is deductible. This includes:

  • Wholesale costs of cigars and tobacco products

  • Humidors, lighters, cutters, and other accessories

  • Shipping and handling fees associated with inventory


Pro Tip: Keep detailed records of your inventory purchases and ensure accurate tracking to calculate your COGS properly.


2. Rent or Lease Expenses


Whether you lease a storefront or a lounge space, your rental payments are fully deductible. Don’t forget to include:

  • Monthly lease payments

  • Property taxes (if you’re responsible for them under the lease agreement)

  • Insurance tied to the leased property


Tip: If you’re operating from home for administrative purposes, you may qualify for a home office deduction.


3. Employee Salaries and Benefits


If you have staff managing your lounge, their salaries, wages, and benefits are deductible. This includes:

  • Hourly wages for employees

  • Managerial salaries

  • Employer’s share of payroll taxes

  • Health insurance and retirement contributions


Bonus: Independent contractors, such as entertainers or event coordinators, are also deductible, as long as you issue them a 1099.


4. Marketing and Advertising Costs


Promoting your cigar lounge is essential to growing your customer base. Deductible expenses include:

  • Digital marketing campaigns (Google Ads, Facebook Ads, etc.)

  • Website hosting and development costs

  • Printing promotional materials like flyers and business cards

  • Sponsorships for local events


Tip: Track ROI on your marketing efforts to ensure you’re maximizing the benefit of each dollar spent.


5. Tobacco Licensing and Compliance Fees


Operating a cigar lounge requires adhering to strict licensing and compliance regulations. Fees associated with:

  • Tobacco retail licenses

  • Local or state permits

  • Compliance-related legal consultations

These are all deductible business expenses.


6. Utilities and Operational Costs


The day-to-day expenses of keeping your lounge running are fully deductible, including:

  • Electricity, water, and gas bills

  • Internet and phone services

  • HVAC maintenance for climate control in your humidor


Pro Tip: Energy-efficient upgrades may qualify for additional tax credits.


Many lounge owners miss deductions that could save them thousands of dollars.


7. Furniture, Fixtures, and Equipment


Your lounge’s ambiance is part of the experience you offer. Deduct the costs of:

  • Furniture like seating, tables, and bar counters

  • Humidors and cigar storage equipment

  • Point-of-sale systems and cash registers


Bonus: Larger expenses may need to be depreciated over time, but they’re still deductible.


8. Travel and Entertainment


If you travel for business purposes, such as attending trade shows or sourcing premium cigars, those expenses are deductible. Eligible costs include:

  • Airfare, lodging, and meals during the trip

  • Registration fees for trade shows and events

  • Mileage if driving your own car for business purposes


Note: Meals are typically 50% deductible, so keep accurate receipts and records.


9. Professional Services


Hiring professionals to manage your business operations can save you time and ensure compliance. Deductible services include:


  • Accounting and bookkeeping services

  • Legal fees for business-related matters

  • Business consulting and financial planning


Pro Tip: Partnering with an accountant who specializes in cigar lounges can help you identify additional savings.


10. Depreciation of Assets


High-value items you purchase for your lounge, such as a state-of-the-art ventilation system or premium furniture, may be deducted over time through depreciation. The IRS provides guidelines for how to calculate and claim these deductions.


Tip: Take advantage of Section 179 to deduct the full cost of certain assets in the year they are purchased.


Final Thoughts


Understanding and leveraging these tax deductions can make a significant difference in the financial health of your cigar lounge. Keeping meticulous records and working with a tax professional can ensure you maximize your deductions while staying compliant with all regulations.


If you’re looking for expert accounting services tailored to cigar lounge businesses, we’re here to help. Contact us today to schedule a consultation.

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