ST. PAUL — A few times a week, John Schumacher gets in his car and drives across the border to Hudson, Wis., where he stops by St. Croix Cigar Co. to meet with friends and enjoy a cigar.

The former Hudson resident, who resides in St. Paul, says it’s the conversation and camaraderie that bring him to the shop’s smoking lounges. But it doesn’t hurt that the stogie he’s puffing on costs less on that side of the St. Croix River.

“There’s a huge difference in pricing; there really is,” Schumacher said Wednesday, cigar in hand. “The prices are substantially higher in Minnesota.”

That difference in pricing stems from how the two states tax premium cigars. In Minnesota, taxes on a cigar are set at 95 percent of the wholesale price or $3.50, whichever is lower. That same cigar in Wisconsin is taxed at 71 percent of the wholesale price, with a cap of 50 cents.

The higher prices in Minnesota have driven some Twin Cities cigar smokers to cross into Wisconsin or go online to buy their smokes, and that has hurt premium cigar retailers in the metro area, said Tom Harlan, owner of Golden Leaf in Minneapolis and St. Paul.

“Taxes are the issue for us,” Harlan said of his stores. “We’ve literally lost all of our box sales. Those customers are still consuming products; they’re just not buying them from brick-and-mortar retailers anymore because of the tax.”

The American Lung Association in Minnesota, however, sees higher taxes on tobacco products as a positive: It serves as a deterrent to smoking.

“Higher prices for tobacco products do have an impact on smoking rates, particularly among young people,” said Bob Moffitt, spokesman for the association. “We’ve seen in states that have raised taxes on tobacco products time and time again that those smoking rates start to drop.”

Cigars do have an allure for some young people, Moffitt said. And while people may have different cigar smoking habits compared with those who smoke cigarettes, cigars are harmful products that can have health consequences, he said.

“There is really no such thing as a safe tobacco product,” Moffitt said.

Carl Kuhl, a representative of the Association of Minnesota Premium Cigar Retailers, said that when it comes to young people picking up tobacco habits, there should be a different conversation with regard to premium cigars.

A cigar that costs $9 or $10 isn’t an item teenagers are typically seeking out, he said. The market for premium cigars is adults who see cigar smoking as part of their lifestyle, and they are sophisticated enough to buy cigars online or in other states to save money.

Instead of serving as a deterrent to cigar smoking, Kuhl said, the higher taxes have more of an effect on where Minnesotans buy cigars.

Residents who bring tobacco into Minnesota that was bought elsewhere may be required to pay taxes on those products, but if those people are making those purchases to avoid higher prices associated with Minnesota’s taxes, it’s not likely they’ll turn around and pay that money to the state, Harlan said.

“All these taxes are not being collected,” he said. “I think it’s a bigger issue than maybe they realize.”

“The state doesn’t benefit,” Harlan added, “because it’s losing the revenue.”

The Minnesota Department of Revenue did not collect tax revenue data specific to cigars prior to last summer. That was when the state saw the latest increase in its tobacco tax, which on cigars went from 70 percent to 95 percent of the wholesale price.

Asked if it is taking enforcement actions against people who bring cigars into Minnesota without paying taxes, the Department of Revenue said in a statement that it works with other states, as well as local and state law enforcement, “to ensure that Minnesota’s tax laws are applied evenly and fairly to all Minnesotans.”

“Frankly, our taxes were way too low in that area before,” Moffitt said of the last tobacco tax increase. “It’s something we need to keep working on. The tobacco companies never quit working to market their products to young people.”

The state also instituted the $3.50-per-cigar cap at the time of the last increase, which actually lowered the taxes on the most expensive cigars. But most cigars went up in price, and many premium sticks are now over $10 — a threshold that some regular cigar smokers won’t cross, said Josh Rushlo, regional sales manager for Tamarac, Fla.-based Gurkha Cigar Group Inc.

Rushlo does business throughout the Midwest, including Minnesota and Wisconsin, and said he sees a difference between the retail cigar industries in both states; there’s growth in Wisconsin, but not in Minnesota.

“It definitely has driven business out of the state,” he said of Minnesota’s tax.

Minnesota premium cigar retailers’ revenues have dramatically decreased over the past 10 years and some have closed, according to Kuhl.

He said the industry would like to see the overall cap on premium cigars lowered, but there are no current legislative efforts to do so.

For Harlan, a cap closer to $1 would help his stores compete with the Internet, he said.

But for now, he’s trying to adapt.

“What we’ve tried to do is become a destination store,” Harlan said, adding his stores have smoking lounges where customers can smoke cigars.

Because customers are smoking cigars bought at the stores, they are in essence sampling the store’s products, which is allowable under the state’s smoking ban, Harlan said.

But the ban has made it harder to sell cigars. Throw in the higher taxes, and these are hard times for what Harlan calls “traditional tobacconists.”