S-CHIP Required Reading

[Tio Gato]

I'm going to show this to my wife as proof that I better buy several hundred cigars in the next couple of months.

[BarneyBandMan]

In talking with my local B&M owner yesterday, he said the cigar manufacturers are looking at all kinds of ways to keep this tax effect to a minimum. For example, he said he's talked to some reps who were indicating that some manufacturers were looking at breaking down the actual cost of a box of cigars in order to reduce the effective actual cost of the tobacco in the box alone and thus reducing the effect of the pass-along tax.

For example, a box of premiums tubos consists of a few dollars worth of wood for the box, the glass for the tubes, etc.--trying to do what ever they could to identify the exact price/value of the tobacco in the box alone and then pay the tax based on that, not the entire package.

He seemed to think it was a possibility to do that. I don't know, but thought I'd pass it along for

[macpappy]

I don't understand his logic in the 70% increase he is predicting.

I don't think/believe the government is going to place a tax increase on most manufacturers since they are not U.S. companies so their cost of business shouldn't go up. The same should be true on US companies, I haven't seen anything to suggest that their cost of business will go up because of SCHIP. The local B&M are going to be the ones hit first because they will have to pay the increase on everything they order. So, if you take a box of 20 cigars that normally has a wholesale price of say $80. Add to that the 40 cents per stick SCHIP tax increase ($8.00) and the wholesale cost goes up from $80 to $88 per box. I would hope that the B&M would do the right thing and only increase the retail price by the amount of the tax increase also. This would take a $5.00 cigar and raise the price to $5.40 per stick.

Now I am not sure how the wholesaler is affective by the tax increase since he is buy directly from the manufacturer. Will the wholesale be required to pay a tax on the price of the cigars from the manufacturer? My foggy understanding was that the tax would be based on what the wholesaler sold the cigars to the retailer for.

I've talked to my local B&M owner and he said that is what he plans to do when forced to. He figures if he increases the price more than he absolutely has to that he will lose business.

[Snake Hips]

Looks like if you roll your own, you may now also have to grow your own...

[hotreds]

Sobering.....

[floydpink]

How will this affect overseas purchases, if at all?

I absoluetly "Love" (Dripping with Sarcasm) How the hardest hit from this is the demographic that likely can withstand this increase the least!

People that roll your own, typically speaking, are the lower middle to lower income tax bracket folks that are least equiped financially to afford that type of tax increase.

God I hate what our Government "Of the People, for the People" is doing to the very constituents it claims to "Serve" (Dripping with Sarcasm yet again!)

Our founding fathers unquestionably are rolling over in their graves in dismay to what this land has become!

Morte a Tyrants

[Buena Fortuna]

Originally Posted by PaleRider

I absoluetly "Love" (Dripping with Sarcasm) How the hardest hit from this is the demographic that likely can withstand this increase the least!

People that roll your own, typically speaking, are the lower middle to lower income tax bracket folks that are least equiped financially to afford that type of tax increase.

God I hate what our Government "Of the People, for the People" is doing to the very constituents it claims to "Serve" (Dripping with Sarcasm yet again!)

Our founding fathers unquestionably are rolling over in their graves in dismay to what this land has become!

Morte a Tyrants

AMEN!

[Snake Hips]

Originally Posted by floydpink

How will this affect overseas purchases, if at all?

Depends on what you mean...certain overseas purchases aren't affected at all anyway, but often the tax is the replacement of your purchase with an awesome letter from the Treasury Department...

[Totemic]

Ok, how about cigars grown, produced and distributed from some other non-Cuban nation with zero presence in the US?

They shouldn't be subject to these taxes no?

[alley00p]

I talked to my B&M owner a couple days ago; he mentioned for the first time, Fuente/Newman has discontinued the practice of "requiring" B&M's order a lot of sticks that they know they won't be able to move. Now, he can pick and choose for the first time since he's been in business (no more boxes of "curly heads" as part of his order )!

The other thing is that the "bulk cigarette tobacco" tax was slated to rise from about @$1.50/lb to $24.00/lb. Even a lot of Democrats are realizing that this would bankrupt the domestic cigarette industry. The number of layoffs in that industry might drawf the crap that has happened in the auto industry! According to a friend, he interviewed an "unnamed source" who said that this is one of the things that is holding S-CHIP up right now.

Who knows what will happen?

[jitzy]

Originally Posted by macpappy

I don't understand his logic in the 70% increase he is predicting.

I don't think/believe the government is going to place a tax increase on most manufacturers since they are not U.S. companies so their cost of business shouldn't go up. The same should be true on US companies, I haven't seen anything to suggest that their cost of business will go up because of SCHIP. The local B&M are going to be the ones hit first because they will have to pay the increase on everything they order. So, if you take a box of 20 cigars that normally has a wholesale price of say $80. Add to that the 40 cents per stick SCHIP tax increase ($8.00) and the wholesale cost goes up from $80 to $88 per box. I would hope that the B&M would do the right thing and only increase the retail price by the amount of the tax increase also. This would take a $5.00 cigar and raise the price to $5.40 per stick.

Now I am not sure how the wholesaler is affective by the tax increase since he is buy directly from the manufacturer. Will the wholesale be required to pay a tax on the price of the cigars from the manufacturer? My foggy understanding was that the tax would be based on what the wholesaler sold the cigars to the retailer for.

I've talked to my local B&M owner and he said that is what he plans to do when forced to. He figures if he increases the price more than he absolutely has to that he will lose business.

I believe the way it works and I could be wrong is this, if a B&M buys a box from the manufacturer for $100 he sells it for double $200. So if the increase hits the cigars before it gets to the B&M and that box now costs him $108 he's gonna sell that for double $216. So sadly one of the only ways to soften the blow on the public is for the B&M to absorb some of the increase and thats really not fair to them. The way I see it B&M's in states like mine (NY) are in a lot of trouble since we already pay 37% tobacco tax here this will kill a lot of these small businesses.

[Kreth]

Originally Posted by jitzy

The way I see it B&M's in states like mine (NY) are in a lot of trouble since we already pay 37% tobacco tax here this will kill a lot of these small businesses.

Especially with our illustrious governor now making noise about raising the state tobacco tax, AGAIN.

[Pat1075]

It'll be the floor tax that'll put the hurt on a lot of businesses. I.E. since the tax was only X when they bought the product they have to pay Y because that tax didn't exist yet on everything they already own. (seems extortionist to me but what do I know)

[AD720]

Originally Posted by Pat1075

It'll be the floor tax that'll put the hurt on a lot of businesses. I.E. since the tax was only X when they bought the product they have to pay Y because that tax didn't exist yet on everything they already own. (seems extortionist to me but what do I know)

I thought the floor tax got pulled from the final bill?


EDIT: We were both right -no floor tax on large cigars but I guess they could still get the floor tax on bulk tobacco and "small" cigars...

-----------------------

New SCHIP Bill—Federal Cigar Tax to Be Capped at 40 Cents [up from 5 cents, that's my pie?]
Cigar Aficionado ^| 2-8-09 | David Savona

Posted on Sunday, February 08, 2009 4:02:05 PM by SJackson

The House Ways and Means Committee introduced the newest incarnation of the State Children's Health Insurance Program (SCHIP) today. The International Premium Cigar & Pipe Retailers Association (IPCPR) reported in an email that the legislation would impose a revised federal excise tax on large cigars—52.4 percent, with a maximum tax cap of 40 cents per cigar.
It was feared throughout the cigar industry that the cap would be much higher. The original version called for a $10 cap, and earlier versions had a cap of $3 per cigar. The tax is currently capped at five cents.
The bill, which seeks to fund an expansion of SCHIP with higher tobacco taxes, is expected to pass given the new Democratic leadership in Washington. Last year, Congress attempted to pass the expansion, but President Bush vetoed the legislation two times, most recently in December.
"Our industry came together to aggressively challenge the disastrous, proposed $3 tax cap," wrote Chris McCalla, legislative director of the IPCPR, in the email. The new legislation also does not have a floor tax on cigars, although certain other tobacco products would be subject to the floor tax.

[mithrilG60]

Originally Posted by macpappy

I don't think/believe the government is going to place a tax increase on most manufacturers since they are not U.S. companies so their cost of business shouldn't go up. The same should be true on US companies, I haven't seen anything to suggest that their cost of business will go up because of SCHIP. The local B&M are going to be the ones hit first because they will have to pay the increase on everything they order. So, if you take a box of 20 cigars that normally has a wholesale price of say $80. Add to that the 40 cents per stick SCHIP tax increase ($8.00) and the wholesale cost goes up from $80 to $88 per box. I would hope that the B&M would do the right thing and only increase the retail price by the amount of the tax increase also. This would take a $5.00 cigar and raise the price to $5.40 per stick.

Now I am not sure how the wholesaler is affective by the tax increase since he is buy directly from the manufacturer. Will the wholesale be required to pay a tax on the price of the cigars from the manufacturer? My foggy understanding was that the tax would be based on what the wholesaler sold the cigars to the retailer for.

My understanding that the tax is applied each time tobacco changes hands. With cigars that will be at least 4 times (as product arrives in the US, as the importer sells to the wholesaler, as the wholesaler sells to the retailer as the retailer sells to the consumer) so the actual tax will be $1.60 per stick and not $0.40. I could be wrong though as, being Canadian, SCHIP makes 0 difference to me one way or the other. Besides SCHIP is still a joke of a tax compared to what we're hit with up here so I'd still count yourselves lucky.

[macpappy]

Originally Posted by mithrilG60

My understanding that the tax is applied each time tobacco changes hands. With cigars that will be at least 4 times (as product arrives in the US, as the importer sells to the wholesaler, as the wholesaler sells to the retailer as the retailer sells to the consumer) so the actual tax will be $1.60 per stick and not $0.40. I could be wrong though as, being Canadian, SCHIP makes 0 difference to me one way or the other. Besides SCHIP is still a joke of a tax compared to what we're hit with up here so I'd still count yourselves lucky.

The explanation given to my local B&M owner is that it is only going to be applied to the wholesale price paid by the retailer.

You may have higher taxes but don't you have that wonderful socialized health care for everyone?(note the sarcasm, please)