Posted on 07/03/2017 10:41:23 AM PDT by Drango
Starting July 1, California’s tax rate for other tobacco products (OTP), including cigars, will increase from 27.3 to 65.08. The reason for this massive increase is Proposition 56, a ballot measure which passed overwhelmingly in November that increased the state’s tax on cigarettes from 87 cents to $2.87.
California taxes other tobacco products by dividing the tax rate per cigarette by the average wholesale cost per cigarette, that number is then the OTP tax. Since 2011, this has generally stayed around 30 percent, but because of the massive cigarette tax increase, the OTP tax has more than doubled.
Consumers are likely already feeling the effects of the cigarette tax. It went into effect on April 1 and because of the turns, i.e. how quickly stores sell their inventory of cigarettes, the higher-taxed cigarettes are likely already being bought.
For cigars, the change will take additional time.
First, because of how the OTP taxes are set, the change was delayed until July. Secondly, the new tax rate only applies to cigars coming into the state beginning July 1. Any product that is already in a retailer’s humidor as of today will still be taxed at the old rate.
Once the changes take affect, they will be substantial. Per halfwheel estimates, a cigar with an MSRP of $9.50 likely retails for around $12.09 in California before the state’s 7.25 percent sales tax. Under the new tax, that price will increase to $15.68. When all is said and done, that $9.50 cigar will cost $16.82 with the new tax and sales tax, a total increase of $3.85.
While many manufacturers have encouraged California retailers to load up on stock under the old rate, at least one manufacturer actually shipped new cigars to California early, just so the retailers could enjoy the old tax rate. Tatuaje shipped its TAA 2017 early, a move that will likely save consumers around $4.85 per cigar.
Though it might take consumers a while to feel the effects, the industry will see negative impacts much earlier. Attendance at the 2017 IPCPR Convention & Trade Show, which begins July 11, is expected to be negatively impacted by the California tax situation. At least three companies have told halfwheel they will not be attending the show because they believe attendance will be light due to the California tax.
Per halfwheel’s estimates, California will now have the third highest tax on cigars in the U.S., it previously ranked 17th.
As free people, we can freely march into voting booths, and freely vote to reduce, regulate, restrict or tax tobacco.
Californians, Just send all your money to the government. You’re screwed.
Many cigar smokers have long since abandoned the brick and mortar stores and bought smokes on-line.
These state taxes have contributed to the creation of on-line mega-stores like Cigars International, Holts, Cigar.com, Cigarpage, Cigarplace, Famous, Bestcigarprices and others.
They thank California for the new business.
Interesting fact—most of these mega-stores are located in PA—because PA has no taxes on cigar sales.
The problem is they can take ALL the money and it still will not be enough...
They need the money to pay for the illegals, the muzzies, the crime, the sex-”change” operations, and all the other things they do that they shouldn’t do with our money.
Some welcome their totalitarian overlords. I for one do not.
“Interesting fact—most of these mega-stores are located in PA—because PA has no taxes on cigar sales.”
I did not know that, I buy from Famous smoke shop. But Holts and Cigar.com are located very close to each other in Bethleham,Easton and N. Philly.
Exactly. Once the profit margin becomes high enough you will see serious smuggling operations pop up. And net tax revenue will go down.
because PA has no taxes on cigar sales.”.....OH, BS. A pack of Captain Black cigars is just south of $7.00. Rendell socked a bigger tax on cigars than the cigarettes about 13 years ago. $6.85 a pack including the 6% sales tax after buying.
Just wait till their respective states start to obtain the sales records of these online sellers then go after the buyers for the unpaid taxes to the state.......
That's what a lot of states did to the out of state cigarette buyers......My state of Michigan included.
I don’t smoke but voted against the onerous increase of tobacco taxes out of concern for the cigarette-addicted 25% of the population, largely lower-income people, who will still buy cigarettes with the higheer tax.
When all is said and done, that $9.50 cigar will cost $16.82 with the new tax and sales tax, a total increase of $3.85.An increase of $3.85??? Was that calculation done with common core math?
By the math that I learned in the last century, a $9.50 cigar being sold for $16.82 results in a $7.32 increase rather than a $3.85 increase.
Does Captain Black count as "cigars"?
I buy cigars from outside the country and don’t pay any US taxes on them.
That is what they are advertised as. Should they be Cuban? If so you can’t get them here.
From:Philly.com (July 19, 2016)
“Cigars will remain tax-free because they are the mainstay of a thriving industry in Pennsylvania. Legislators say they want to keep it that way…. Florida and Pennsylvania are the only states that do not tax cigars of either the premium or the gas-station variety.”
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