Posted on 05/21/2002 6:27:48 AM PDT by Phantom Lord
Two cigar stores snuffed out
A hike in the state cigar tax has caused the owners of at least two cigar stores to say they are closing their doors by July 2 when the new tax goes into effect. Both Stogie Bros. in Buffalo and Smokin Flamingo in Clarence say the tax going from 20 percent to 37 percent on the wholesale price of a cigar makes it impossible for them to compete with cigar catalogs, Internet sites and Indian reservations that pay no tax.
"It gets to a point where it's not worth swimming uphill," said Rick Fickhesen, owner of Stogie Bros. on Franklin Street, across from the convention center. "The state isn't a tax friendly state or business friendly state. As long as they try to tax their way into prosperity people will leave."
Stogie Bros. is the last cigar store in downtown Buffalo. Wings of the World Cigar Adventure, which had been in the Hyatt Regency Buffalo since 1997, closed May 1 because of the drop in hotel occupancy at the Hyatt due to the decrease in travel since the Sept. 11 terrorist attacks, said former store manager Len Hoeglmeier.
State lawmakers initially considered raising the cigar tax to 54 percent of the wholesale price, but intense lobbying resulted in a 37 percent cigar tax. New York State currently gets about $21 million a year from the 20-percent tax and expects to get an additional $15 million from raising it to 37 percent.
Cigar store owners wonder if the state will get much additional revenue because they believe the higher taxes will give their customers additional incentives to avoid taxes by buying from catalogs, the Internet or Indian reservations.
Because of the taxes in New York State, Larry Leibowitz buys his boxed cigars from catalogs, but likes stopping by Stogie Bros. to sample new cigars or buy accessories such as the lighter he purchased Monday.
"The taxes are so high in New York," said Leibowitz, manager of Infinity Broadcasting in Buffalo. "It's just going to drive more business away."
If a box of cigars cost Fickhesen $100, he might sell the box for $180 in his store. A catalog might sell the same box for $160 so he would match the price to keep a customer. After paying $20 in tax, he makes $40. With the new tax at 37 percent, his profit would drop to $23.
Fickhesen says he makes about $30,000 a year from running the shop now, but can't afford to support his wife and four kids on the slimmer margins that the tax increase will cause. He hopes someone might want to buy the store and its inventory.
Earl and Louis Schultz, who own and operate Smokin Flamingo, are also closing by the end of June.
"Everybody outside New York State has a 45 percent advantage," said Earl Schultz, who opened the store on Main Street across from the state police barracks four years ago. "People won't smoke less. They'll buy their cigars some place else."
Adding to their troubles is that fact that Main Street is undergoing reconstruction, reducing customer traffic to a trickle.
"This tax increase couldn't have come at a worst time," Schultz said. "You add all these things up and New York State has made it very, very difficult to do business."
Even cigar stores that will remain open such as the Tinder Box in Amherst are holding sales to reduce their inventory before the tax increase takes effect July 2. In addition to stores paying 37 percent on any new cigars they buy, stores must also pay the difference between the old and new tax rate on any cigars they have in stock.
With an inventory worth $100,000, the Tinder Box would have to pay $17,000 in taxes, said owner Steve Dvorak. He plans to reduce his inventory to between $30,000 and $40,000 by giving customers 20 percent off any box of cigars and selling some of his inventory to Tinder Box franchises in other states. Dvorak gets his 20 percent tax back on any cigars he ships out of state.
After the 37 percent tax on the wholesale price goes into effect, Dvorak says he'll have to raise his retail prices by 8.5 percent to 10 percent.
"The guys who buy a couple of cigars for the golf course will still stop in," he said, "But the serious smokers, we may lose the box sales."
Give 'em a try
Idiots.
HaHaHaHaHa. That is really rich. Those liberal jerks running New York State don't have a clue! Don't they teach economics in schools anymore?
Not only will NY lose money due to higher taxes, it will force more small business out of business losing more revenue. What a mess we have here in NY.
Pray for us Freepers.
The city of San Jose and state of CA (via its "Meathead Tax") are doing the same to cigar vendors. You can almost smell the desperation at my local store, Club Havana Cigars.
They have outlets in Burlington and Statesville also. They just opened a new remodeled store on 5th avenue in Manhatten, but the prices aren't as good.
I bought a gift box of Montecristo Delacrois (10 cigars) for 59.99 a month ago. I saw the same gift set in a Vegas cigar shop for 175.00! They were selling the individual stogies for 17.50! I felt like a prince smoking those big suckers at the table, especially knowing I paid only 6 bucks each.
So, judging by your profile, you're all for state interference in matters you don't like - yet when YOU'RE being taxed it's a different story. That may strike some as hypocritical, you know.
Don't gloat, they'll be coming after your vice next.
I used to enjoy The Griffins #300. But after their factory burned down the price went sky high. Hoyo Excalibur #1 is a favorite of mine.
I have some Partagas 1993 Reserves sitting in my humidor that have been there for 6 years. Some cubans from trips abroad the same age. I just cant bring myself to smoke em just yet.
Where do you people come from? Germany or Mars!
Fighting Ordinances & Restrictions to Control & Eliminate Smoking.
Don't gloat, they'll be coming after your vice next.
Truer words have never been spoken. Atlas Shrugged is being played out before our eyes.
Don't ever forget what Hillary said during the Great Health Care War of 1994 (paraphrased): I can't worry about every undercapitalized business out there.
When the politicians have killed the golden goose called 'Big Tobacco', they'll have to go elsewhere to replace those revenue streams. The sights are being set on 'Big Mac'.
Although most of what passes for economics these days is just liberal claptrap.
The real problem is that most legislatures are composed almost entirely of lawyers and I doubt if they have ever seen any economics textbook.
As the old saying goes . . . taxes corrupt politicians!
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