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."
Mrs TC and I visit NYC every January and Nat's is one of my favorite stops.
I'll usually let the Mrs. wander off shopping down 5th avenue and I'll find a comfortable overstuffed chair in Nat Sherman's humidor and enjoy a good smoke.
JR's has the right prices, but Nat's is the place to smoke.
Does Mrs. Phantom Lord have a like-minded sister? Most of my girlfriends have freaked when I have taken one out of the humidor, nevermind when I have lighted one up!
It effects everyone every year when health insurance premiums are determined and then passed on to all of us. In essence, those of us who do not smoke are subsidizing the health care costs of those who litter the CVICU and cardiac cath labs of this country not to mention the oncology wards.
My wife has worked the last 7 years in Cardiovascular ICU, Telemetry, and Cardiac Cath units and one common element for those in the units are tobacco.
Deny you the right to smoke? I wouldn't vote for it.
Make you pay more for your health care based on that? Yep.
Thats not what is happening though.
And you non smokers live so much longer than smokers and collect far more in SS benefits and medicare benefits. Non smokers should pay higher SS and Medicare taxes than smokers since they receive far higher benefits from them.
I was referring to trying to tax my right to an occasional cigar out of existence. As regards Health Insurance Premiums, I'm willing to kick in for the extra risk to my health caused by my handful of cigars each year as soon as everyone who overeats, overdrinks, uses drugs and doesn't exercise presents me with my rebate.
(end sarcasm)
Just goes to show government is behind most of the ills in society today.
Have you not heard of the Senator in California that wants to impose an extra tax on so-called junk food?
Since you can point your finger at smokers, I'm sure I can assume that you are 100% healthy, do not ever nor have ever touched or consumed an illegal drug, are not even one pound overweight or underweight, have never or will never drank alcholic beverages more than the safe daily amount prescribed by the medical community, that you have a strict monogamous relationship. I trust you never indulge in risky pastimes such as skydiving, skiing, ATV riding, motorcycling, horseback riding or anything that could conceivable pull muscles or break bones. After all we don't want you missing work and adding to the cost of doing business by absenteeism because that is passed on to the consumer, you know. Or having an accident that would paralyze you and cause you to draw on the public till to care for you.
I trust that you never exceed the speed limit because to do so would put other drivers at risk because of your negligent driving.
Can't discuss the issue in a normal, adult rational manner. Drops the bomb and heads for the hills!!!!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.