Question on SCHIP

[enerjay]

Local B&M sent me a notice.

CIGARS WILL INCREASE EFFECTIVE APRIL 1, 2009. INDIVIDUAL
STICKS WILL INCREASE $0.80 AND BOX PRICES WILL INCREASE ...

UPDATE: According to the IPCPR, the tax cap will be 40 cents per large cigar. Please click here for their full press release. The tax portions of the bill can be

What am I missing, its a .40 cent cigar per stick tax increase. Right ?

 

[SPIVY]

it is .40 on the manufacturer level. It will equate to 1-1.50 a cigar

 

[uptown_isy]

There are some companies out there who are raising their prices anyway. Great idea...price increase amongst the tax increase. Others are increasing the tax only. And there are a few who are eating up the tax and not increasing their prices at all. If we are charged an extra $0.40 per cigar, then we will increase our price by $0.40.

 

[Boomer52]

If the SCHIP tax takes effect on April 1, and only applies to imports starting on that date, why are some dealers raising prices on their current stock?

 

[mmburtch]

From what I can tell, there are fundamental misunderstandings of the implication at the B&M level and the consumer level. Frankly, neither of them needs to get it right. The distributors are responsible for charging and collecting the tax.

As for pricing, in a perfect world, the seller would take his cost minus taxes and multiply it by whatever brings him up to MSRP, then add on the taxes. The reality is, Joe the Tobacconist is likely to simply double what he is charged.

 

[gmiranda33]

You are correct. The tax is $.40+ per cigar, roughly $.41 rounded up. As a retailer I am only increasing the retail prices by just that, which is what the manufacters are going to increase their prices by.
IMO some sneaky retailers will increase it to the $.80 per stick to make a profit.
Its ultimately up to you the consumer to decide whom you purchase from.

 

[BlindedByScience]

Check this out - I stopped by a local store to score the wife some Nat Sherman cigarettes, and was told "...you lucked out; those are the last ones that don't have the SCHIP tax on them...". I pointed out that the tax doesn't start until the first of the month and was told "...oh, lots of distributors are charging it already...".

Wonder who's pocket that's going in.....??

 

[uptown_isy]

Check this out - I stopped by a local store to score the wife some Nat Sherman cigarettes, and was told "...you lucked out; those are the last ones that don't have the SCHIP tax on them...". I pointed out that the tax doesn't start until the first of the month and was told "...oh, lots of distributors are charging it already...".

Wonder who's pocket that's going in.....??

It's going to the retailer's pocket. They hope to have a bit more cash on hand for this floor tax. We are still charging the old rate and will charge the new rate once we are charged that rate as well. Hopefully, on April 1st, I won't have ANY cigarettes or RYO tobacco on hand. Already, I'm down to bare minimums.

 

[flamchop]

Where does the $.80 figure come from? The notice I saw at my local shop also mentioned a roughly $.40 per cigar increase...

 

[SPIVY]

some shops will not pass on the tax but factor it into the price of the cigar and mark it up. Hence the $0.80

 

[jayro75]

I got an email from a shop yesterday saying they are adding $1 per cigar for SCHIP. As if the taxes charged here in NY aren't high enough.

 

[Footbag]

Pete Johnson said he will be absorbing the .40 increase, and his lines will not have a price increase. I don't mind the B&M's raising their prices in step with the manufacturers, but hopefully the B&M's will not use the tax to increase their margins. At least we know the good ones won't.

 

[SPIVY]

Pete Johnson said he will be absorbing the .40 increase, and his lines will not have a price increase. I don't mind the B&M's raising their prices in step with the manufacturers, but hopefully the B&M's will not use the tax to increase their margins. At least we know the good ones won't.

He even told his rep from this area to drop the retailer if he notices them putting a blanket increase in price.

 

[Footbag]

Pete Johnson said he will be absorbing the .40 increase, and his lines will not have a price increase. I don't mind the B&M's raising their prices in step with the manufacturers, but hopefully the B&M's will not use the tax to increase their margins. At least we know the good ones won't.

He even told his rep from this area to drop the retailer if he notices them putting a blanket increase in price.

Glad to see he's looking out for the consumer and making some tasty cigars!


IMO, it seems a bit hypocritical for a retailer to vocally oppose SCHIP, and then use it to increase their margins.

 

[mmburtch]

I got an email from a shop yesterday saying they are adding $1 per cigar for SCHIP. As if the taxes charged here in NY aren't high enough.

Did you email them back saying that you would not be purchasing from someone is is charging 2.5 times the actual tax? You should.

 

[Keystone_Raider]

Check this out - I stopped by a local store to score the wife some Nat Sherman cigarettes, and was told "...you lucked out; those are the last ones that don't have the SCHIP tax on them...". I pointed out that the tax doesn't start until the first of the month and was told "...oh, lots of distributors are charging it already...".

Wonder who's pocket that's going in.....??

I've been told that by one of my larger vendors also. And Drew Estate has factored the tax and a price increase into their products- I believe it was effective Mid March. Every order placed after that day had the tax included in the cost. Their reason was that they are a small company and need to raise money to pay the tax- that is not an exact quote but close enough.

I have also been told that when Phillip Morris jacked up their cigarette prices a week or so back that the increase included the SCHIP tax and that there will not be an increase again next week- that remains to be seen.

So some apparently are charging the tax already.

Yesterday I received updated pricing from another vendor and the new pricing made no sense so we called for clarification and was told that depending upon the size of the cigars there was a different tax. I know there is a different tax for large and small cigars but these cigars are all in the large category. If this in fact true- I missed something somewhere along the line. Which with me, is quite possible. :laugh:

The method for funding SCHIP is BS. As one of my friendly competitors said - let them tax clothing so that everyone helps pay for it instead of targeting the tobacco industry.

 

[jayro75]

I got an email from a shop yesterday saying they are adding $1 per cigar for SCHIP. As if the taxes charged here in NY aren't high enough.

Did you email them back saying that you would not be purchasing from someone is is charging 2.5 times the actual tax? You should.

I would have but considering they've lost most of their clientele I didn't think it was worth rubbing salt in the wounds. Plus I haven't been there in about a year.

 

[CigarMan Andy]

Here is the actual SCHIP section on cigars and pipe tobacco, AS IT IS WRITTEN and a link to the entire document.

SEC. 701. INCREASE IN EXCISE TAX RATE ON TOBACCO PRODUCTS.

(a) Cigars.--Section 5701(a) of the Internal Revenue Code of
1986 <<NOTE: 26 USC 5701.>> is amended--
(1) by striking ``$1.828 cents per thousand ($1.594 cents
per thousand on cigars removed during 2000 or 2001)'' in
paragraph (1) and inserting ``$50.33 per thousand'',
(2) by striking ``20.719 percent (18.063 percent on cigars
removed during 2000 or 2001)'' in paragraph (2) and inserting
``52.75 percent'', and
(3) by striking ``$48.75 per thousand ($42.50 per thousand
on cigars removed during 2000 or 2001)'' in paragraph (2) and
inserting ``40.26 cents per cigar''.

(b) Cigarettes.--Section 5701(b) of such Code is amended--
(1) by striking ``$19.50 per thousand ($17 per thousand on
cigarettes removed during 2000 or 2001)'' in paragraph (1) and
inserting ``$50.33 per thousand'', and
(2) by striking ``$40.95 per thousand ($35.70 per thousand
on cigarettes removed during 2000 or 2001)'' in paragraph (2)
and inserting ``$105.69 per thousand''.

&copy; Cigarette Papers.--Section 5701&copy; of such Code is amended by
striking ``1.22 cents (1.06 cents on cigarette papers removed during
2000 or 2001)'' and inserting ``3.15 cents''.
(d) Cigarette Tubes.--Section 5701(d) of such Code is amended by
striking ``2.44 cents (2.13 cents on cigarette tubes removed during 2000
or 2001)'' and inserting ``6.30 cents''.
(e) Smokeless Tobacco.--Section 5701(e) of such Code is amended--
(1) by striking ``58.5 cents (51 cents on snuff removed
during 2000 or 2001)'' in paragraph (1) and inserting ``$1.51'',
and
(2) by striking ``19.5 cents (17 cents on chewing tobacco
removed during 2000 or 2001)'' in paragraph (2) and inserting
``50.33 cents''.

[[Page 123 STAT. 107]]

(f) Pipe Tobacco.--Section 5701(f) of such Code is amended by
striking ``$1.0969 cents (95.67 cents on pipe tobacco removed during
2000 or 2001)'' and inserting ``$2.8311 cents''.

 

[smokintexas]

I think it would be beneficial to compile a list of the manufacturers that are eating the $0.40. That way when someone goes into a B&M that charges 2-3x MSRP for a cigar and blames it on SCHIP you can just say "the manufacturer didn't charge you for the tax increase so where is this extra money going?"

 

[SPIVY]

The only one I know is Pete (Tatuaje)