• Hi Guest - Come check out all of the new CP Merch Shop! Now you can support CigarPass buy purchasing hats, apparel, and more...
    Click here to visit! here...

SCHIP Information update.

I think you would be surprised how many will be able to handle the floor tax. Most of the small business guys I work with would say that they would close their doors, not be able to make it, etc., but when the rubber meets the road they love what they do and find a way to make it work. I think this is terrible legislation, but I also think that the majority of the retailers would be OK. The business won't be nearly as profitable, and many of them will probably open secondary businesses, but I don't see very many shops closing from my experience.

D
 
mmburtch said:
Blue Dragon said:
So, out of curiosity, what would this mean to me? Please check my math and LMK if I am looking at this correctly.

Let's start with an $8 MSRP cigar, today. So, before the tax, the cigar retail price was $6.34. Tax on this cigar would be $3.36, but with the cap it would be $3. So the new cost of the cigar would be $9.34.

Does that look correct? TIA.
Click to expand...

I'm not quite sure why you list a MSRP of $8 and a retail of $6.34. Here is how I read this as it applies to you a resident of Idaho.

Assuptions are that Wholesale is 50% of retail and retail is MSRP, Idaho state tobacco tax is 40% of wholesale, Federal tax will be driven by MSRP not shelf pricing.

As it stands today:

Retail price...8
State tax...1.6
federal tax....05 (current cap)

total $9.65 before local sales tax

If the cap increases

retail price...8
state tax...1.6
federal tax...3

total $12.60 before local sales tax
Click to expand...
You answer your own question; Federal tax will be dictated by MSRP. That was the assumption I made. It didn't seem to make sense if the tax would be dictated by floor pricing as that would continuously change when you start adding taxes....

You don't take into consideration that there is already a 20.79% tax in place, so in order to find the increase I took away the 20.79% federal tax and then applied the 52.988% federal tax. Or at least, that is what I was trying to do. I guess I was assuming that the federal tax was already included today in MSRP.

I am trying to see what would change in the base price of a cigar with out any influence from a state's tax structure, so I didn't apply the Idaho tax; although you are correct, it is 40% of the wholesale price. Maybe a current cigar retailer could shed a little light on how the current federal tax is applied to cigars?

About the floor tax you mention, it seems that it would depend on whether or not the tax is assessed at POS, which I believe it is. Which would mean that the alleged $52,988 tax bill would only get paid as cigars sold. However, your $52,988 number is incorrect as it does not take into consideration the $3 cap. My previous calculation at least shows that even a $6 cigar would incur the $3 cap. So it would be more close to accurate to say that the number of cigars X $3 would be the total floor tax from the bill.

*edit: oh .. I didn't see where you say there is a $.05 cap on federal tax currently. If that's the case, then I can see how a retailer could still sell at MSRP and absorb the $.05 federal tax.
 
Blue Dragon said:
mmburtch said:
Blue Dragon said:
So, out of curiosity, what would this mean to me? Please check my math and LMK if I am looking at this correctly.

Let's start with an $8 MSRP cigar, today. So, before the tax, the cigar retail price was $6.34. Tax on this cigar would be $3.36, but with the cap it would be $3. So the new cost of the cigar would be $9.34.

Does that look correct? TIA.
Click to expand...

I'm not quite sure why you list a MSRP of $8 and a retail of $6.34. Here is how I read this as it applies to you a resident of Idaho.

Assuptions are that Wholesale is 50% of retail and retail is MSRP, Idaho state tobacco tax is 40% of wholesale, Federal tax will be driven by MSRP not shelf pricing.

As it stands today:

Retail price...8
State tax...1.6
federal tax....05 (current cap)

total $9.65 before local sales tax

If the cap increases

retail price...8
state tax...1.6
federal tax...3

total $12.60 before local sales tax
Click to expand...
You answer your own question; Federal tax will be dictated by MSRP. That was the assumption I made. It didn't seem to make sense if the tax would be dictated by floor pricing as that would continuously change when you start adding taxes....

You don't take into consideration that there is already a 20.79% tax in place, so in order to find the increase I took away the 20.79% federal tax and then applied the 52.988% federal tax. Or at least, that is what I was trying to do. I guess I was assuming that the federal tax was already included today in MSRP.

I am trying to see what would change in the base price of a cigar with out any influence from a state's tax structure, so I didn't apply the Idaho tax; although you are correct, it is 40% of the wholesale price. Maybe a current cigar retailer could shed a little light on how the current federal tax is applied to cigars?

About the floor tax you mention, it seems that it would depend on whether or not the tax is assessed at POS, which I believe it is. Which would mean that the alleged $52,988 tax bill would only get paid as cigars sold. However, your $52,988 number is incorrect as it does not take into consideration the $3 cap. My previous calculation at least shows that even a $6 cigar would incur the $3 cap. So it would be more close to accurate to say that the number of cigars X $3 would be the total floor tax from the bill.
Click to expand...


Although the current Fed tax rate is 20%, the current cap is $.05. which I reflected above.

If the floor tax is enacted as a POS tax, how will a retailer differentiate stock on hand Jan 1 2008 from stock purchased after that date on which the tax was already paid. It was my understanding that the floor tax was on all inventory as of Jan 1, 2008. You are correct, as I did forget the cap which would reduce the floor tax. I still feel, that for many of the small retailers, it will result in a 50% reduction in proffit for the year. The big boys, like Famous, CI and others would be stupid not to be quietly searching for offshore locations.
 
Hopefully those that voted against this measure stand their ground. I wonder how many of them are up for re-election in 2008? It seems like they would be the most likely to change their vote.

This is seeming inevitable, though. I don't even think it matters who is President after Bush. This is going to go through one way or the other. Hopefully they can work out something that can be funded with zero tax increases for anybody. I won't hold my breath, though.
 
LilBastage said:
Hopefully those that voted against this measure stand their ground. I wonder how many of them are up for re-election in 2008? It seems like they would be the most likely to change their vote.

This is seeming inevitable, though. I don't even think it matters who is President after Bush. This is going to go through one way or the other. Hopefully they can work out something that can be funded with zero tax increases for anybody. I won't hold my breath, though.
Click to expand...

What they're proposing can't be funded WITH the tax increases proposed.
 
With all the doom and gloom in here, it seems like we're going to have to coordinate runs to our Canadic neighbors for decently priced smokes.

In the meantime, fill those coolerdors, and when they're full, make more! Mortgage the house! Sell the motorhome! There's a tobacco crisis looming! Sever your own head and run around!!!! augh!!!

Seriously, if it passes, I'll be taking more trips out of the country and bringing back suitable quantities of personal-use tobacco. It's amazing what you can fit in the back of a large SUV. :)
 
You must log in or register to reply here.
Top