The actual SCHIP document on cigar & pipe tobacco

[CigarMan Andy]

There has been a lot of questions about SCHIP and the imposed taxes.

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''.

 

[gljvd]

so um whats this mean. How much are prices going up ?

 

[CigarMan Andy]

so um whats this mean. How much are prices going up ?

$.4026 a stick from the time they hit the US. So wholesale .40 a stick to the B&M and that adds up to .80 a stick to $1.6 a stick if made in the US. Made in the US - .40, goes to the distributor .80, and then to the B&M $1.60 if keystone (100%) mark up. That is what I was told.

If you read the document, and there is a link to that page, go to section 701 and read it in it's entirety.

 

[597]

I told Andy at the herf I would look at the document, and I did briefly (just the cigar tax section). I will look at it more on the weekend if anyone would like as well but have summed up the critical portions. If you shoot me a PM with you e-mail Andy I can send you the word document of my findings, and the IRS tax code which is being replaced.

Well here is the summary:



(A) Cigars (manufactured in or imported into the U.S.)


1. Small cigars (defined as weighing not more than 3 pounds per thousand)

Old Tax: $1.828 cents per 1000
$1.594 cents per 1000 for cigars removed during 2000-2001

New Tax: $50.33 per 1000

Difference in Tax:

2653.28% increase, $48.502 increase per 1000 or 4.85 cents per cigar (from original tax of .1828 cents per cigar) this does not including 2000-2001 cigars.


2. Large Cigars (defined as weighing more than 3 pounds per thousand)

Old Tax: 20.719% of the price for which sold, but not more than $48.75 per thousand.

18.063% of the price for which sold for cigars removed during 2000-2001, but not more than $42.50 per thousand

New Tax: 52.75% of the price for which sold, but not more than 40.26 cents per cigar

Difference in Tax:

32.03% increase, (old cap cigar tax 4.875 cents per cigar) new cap cigar tax increases 35.385 cents per cigar or an increase of 7258.46% on the cap tax.


In other words any cigar that costs over $1.25 per stick you will be paying the maximum cigar tax allowable by law (40.26 cents per cigar), where as before you would have been paying a tax of 4.875 cents (the maximum tax allowable by law, which would be reached at any cigar above the price of 25 cents).


Note: These taxes are applied to the manufacturer when the tobacco is sold for consumption.


Any other questons from people I would galdly attempt to anwser them to the best of my ability.



<DISCLAIMER: These notes are merely my opinion of the law and should not be constituted as legal advice>