There are several key takeaways from the proposed tax increase being circulated in Congress for PCA retail members. Going from $0.40 per stick to a ‘per pound’ tax would change a lot. The proposed tax would be $49.56 per pound.
- Example: if a cigar has a weight of 0.636oz, that would mean there are around 25 cigars per pound. Because of its weight, the new federal tax burden per cigar would be $1.57 per cigar. Going from $0.4026 to $1.57 is a tax increase of 365.74%!
Using the numbers provided by the National Association of Tobacco Outlets, the decrease in demand for specific cigars can be calculated.
- Example: If a cigar currently is selling for $11.23 and now has the new federal tax on it, it would be selling for $12.83. This is an 15.06% total increase, because of that, there would be a 9.04% reduction in demand. In more simple terms, as a retailer, you will sell 9.04% less of that cigar after the new federal tax is put on the cigar.
Below are several examples of cigars that have common weights and prices.
|Name||weight (oz)||RETAIL PRICE (PER TAX INCREASE)||new price||% INCREASE IN TOTAL COST||DECREASE IN DEMAND||tax % increase|
|Cigar ‘A’ |
(4in x 56rg)
|Cigar ‘B’ |
(5in x 50rg)
|Cigar ‘C’ |
(5.5in x 50rg)
|Cigar ‘D’ |
(6in x 60rg)
|Cigar ‘E’ |
(7in x 70rg)
|Cigar ‘F’ |
(6in x 80rg)
Your business stands to lose between 9% and 12% of your total sales if this tax goes through. This is why we are encouraging every retailer to take action using CigarAction.org and make sure your members of Congress know that this will hurt your business in a significant way. Also, spreading the word to your customers that their favorite cigars will have a major tax increase will help spread the word on this issue. Lastly, getting your customers to take action using CigarAction.org will give us the resources we need to fight this tax hike.