The Premium Cigar Association (PCA), representing 3,000+ retail tobacconists, 30,000 employees, 250+ premium cigar manufacturers, and millions of consumers across the country, recognizes the extreme financial difficulties placed on our industry in the wake of COVID-19. PCA calls upon Congress and the Administration to take action to prevent layoffs, job loss, and small business closures as PCA members and the larger retail sector begin to recover. PCA believes the actions outlined below addressing tax policy improvements coupled with liability protections and Paycheck Protection Program reform will allow our businesses to rebound.
Continued Postponement of Deadlines for Certain Tax Filings and Collection
Earlier this year the Administration ordered the Department of the Treasury to exercise its authority to postpone deadlines for certain tax filings and payments during a National Emergency.
PCA POSITION: The postponement of filings and collection of Federal Income Tax and Excise Tax should continue to be extended until the COVID-19 Emergency Declaration expires.
JUSTIFICATION: Small businesses have limited access to credit and capital needed to bridge the economic shortfalls caused by social distancing requirements made necessary to combat COVID-19.
Tax Deduction for Business Expenses related to Social Distancing, Hygiene and Sanitation
In order to comply with Social Distancing guidelines issued by the Centers for Disease Control and State and Local Health authorities, small businesses have had to redesign stores and invest in furnishings, sanitation and hygiene supplies that are not considered business expenses. This includes checkout line dividers, plexiglass, PPE, hand sanitizer, soap, disinfectant, etc.
PCA POSITION: Expenses incurred to comply with CDC guidelines related to social distancing should be tax deductible.
JUSTIFICATION: Social distancing compliance is necessary to safely reopen and instill consumer confidence. These are necessary business-related expenses that should be tax deductible.
Restore the Business Entertainment and Food & Beverage Tax Deductions
The TCJA eliminated all entertainment expenses and caused confusion as to whether any food and beverage could be deducted when cigars are also consumed (entertainment) or at cigar related events. Furthermore, the food and beverage tax deduction was sustained at 50%.
PCA POSITION: Entertainment expenses are a regular function of business and should be treated as a tax-deductible expense. Similarly, business meals should be brought in line with other regularly incurred business expenses by allowing 100% of the expense to be tax deductible.
JUSTIFICATION: The hospitality industry was the hardest hit sector of the economy. Cigar lounges are traditional venues for business meetings, negotiations and business networking. Restoring tax deductions for entertainment and a 100% deduction for food and beverage expenses would encourage business traffic and support economic recovery.
Oppose increases in Excise Tax and User Fees for Premium Cigars
There is growing concern that increased tobacco excise tax, fees, or import duties may be used to offset the costs associated with economic recovery.
PCA POSITION: Increased taxes, fees or import duties on the premium cigars disproportionately burdens small businesses, which are the primary source of new jobs in a recovering economy and currently struggling to survive.
JUSTIFICATION: Premium cigars are one of the most heavily regulated and taxed industries, despite never having been a factor in the tobacco epidemic defined by nicotine addiction, youth tobacco usage, and adverse impact on public health (according to FDA and NIH PATH data).