RYO Equality Could Cost Cigar Sales

Published in Tobacco E-News

Cigar retailers weigh in on implications of proposed Tobacco Tax Equity Act

By  Melissa Vonder Haar, Tobacco Editor

BOULDER, Colo. -- Bringing the taxes on roll-your-own (RYO) pipe tobacco closer to the taxes imposed on cigarettes and other tobacco products has been at the center of most discussions about the proposed Tobacco Tax Equity Act, introduced by U.S. Senators Dick Durbin (D-Ill.), Frank Lautenberg (D-N.J.) and Richard Blumenthal (D-Conn.) last week. While the equality in pricing would certainly bring some relief to convenience store and tobacco retailers who have not bought in to the RYO phenomenon, it's not just RYO tobacco the senators are looking to tax--if passed, the Tobacco Tax Equity Act would also impact cigars and smokeless tobacco.

"There is an issue with the RYO machines and differential, there's no question it's a problem," said Mary Szarmach, vice president of trade marketing with Smoker Friendly, Boulder, Colo. "But the way this bill is written is a much, much larger encompassing tax on tobacco. What it would to do moist snuff, what it would do to cigars … it would be a huge tax increase."

With the bill proposing all tobacco be taxed at the same rate in which cigarettes are currently taxed, those huge increases would include a tax ceiling raise of 150% from 40.26 cents to 100.66 cents for large cigars and the creation of a tax floor of 5.033 cents.

Szarmach estimated that, if passed, the bill would result in a price escalation of almost $1.01 per cigar.

"It would be devastating for cigars," Szarmach told Tobacco E-News. "It's really ridiculous."

And it's not just c-store operators who would feel the pinch from such drastic increases in the price of cigars--Stephen Roel, partner in cigar accessory manufacturer Havana Saver Inc., also expressed concern over the Tobacco Tax Equity Act.

"As a supplier to cigar shops across the country, this onerous bill would put many cigar shops out of business and deeply cut into my business," Roel said. "This poorly thought out bill will affect employment and small businesses alike."

In fact, the bill could actually be bad for the government. Szarmach suggested such drastic tax increases "put a lot of pressure on manufacturers, put a lot of pressure on retailers and obviously a lot pressure on consumers. It drives what would otherwise be completely good consumers to other methods of purchasing products and no one wins with that."

Those other methods include ordering cigars online or turning to the black market. "We lose business and the government collects no taxes," Szarmach said of such purchases.

While Szarmach agrees the inequality in taxes for RYO tobacco has hurt the industry, she believes the Tobacco Tax Equity Act would hurt sales even more.

"Regardless of the RYO situation, any new tax would be brutal," Szarmach said.

Or as Roel put it, "We say NO!"