Quote:
Originally Posted by stitch
I'm an RYO guy, Been rolling my own for 35 years,
This $24. tax is the most insane thing I've seen from our wonderful protectors in DC in some time .... I just bought 20 pounds of my favorite rolling tabac.
God only knows what they have in store for us next.
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If you notice, the CigarFox article was from 17 days ago. From what I've heard, a revised version of the bill was put together on Tuesday that lowers the $24 tax on RYO substantially. I could be wrong, but it's just what I overheard today.
As far as the tax on cigars goes, let me break it down in the sake of whole numbers.
-You have a box (let's call it Box A) of 25 cigars that has a wholesale cost of $100.
-Manufacturer X now has to pay an additional 35 cents per cigar (right now, they pay 5 cents per cigar).
-Box A, used to cost $100 on the wholesale level. With the new tax Box A now costs $108.75 on the wholesale level.
-Shop B buys Box A for $108.75. Shop B's state (let's say it's Michigan for example) has to pay the state of Michigan 32% of the wholesale cost. Shop B, before the tax was paying the state $32. Now Shop B is paying Michigan $34.80 per box.
-Now is where things get tricky and it comes down to Shop B's personal business practices and this is what will make the biggest difference. The below are just two basic keystone structures.
- First, let me give you an example of a basic keystone formula that is commonly used by many manufacturers to get MSRP. The wholesale cost of the Box A is now $108.75 with SCHIP. On a full keystone cigar, that would mean MSRP of that stick would be $8.70 ($108.75 * 2 / 25). Now, obviously, MSRP is before state taxes.
-Method 1 - Box A is $108.75. Keystone of that cigar is $8.70. HOWEVER, Shop B must pay $34.80 to the state of Michigan. Method 1 is a shop takes $34.80 / 25 and gets $1.40 per stick added to the $8.70 stick, making the final price, before sales tax (if there is any) $10.10
-Method 2 - Box A is $108.75. Tax is $34.80. Shop B adds the two together getting a total of $143.55, THEN keystone's the cigar, now making the final price, before sales tax (if there is any) $11.48
These are just two basic examples of the end result of SCHIP. Now lets compare Method 1 and Method 2 pre SCHIP.
Pre SCHIP
Method 1 - Box A is $100 wholesale. Keystone is $8 per stick at the consumer level. After state tax is paid, cigar ends up being $9.28 before sales tax.
Method 2 - Box A is $100 wholesale. Keystone is $8 per stick at the consumer level. Adding tax, then doing keystone on said cigar would make it $10.56.
So, in the end, using methods 1 and 2 your difference per stick post SCHIP would be:
Method 1 would give you an 82 cent increase per stick, or $20.50 per box.
Method 2 would give you a 92 cent increase per stick, or $23 per box.
Please keep in mind, these are just examples and like I said, every shop prices their cigars differently, this was just laid out to give everyone an idea of what were looking at. To be honest, under a buck a stick increase on the HIGH end isn't going to really change my buying habits much. I've spoken with many many cigar smokers and like you and I they're not happy about it, nor should they be. However, almost all of them said the same thing, their going to continue smoking what they like. Weather your $30 cigar now costs you $30.82 or your $5 cigar now costs you $5.82, smoke what you like when you like.
With that being said, I'm going to bed. I haven't done that much math since college and my brain is tired. If my math is wrong I apologize, I tried my best, lol.