S-CHIP Required Reading

[Kreth]

Originally Posted by jitzy

The way I see it B&M's in states like mine (NY) are in a lot of trouble since we already pay 37% tobacco tax here this will kill a lot of these small businesses.

Especially with our illustrious governor now making noise about raising the state tobacco tax, AGAIN.

[Pat1075]

It'll be the floor tax that'll put the hurt on a lot of businesses. I.E. since the tax was only X when they bought the product they have to pay Y because that tax didn't exist yet on everything they already own. (seems extortionist to me but what do I know)

[AD720]

Originally Posted by Pat1075

It'll be the floor tax that'll put the hurt on a lot of businesses. I.E. since the tax was only X when they bought the product they have to pay Y because that tax didn't exist yet on everything they already own. (seems extortionist to me but what do I know)

I thought the floor tax got pulled from the final bill?


EDIT: We were both right -no floor tax on large cigars but I guess they could still get the floor tax on bulk tobacco and "small" cigars...

-----------------------

New SCHIP Bill—Federal Cigar Tax to Be Capped at 40 Cents [up from 5 cents, that's my pie?]
Cigar Aficionado ^| 2-8-09 | David Savona

Posted on Sunday, February 08, 2009 4:02:05 PM by SJackson

The House Ways and Means Committee introduced the newest incarnation of the State Children's Health Insurance Program (SCHIP) today. The International Premium Cigar & Pipe Retailers Association (IPCPR) reported in an email that the legislation would impose a revised federal excise tax on large cigars—52.4 percent, with a maximum tax cap of 40 cents per cigar.
It was feared throughout the cigar industry that the cap would be much higher. The original version called for a $10 cap, and earlier versions had a cap of $3 per cigar. The tax is currently capped at five cents.
The bill, which seeks to fund an expansion of SCHIP with higher tobacco taxes, is expected to pass given the new Democratic leadership in Washington. Last year, Congress attempted to pass the expansion, but President Bush vetoed the legislation two times, most recently in December.
"Our industry came together to aggressively challenge the disastrous, proposed $3 tax cap," wrote Chris McCalla, legislative director of the IPCPR, in the email. The new legislation also does not have a floor tax on cigars, although certain other tobacco products would be subject to the floor tax.

[BengalMan]

My question is this, how is the floor tax going to be collected? It's not like the state that can walk in at any given time. Tobacco on a federal level is regulated by the ATF, and I'm sure they have better things to do than chase down a couple hundred dollars from a tobacco shop off the side of the highway in the middle of no where. In order to get an accurate collection, every purchase invoice from the distributor to the shop would have to be pulled, then accurate sales up to the day they are being inquired on would have to be pulled. All this seems like too much hassle. Maybe they will try to go on an honor policy? However, I highly doubt that as well. Who knows.

[ScottieM]

Save yourselves the hassle and heartache. Buy Cuban!

[TheRiddick]

Originally Posted by BengalMan

My question is this, how is the floor tax going to be collected? It's not like the state that can walk in at any given time. Tobacco on a federal level is regulated by the ATF, and I'm sure they have better things to do than chase down a couple hundred dollars from a tobacco shop off the side of the highway in the middle of no where. In order to get an accurate collection, every purchase invoice from the distributor to the shop would have to be pulled, then accurate sales up to the day they are being inquired on would have to be pulled. All this seems like too much hassle. Maybe they will try to go on an honor policy? However, I highly doubt that as well. Who knows.

May not be as difficult as you think. Every shop collects and then submits sales tax to the state, most on a quarterly basis at least here in CA. If they, say, report floor stock of X and then their subsequent quarterly sales tax submissions greatly exceed that number it won't take long before they are closed for inventory and double checked. I don't think any shop would want to play that game as it will cost them far more in the long run than paying actual floor tax. The last place you want to deal with is state tax board, they are far worse than IRS to deal with and have the authority to stop your business until they check the numbers.

I thought floor tax is not part of the SCHIP deal?

[BengalMan]

Originally Posted by TheRiddick

May not be as difficult as you think. Every shop collects and then submits sales tax to the state, most on a quarterly basis at least here in CA. If they, say, report floor stock of X and then their subsequent quarterly sales tax submissions greatly exceed that number it won't take long before they are closed for inventory and double checked. I don't think any shop would want to play that game as it will cost them far more in the long run than paying actual floor tax. The last place you want to deal with is state tax board, they are far worse than IRS to deal with and have the authority to stop your business until they check the numbers.

I thought floor tax is not part of the SCHIP deal?

It is for RYO tobacco, which, in my area, a LOT of cigar shops stock it, and they don't stock a small amount of it.

[AD720]

Originally Posted by TheRiddick

May not be as difficult as you think. Every shop collects and then submits sales tax to the state, most on a quarterly basis at least here in CA. If they, say, report floor stock of X and then their subsequent quarterly sales tax submissions greatly exceed that number it won't take long before they are closed for inventory and double checked. I don't think any shop would want to play that game as it will cost them far more in the long run than paying actual floor tax. The last place you want to deal with is state tax board, they are far worse than IRS to deal with and have the authority to stop your business until they check the numbers.

I thought floor tax is not part of the SCHIP deal?

Same here, see three posts above. "Large" cigars are immune to the floor tax but I'm guessing everything else is not, especially "cigarette replacements" like small cigars and RYO.

[TheRiddick]

I still say that anyone not reporting correct floor tax is playing with fire. That said, and looking at the RYO increase in the SCHIP, that's a LOT of tax to pay and looks to be very painful. I would recommend any shop with stock on hand right now sell it at huge discount if need be so that come April 1st they have nothing to report or as little as is possible.

Don't forget that state tax boards have 2 months now to figure out which shops will owe them come time to report and collect. This is going to be ugly for the large shops we all buy from, Famous, JR, Corona, CI and others, they have plenty of those small cigars (cigarette replacements) in stock.

[mithrilG60]

Originally Posted by macpappy

I don't think/believe the government is going to place a tax increase on most manufacturers since they are not U.S. companies so their cost of business shouldn't go up. The same should be true on US companies, I haven't seen anything to suggest that their cost of business will go up because of SCHIP. The local B&M are going to be the ones hit first because they will have to pay the increase on everything they order. So, if you take a box of 20 cigars that normally has a wholesale price of say $80. Add to that the 40 cents per stick SCHIP tax increase ($8.00) and the wholesale cost goes up from $80 to $88 per box. I would hope that the B&M would do the right thing and only increase the retail price by the amount of the tax increase also. This would take a $5.00 cigar and raise the price to $5.40 per stick.

Now I am not sure how the wholesaler is affective by the tax increase since he is buy directly from the manufacturer. Will the wholesale be required to pay a tax on the price of the cigars from the manufacturer? My foggy understanding was that the tax would be based on what the wholesaler sold the cigars to the retailer for.

My understanding that the tax is applied each time tobacco changes hands. With cigars that will be at least 4 times (as product arrives in the US, as the importer sells to the wholesaler, as the wholesaler sells to the retailer as the retailer sells to the consumer) so the actual tax will be $1.60 per stick and not $0.40. I could be wrong though as, being Canadian, SCHIP makes 0 difference to me one way or the other. Besides SCHIP is still a joke of a tax compared to what we're hit with up here so I'd still count yourselves lucky.

[macpappy]

Originally Posted by mithrilG60

My understanding that the tax is applied each time tobacco changes hands. With cigars that will be at least 4 times (as product arrives in the US, as the importer sells to the wholesaler, as the wholesaler sells to the retailer as the retailer sells to the consumer) so the actual tax will be $1.60 per stick and not $0.40. I could be wrong though as, being Canadian, SCHIP makes 0 difference to me one way or the other. Besides SCHIP is still a joke of a tax compared to what we're hit with up here so I'd still count yourselves lucky.

The explanation given to my local B&M owner is that it is only going to be applied to the wholesale price paid by the retailer.

You may have higher taxes but don't you have that wonderful socialized health care for everyone?(note the sarcasm, please)

[mithrilG60]

I could very well be wrong, to be honest I've never given SCHIP more than a passing interest as it doesn't affect me one way or the other.

I recognize the sarcasm, but you're right it is wonderful. It's wonderful to not have to go tens, if not hundreds, of thousands of dollars into debt just to save your life just because you were unlucky enough to be in a car accident or develop some rare disease, etc. It's wonderful not to have your doctor recommending procedures more because they line his pocket and less because they are required for your health. It's wonderful not to have to ask permission of some faceless corporate entity if their profit margin this month allows you to have a procedure required to save or improve your quality of life. No universal access to health care is a basic human right in the all of the developed world.... I'm left to wonder why the US joined the developed world yet?

[groogs]

The whole SCHIP thing really depresses me.

Originally Posted by mithrilG60

No universal access to health care is a basic human right in the all of the developed world.... I'm left to wonder why the US joined the developed world yet?

Heart transplants, liposuction, knee replacements, and elective health care is a human right?

In the US, Federal law gives everyone the right to emergency care, regardless of your ability to pay. The law entitles you to three things: screening, emergency care and appropriate transfers. A hospital must provide "stabilizing care" for a patient with an emergency medical condition. The hospital must screen for the emergency and provide the care without inquiring about your ability to pay. Hospitals cannot transfer patients until their condition has been stabilized. So in an emergency everyone has equal access to care. If its not an emergency, there are plenty of free clinics and reduced cost facilities around. My daughter chooses to not have insurance against her mothers and I advice. A year ago she needed a procedure done that was going to cost well over a grand. She did some checking around, filled out some papers waited a few months (not life threatening) and got it done for 2 payments of $159. All legal, performed by the same facility that said it was over a grand months earlier.

Chas

[macpappy]

Originally Posted by mithrilG60

I could very well be wrong, to be honest I've never given SCHIP more than a passing interest as it doesn't affect me one way or the other.

I recognize the sarcasm, but you're right it is wonderful. It's wonderful to not have to go tens, if not hundreds, of thousands of dollars into debt just to save your life just because you were unlucky enough to be in a car accident or develop some rare disease, etc. It's wonderful not to have your doctor recommending procedures more because they line his pocket and less because they are required for your health. It's wonderful not to have to ask permission of some faceless corporate entity if their profit margin this month allows you to have a procedure required to save or improve your quality of life. No universal access to health care is a basic human right in the all of the developed world.... I'm left to wonder why the US joined the developed world yet?

I think we'll just agree to disagree on the health care thing. I've talked to other friends from Canada and they think the "universal health care" is a disaster and tell me horror stories about problems they have had. So you haven't had their problems and the system has been good for you. That great.

I also can't really say I've seen the problems you attribute to the United States medical system either because even though I was in a bad car accident that lead to me having back surgery, I didn't have any of those problems. But that is probably because I'm a military retiree and one of the benefits of surviving 21 years of active duty is I have access to health care with very reasonable co-pays. That being said, my daughter-in-law is a doctor (general practice) and she has to fight with insurance companies on behalf of her patients and not because she's "lining her pockets." In fact the hospital she is associated with has just canned a doctor for that type of behavior.

[Sr Mike]

Originally Posted by mithrilG60

I recognize the sarcasm, but you're right it is wonderful. It's wonderful to not have to go tens, if not hundreds, of thousands of dollars into debt just to save your life just because you were unlucky enough to be in a car accident or develop some rare disease, etc. It's wonderful not to have your doctor recommending procedures more because they line his pocket and less because they are required for your health. It's wonderful not to have to ask permission of some faceless corporate entity if their profit margin this month allows you to have a procedure required to save or improve your quality of life. No universal access to health care is a basic human right in the all of the developed world.... I'm left to wonder why the US joined the developed world yet?

Wow, no sarcasm in your post at all. It is obvious you have no idea what you are talking about.

[Buena Fortuna]

Originally Posted by mithrilG60

I could very well be wrong, to be honest I've never given SCHIP more than a passing interest as it doesn't affect me one way or the other.

I recognize the sarcasm, but you're right it is wonderful. It's wonderful to not have to go tens, if not hundreds, of thousands of dollars into debt just to save your life just because you were unlucky enough to be in a car accident or develop some rare disease, etc. It's wonderful not to have your doctor recommending procedures more because they line his pocket and less because they are required for your health. It's wonderful not to have to ask permission of some faceless corporate entity if their profit margin this month allows you to have a procedure required to save or improve your quality of life. No universal access to health care is a basic human right in the all of the developed world.... I'm left to wonder why the US joined the developed world yet?

I've worked in health care for over 25 years in Michigan. If Canada's universal health care is so great, why are our hospitals in Detroit and Port Huron filled up to 20% with Canadian patients who either can't access health care they need or can't wait for bureaucratic red tape delays???

[Sailchaser]

Some good info from everyone here ,bottom line is they are going to increase the price of sticks no matter what, The sad part is that we will contiune to buy and they (goverment) will see that we do and add another tax on in 6 months to pay for some other program they come up with, It sucks but the USA is still one of the best places on earth to live ,
Happy Smoking

[Buena Fortuna]

Originally Posted by Sailchaser

Some good info from everyone here ,bottom line is they are going to increase the price of sticks no matter what, The sad part is that we will contiune to buy and they (goverment) will see that we do and add another tax on in 6 months to pay for some other program they come up with, It sucks but the USA is still one of the best places on earth to live ,
Happy Smoking

Who's going to use their stimulus funds to off set the S-CHIP increase??? Sounds like a plan to me

[TheRiddick]

Originally Posted by Buena Fortuna

Who's going to use their stimulus funds to off set the S-CHIP increase??? Sounds like a plan to me

I am sure we'll see a run on cigars and RYO in the next month or so, right up to the March 30th cutoff. The only problem I see is that we'll end up with flat sales for the products after that point, for months to come, and that will lead to either some jobs lost (best case scenario) or closures of some places altogether and many more jobs lost.

I am watching CA budget impasse right now, the latest is that they will create a new tax on ALL alcoholic beverages, at $0.05 per drink. Not much, it seems, but I am not sure yet where that will start, if it starts at the production end, then it will escalate upwards eventually and that nickel becomes much more by the time you down that drink.

And as is, CA passed this "SCHIP like" tax on tobacco about 10 years ago, we will now pay on top of that. I would love to know where the money has gone for the past 10 years, if it hasn't worked in CA as intended, then why does Hussein's team believe it will work for the entire country? Anyone hear from Rob Reiner since he was able to enact this stupidity in CA and can he provide real time numbers for anyone to look at and see if the program actually works?

I'll fire off a few emails to Rush and O'Reilly and see if they want to pick this up.