Written by Puff Staff

Monday, 10 May 2010

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cigar1 Sit back, relax, and check out this first edition of May's cigar news. Today we will talk about some new and unfortunate tax hikes in Utah and Washington, as well as a ridiculous smoke ban in one Florida city that was denied.

Tax Hikes Coming to Utah this Summer


Cigar smokers in Utah have some unfortunate changes coming their way this summer. The unfortunate changes come in the way of an increased tax on cigars. The increase is not a subtle one either, as it will make the tax on cigar bought in Utah jump from its current rate of 35 percent all the way up to an exorbitant level of 86 percent. The new tax rate will take effect beginning on the first day of July.

The cigar tax increase does not only effect cigar fans in Utah when purchasing cigars. Of course, by raising the taxes so high, cigar retailers will be affected by what will likely be a lower sales volume. For many, cigars are seen as a luxury, and if they become too expensive to buy, they may become expendable in one's budget. That does not even take into account the fact that the United States' economy is not too hot at the moment. Those who really love their cigars, however, can also take the alternate route of ordering them online, or even driving out of the state of Utah to purchase them minus the 86 percent tax rate.

Projected lower sales is not the only way this tax will hurt Utah cigar retailers, though. In order to prevent the cigar retailers from acquiring more inventory before the July 1 tax hike, Utah's legislators will also enact a floor tax on the same date. What this floor tax does is demand that retailers pay a tax on whatever inventory they have on that date. The floor tax is no petty amount either, as it will be 51 percent, or the difference between the new 86 percent rate and the old 35 percent rate. Depending on how big the store is and how much inventory they have, the amount they could owe the state could be huge. So, not only does this new tax likely hinder the demand for cigars in Utah, but it could very likely cut the supply as well, as many retailers will find this “double tax” to be too much to bear, especially when synchronized with the nation's poor economy.

If you want to see an example of the negative effects the tax will have on the cigar industry Utah, just look at the capital and Salt Lake City, where a mainstay since 1949, Jeanie's Smoke Shop, will close. According to its owner, Gary Klc, the amount he would have to pay in taxes on July 1 for his inventory would exceed $100,000. Such a cost, along with the likely reduction in customers, makes his shop's business forecast look bleak. There is little doubt that Jeanie's will be the only shop to take the route of closing, as most are in the cigar store business to turn a profit, but with so much stacked against them with the new cigar taxes, such a task seems almost impossible.

Although the new rise in Utah's cigar taxes might prevent cigar smokers from buying cigars in that state, it likely will only hurt Utah in the long run. Cigar sales within the state will most likely drop, causing the tax revenue generated from those sales to drop as well. Other states or online retailers will reap the benefits of Utah's transplanted customers, as Utah's cigar outlets slowly die off.

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