A Taxing Problem, A New Cigar and FDA by Frank Seltzer
I am just back from NATO, the National Association of Tobacco Outlets, convention in Vegas. This is a much smaller show than the IPCPR coming up this summer, but it is interesting nonetheless. Because the members are primarily tobacco outlets, there were a lot of cigarette, especially electronic cigarette companies on the floor. But that does not mean it was a cigarette show. Nope. Drew Estate, Rocky Patel, General Cigar with Macanudo and Altadis USA were all there along with others.
At the Altadis booth, General Manager Javier Estades was visiting with some of the attendees while smoking a Vega Fina Forteleza 2. This is a cigar that debuted last summer at the show and combines the flavor of the regular Vega Fina line, which is a huge seller in Spain against the Cuban cigars, with some extra strength. As Javier was busy I did not get to spend much time with him at the show, but should be seeing him later this week at the Altadis office. By the way, another Altadis cigar that sometimes gets overlooked is the Saint Luis Rey. These are tasty cigars especially the maduro version. There is a rumor that a new, slightly stronger SLR is in the offing, called Saint Luis Rey Gen 2. No word yet on when it will come out or the blend…but it should be showing up soon.
FDA
The main reason I went was to hear from Mitch Zeller, who is the new director of the Center for Tobacco Products in the FDA. Zeller’s group is set to issue guidelines about cigars. Actually, the FDA was supposed to have the guidelines about a week or so ago. Zeller’s group is charged with enforcing the Family Smoking Prevention and Tobacco Control Act that was passed by Congress and signed by President Obama in 2009. The goal of that law, Zeller said was the noble one of keeping cigarettes out of kids hands. Much of his talk centered on the inspection process the FDA does.
Yup, virtually ever place that sells cigarettes can be inspected by the FDA..from your local convenience store to any cigar shop. The FDA will inspect to be certain all the laws are met and sometimes use underage kids to see if age checks are being done or if cigarettes are being sold to them. Zeller said so far compliance on the laws is about 96% which is good. Zeller told the group that he was working to make the FDA more transparent, letting stores know faster when they have been inspected.
While not addressing the cigar issue ( he would not comment on upcoming rulings) Zeller did seem to reach out to the tobacco industry. One analyst attending the seminar, said she was cautiously optimistic about Zeller’s statements and tone.
Make no mistake, the FDA is not our friend and Zeller did say he felt his goal was to “de-normalize” smoking. However, one thing he said that was very important for all of us, was that everyone must be involved in providing feedback to proposed rules and regulations. In fact, he said public comments on proposed rules are extremely important and almost begged people to provide the FDA with their thoughts.
We know the other side will flood the FDA with comments so when the times comes we must be ready too.
Internet Business Disaster Act
You will not hear this from the IPCPR and maybe not even from the Cigar Rights of America..but speaking of letting people know, and getting involved, there is a horrible bill now passed by the Senate and heading to the House that MUST be stopped. The bill would put local sales taxes on Internet purchases. Called the Marketplace Fairness Act, it would subject online retailers to local sales taxes from nearly 10,000 jurisdictions across the United States. Since many states and cities want more money, they are asking Congress to let them rob the piggy bank of Internet retailers. It is being sold as a way to level the playing field between brick and mortar stores and internet retailers…someting cigar shops have complained about us and others for years. Levelling the playing field is something we have heard for years regarding smoking bans. Restaurants suffer from the bans, then they want to “Level the playing field” by imposing a ban in areas where there is none. In this case, local shops subject to onerrous taxes want everyone else to have to pay them…rather than fighting the tax to begin with.
(By the way these are my opinions and I have not spoke with anyone at JR about this legislation).
Under this present bill, an Internet retailer would have to figure out what the sales tax rate is in your city, county and state and on what product. It is not a stretch to imagine the states going after the tobacco taxes as well.
According to L. Gordon Crovitz writing in the Wall Street Journal:
When a similar bill to collect online sales tax was proposed in 2005, proponents assured skeptics that the law would only come into effect after states streamlined and standardized their tax systems. A Streamlined Sales Tax Governing Board had been set up in 2000 for this purpose, but sales-tax rules remain byzantine
We take the largely free and untaxed Internet for granted, but often forget it was the rare act of politicians voting to keep their hands off that made today’s Internet possible. The Internet Tax Freedom Act of 1998 stopped the federal government, states and cities from taxing Internet services directly. Congress has always had the power to force collection of sales tax online but until now was reluctant to get in the way of the smooth operations of the Internet.
Amazon used to be opposed to the idea of collecting sales tax, but now since it has a physical presence in many states, it is now in favor or it. The key has been if you have a presence in a certain state, then you must collect the sales tax. This actually makes sense because if a business has a store or shipping locale in say Texas, it does benefit from the state’s services. But if it is not in California, why should it pay any taxes to that state? This very easily could affect Ebay users and that company is working to try to stop the bill. This also could affect those of you who like to buy from us. Get involved. Contact your Congressman and say NO to the Marketplace Fairness act and help keep the Internet free.
Bottom line, you really need to be involved.
