Following a long, drawn-out political fight started in 2007, President Obama signed into law the State Children's Health Insurance Program (SCHIP) renewal and expansion.
The new federal excise tax rates to take affect April 1, 2009 are as follows:
Cigarettes $1.0066/pack
Large cigars 52.75% (capped at 40.26 cents per cigar)
Snuff $1.51/lb.
Chew $.5033 cents/lb.
Pipe tobacco $2.8311/lb.
RYO $24.78/lb.
Little cigars $50.00/1,000
Note - While the new law says that the increase is capped at .4026 cents per cigar....Don't fool yourself! On top of the actual increase, manufacturers, wholesalers, and yes retailers will have to take an increase to maintain their gross margins. My guess is that the cigars will go up an average of .55 cents each and by $15 per box by the time it is all done!
While the tax goes into effect April 1, the manufacturers responded by immediately raising prices on all Machine Made Cigars and many of the Premium Cigars. The 8% to 15% was effective February 4th. So our costs are ALREADY UP WHEN WE ORDER FROM OUR SUPPLIERS...But not our prices to you!
I fully expect an additional price increase before March 15th, of about the same amount. These increases along with the increase taken last September by the manufacturers will allow them to not increase their prices beginning April 1st or if they do, by a very small amount!
It is our intent to continue to give our customers an opportunity to purchase product before we raise our prices over the next few weeks.
--------------------------------------------------------------------------------
ANNOUNCING....THE LAST CHANCE SALE!
Prices will not go up until March 1st as part of out PRE - SCHIP TAX promotion. In addition to continuing to sell all of our cigars at the old prices, we will be offering SPECIAL PROMOTIONS to help you afford to stock up before we raise prices beginning February 15th.
This is an unprecedented event that puts the entire burden of funding Health Care for Children on the backs of those that use Tobacco! While it provides funding for 100% of the low income Children, it is funded by less than 25% of the population that uses tobacco. THIS IS UNFAIR...BUT IT IS DONE!
I would like to thank everyone that did their part contacting elected officials over the past 3 years as we fought this battle. Today it is the smokers that are taking it on the chin....tomorrow it will be the Beer Drinkers, French Fry Eaters, Soda Drinkers and more.
BE PREPARED...at some time the apathetic American People will say enough is enough!
THE GREAT AMERICAN TAX REVOLT IS COMING!
Our forefathers did not stand by idly while their government put unbearable taxes on them....
THEY THROUGH THE TEA IN THE HARBOR!
We promise to continue to do our part in keeping Cigars as affordable as possible to our customers through CigarFox.com! We will continue to enjoy our cigars and comradery at any price! Thanks for your continued business and Buy Now Before the Increase!
Thursday, February 5, 2009
Monday, January 19, 2009
CigarFox Smokin' SuperBowl Party
The Cigar Factory Outlet is Having a Smokin' SuperBowl Party and giving you the chance to win an HDTV while smoking great cigars and enjoying SUPER DEALS. Click the Video for additional information.
Thursday, January 15, 2009
S-Chip Update – REQUIRED READING FOR ALL CigarFox CUSTOMERS
Dear Customers~
It is my intent in the coming weeks to keep you updated as the S-Chip legislation as it develops.
1/13/09 - The latest version of the State Children's Health Insurance Program (SCHIP), HR2, was officially introduced in the House Ways & Means Committee. The industry compromise on the revised tax rate on large cigars has been incorporated into HR2. According to this new legislation, the new tax rate is proposed to be 52.4% of manufacturer cost with a maximum tax cap on any one cigar at .40 cents per cigar.
In previous versions of SCHIP legislation that were vetoed twice by President Bush, the tax cap rate was proposed at $3 to $10 per cigar. Trade associations and our federal lobbyists, working in conjunction with the Cigar Association of America, and our industry, came together to aggressively challenge the disastrous, proposed $3 tax cap. Through our efforts we have been able to get the cap substantially reduced in this new legislation to the more sustainable 40-cent per cigar tax.
While HR2 looks to breeze through the House, it may have a slower journey through the Senate, though our lobbyists do not expect any direct changes to the tax cap rate. According to Nancy Pelosi, the Senate will move this bill quickly and present it to the President as one of the first pieces of legislation that he will sign and put into effect.
Current “PROPOSED” S-CHIP Legislation Details
The new tax rates are proposed to be effective April 1, 2009;
The cigarette tax rate goes from $.39 per pack to $1.00 per pack; +$6.00 per carton
The tax on snuff goes from $.585 per pound to $1.50 per pound;
The tax on pipe tobacco goes from $1.0969 per pound to $2.8126 per pound;
The tax on RYO Cigarette Tobacco goes from $1.0969 per pound to $24.62 per pound (This is not a typo).
The tax change to small cigars (Items that look like a cigarette and come in packs of 20 cigars weighing less the three (3) pounds per thousand will be phased in over five (5) years at the following rates per year:
2009 & 2010 - $.25 per pack; =$2.50 per carton
2011 & 2012 - $.50 per pack = $5.00 per carton
2013 & 2014 - $.75 per pack = $7.50 per carton
2015 and beyond - $1.00 per pack = $10.00 per carton
The tax on large cigars will be 52.4% of the manufacturer cost with a cap of .40cents per cigar
What does this mean to you?
All that I can do is try my best to read into my crystal cigar and give you my best guess as to what will happen in the coming weeks. With 45 years experience in the tobacco industry all I can say is One Thing Is Certain….The tax man is going to tax your cigars….SOON!
1. The current funding of SCHIP expires 3/31/09 so this legislation will move quickly. I predict the new tax will go into effect as early as April 1, 2009, but most likely not later than June 1, 2009.
2. The tax rate that is shown in the House version above is likely to be close to the final legislation that comes out of the Senate. Keep in mind that the lobbyists have been working for months behind the scenes to get this new version of the funding in order. It is only my guess that the Senate version has also been negotiated and will be very close to this House Version.
(Disclaimer: I thought the Detroit Lions would at least WIN 1 game this past year….They were 0 - 16)
For Cigars this means an increase in price to the consumer someplace in the area of 70% over the current prices you are paying. The reason it will be more than the 52.4% is because the manufacturers, the wholesalers, and the retailers are all going to experience an increased cost of doing business. As a result of this increased cost, one can anticipate that they will take an additional mark up on the products. Plus you have to keep in mind that the States Other Tobacco Products Taxes will be levied on this new cost!
Looking into my My Crystal CIGAR here is an EXAMPLE – Premium Cigars
Current Price Estimated New Price
$30.00 per Box $50.00 to $60 per Box
$50.00 per Box $60.00 to $70 per Box
$60.00 per Box $70.00 to $80 per Box
$70.00 per Box $80.00 to $90 per Box
Note – The above example are for 25ct boxes of Premium Cigars. Keep in mind that the manufacturers, distributors, wholesalers, and retailers will take an increase on top of the .40 cent cap and the states levy their OTP tax on the new cost including the tax.
3. What will happen in the next 75 days?
This is where things could get very interesting….
~Manufacturers could raise prices within days or weeks and make the additional income between now and the actual tax increase and then not have to raise prices when the increase goes into effect. I give this a 50/50 chance of happening.
~Manufacturers will be bombarded with pre tax orders as all cigar smokers hoard inventories prior to the tax increase. When this happens, the manufacturers will not be able to meet the demand and cigars will be put on allocation and be in short supply until after the actual tax increase!
~Retailers will attempt to unload all kinds of “Don Nobody Cigars” with great pricing as they attempt to minimize their inventories of the garbage they have bought. CIGAR BUYERS BEWARE!
4. What should you do if you smoke Premium Cigars?
Hey, no matter how you look at it, a $10 to $20 increase per box is a ton of money! At a prjected increase of a minimum of .50 cents per cigar and a consumption rate of 2 per day, you are talking about an increased cost of over $300 in the next 12 months! I would buy a couple of boxes for insurance reasons alone….Remember the Cap could be increased in the Senate version to $1.00 per cigar and then you would be looking at an increase of $25.00 or more per box!
5. What should you do if you smoke little cigars or roll your own cigarettes?
This might be the easiest answer of all….Mortgage the house and BUY BUY BUY! If a tobacco item looks like a cigarette or is used to make a cigarette, it is about to be taxed out of existence! For you smokers of tins of little Premium Cigars….You are looking at a $4.00 to $5.00 per tin increase! RYO 16 oz. Tobacco is going from about $15 per bag to $40 per bag!
In closing, I hope that my best “guestimate” at this early stage of the game is helpful to you as you contemplate your next move. I can tell you that we are staffing up and building inventory here at CigarFox as I am betting the house on what is about to unfold. We are already experiencing back orders and out of stocks from the manufacturers. We want to be ready for you when you call and be able to ship your product to you prior to any tax increase! The final decision is yours, but if you are smart, you will get your order in soon!
Thanks for your business and Sorry to be the bearer of Bad News, but I do hope this information is helpful to you. I will keep you updated as the bill moves through the House and Senate.
Cigar Dan
It is my intent in the coming weeks to keep you updated as the S-Chip legislation as it develops.
1/13/09 - The latest version of the State Children's Health Insurance Program (SCHIP), HR2, was officially introduced in the House Ways & Means Committee. The industry compromise on the revised tax rate on large cigars has been incorporated into HR2. According to this new legislation, the new tax rate is proposed to be 52.4% of manufacturer cost with a maximum tax cap on any one cigar at .40 cents per cigar.
In previous versions of SCHIP legislation that were vetoed twice by President Bush, the tax cap rate was proposed at $3 to $10 per cigar. Trade associations and our federal lobbyists, working in conjunction with the Cigar Association of America, and our industry, came together to aggressively challenge the disastrous, proposed $3 tax cap. Through our efforts we have been able to get the cap substantially reduced in this new legislation to the more sustainable 40-cent per cigar tax.
While HR2 looks to breeze through the House, it may have a slower journey through the Senate, though our lobbyists do not expect any direct changes to the tax cap rate. According to Nancy Pelosi, the Senate will move this bill quickly and present it to the President as one of the first pieces of legislation that he will sign and put into effect.
Current “PROPOSED” S-CHIP Legislation Details
The new tax rates are proposed to be effective April 1, 2009;
The cigarette tax rate goes from $.39 per pack to $1.00 per pack; +$6.00 per carton
The tax on snuff goes from $.585 per pound to $1.50 per pound;
The tax on pipe tobacco goes from $1.0969 per pound to $2.8126 per pound;
The tax on RYO Cigarette Tobacco goes from $1.0969 per pound to $24.62 per pound (This is not a typo).
The tax change to small cigars (Items that look like a cigarette and come in packs of 20 cigars weighing less the three (3) pounds per thousand will be phased in over five (5) years at the following rates per year:
2009 & 2010 - $.25 per pack; =$2.50 per carton
2011 & 2012 - $.50 per pack = $5.00 per carton
2013 & 2014 - $.75 per pack = $7.50 per carton
2015 and beyond - $1.00 per pack = $10.00 per carton
The tax on large cigars will be 52.4% of the manufacturer cost with a cap of .40cents per cigar
What does this mean to you?
All that I can do is try my best to read into my crystal cigar and give you my best guess as to what will happen in the coming weeks. With 45 years experience in the tobacco industry all I can say is One Thing Is Certain….The tax man is going to tax your cigars….SOON!
1. The current funding of SCHIP expires 3/31/09 so this legislation will move quickly. I predict the new tax will go into effect as early as April 1, 2009, but most likely not later than June 1, 2009.
2. The tax rate that is shown in the House version above is likely to be close to the final legislation that comes out of the Senate. Keep in mind that the lobbyists have been working for months behind the scenes to get this new version of the funding in order. It is only my guess that the Senate version has also been negotiated and will be very close to this House Version.
(Disclaimer: I thought the Detroit Lions would at least WIN 1 game this past year….They were 0 - 16)
For Cigars this means an increase in price to the consumer someplace in the area of 70% over the current prices you are paying. The reason it will be more than the 52.4% is because the manufacturers, the wholesalers, and the retailers are all going to experience an increased cost of doing business. As a result of this increased cost, one can anticipate that they will take an additional mark up on the products. Plus you have to keep in mind that the States Other Tobacco Products Taxes will be levied on this new cost!
Looking into my My Crystal CIGAR here is an EXAMPLE – Premium Cigars
Current Price Estimated New Price
$30.00 per Box $50.00 to $60 per Box
$50.00 per Box $60.00 to $70 per Box
$60.00 per Box $70.00 to $80 per Box
$70.00 per Box $80.00 to $90 per Box
Note – The above example are for 25ct boxes of Premium Cigars. Keep in mind that the manufacturers, distributors, wholesalers, and retailers will take an increase on top of the .40 cent cap and the states levy their OTP tax on the new cost including the tax.
3. What will happen in the next 75 days?
This is where things could get very interesting….
~Manufacturers could raise prices within days or weeks and make the additional income between now and the actual tax increase and then not have to raise prices when the increase goes into effect. I give this a 50/50 chance of happening.
~Manufacturers will be bombarded with pre tax orders as all cigar smokers hoard inventories prior to the tax increase. When this happens, the manufacturers will not be able to meet the demand and cigars will be put on allocation and be in short supply until after the actual tax increase!
~Retailers will attempt to unload all kinds of “Don Nobody Cigars” with great pricing as they attempt to minimize their inventories of the garbage they have bought. CIGAR BUYERS BEWARE!
4. What should you do if you smoke Premium Cigars?
Hey, no matter how you look at it, a $10 to $20 increase per box is a ton of money! At a prjected increase of a minimum of .50 cents per cigar and a consumption rate of 2 per day, you are talking about an increased cost of over $300 in the next 12 months! I would buy a couple of boxes for insurance reasons alone….Remember the Cap could be increased in the Senate version to $1.00 per cigar and then you would be looking at an increase of $25.00 or more per box!
5. What should you do if you smoke little cigars or roll your own cigarettes?
This might be the easiest answer of all….Mortgage the house and BUY BUY BUY! If a tobacco item looks like a cigarette or is used to make a cigarette, it is about to be taxed out of existence! For you smokers of tins of little Premium Cigars….You are looking at a $4.00 to $5.00 per tin increase! RYO 16 oz. Tobacco is going from about $15 per bag to $40 per bag!
In closing, I hope that my best “guestimate” at this early stage of the game is helpful to you as you contemplate your next move. I can tell you that we are staffing up and building inventory here at CigarFox as I am betting the house on what is about to unfold. We are already experiencing back orders and out of stocks from the manufacturers. We want to be ready for you when you call and be able to ship your product to you prior to any tax increase! The final decision is yours, but if you are smart, you will get your order in soon!
Thanks for your business and Sorry to be the bearer of Bad News, but I do hope this information is helpful to you. I will keep you updated as the bill moves through the House and Senate.
Cigar Dan
Wednesday, January 14, 2009
This is what Cigar Dan is receiving 4 or 5 times a week! Your continued generosity is what is allowing us to continue to support our troops.
Hi,
My name is SFC Salazar and I am in the Armed Forces now deployed in Iraq. I was wondering if you can provide us with some free of your premium cigars as a care package. We have been here almost 9 months and still have about 6 more to go. We would really apreciated it if you can donate some. If you can please send them to the following address:
SFC Salazar, Leonardo CMR 405 BOX 2407 APO, AE 09034
LEONARDO SALAZAR
leonardo.salazar1@us.army.mil
520-287-6249
My name is SFC Salazar and I am in the Armed Forces now deployed in Iraq. I was wondering if you can provide us with some free of your premium cigars as a care package. We have been here almost 9 months and still have about 6 more to go. We would really apreciated it if you can donate some. If you can please send them to the following address:
SFC Salazar, Leonardo CMR 405 BOX 2407 APO, AE 09034
LEONARDO SALAZAR
leonardo.salazar1@us.army.mil
520-287-6249
Wednesday, January 7, 2009
Tuesday, January 6, 2009
The World Famous Pete Johnson will be at The Cigar Factory Outlet This Friday January 9th from 3-7PM!!!
You heard it right....The Cigar Factory Outlet welcomes possibly the biggest name in the Cigar industry Pete Johnson of the world famous Tatuaje Cigars!
Join us this Friday from 3-7PM for a meet and greet with the remarkable Pete Johnson. He will not be making any other stops while he is town, so this is a must attend party as Pete does roughly 5 events per year and The Cigar Factory Outlet is lucky enough to have him for his first of the year!
So here are the details.....
*20% off all box purchases!
*FREE Tatuaje Black 3 pack sampler with all box purchases! (The most sought after cigar in the World!)
*Great food and refreshments!
*A once in a lifetime opportunity to meet Pete Johnson of Tatuaje Cigars!
Thank you for your consideration and as always Thank You for your business!
Tuesday, December 30, 2008
THE SCHIP and TAXES ON CIGARS
Dear Customers~
Over the past year you have heard me refer to or write about "SCHIP". While I thought that everyone knew about S-Chip, I continue to get questions about what it is and what it means to Cigar Smokers. So I am going to put it in as simple terms as I can....
The State Children's Health Insurance Program (SCHIP). This is and was a 10 year program that ran from 1997 to DEC 2007 that provided Health Insurance for children of low income families. A low income family under the original bill was a family earning up to 200% of what was determined to be the national poverty level. In 1997 this meant a 2 Parent Family with 2 children under the age of 19 were considered eligible for SCHIP if they earned less that $41,300. As the bill neared expiration in 1997 the Senate introduced legislation to greatly expand the limits. The new S-CHIP that was proposed increased the qualifying income level to 400% of the national poverty level and included children under the age of 25. This would have meant that a 2 Parent Family with 2 Children under the age of 25 earning less than $82,600 would have been eligible for S-Chip benefits!
While there was not much that President Bush did that I agreed with, I will give him credit for this....He Vetoed the legislation twice after it was passed by the Senate.....At the end of 2007, President Bush signed an extension of the current program to cover current enrollment levels through March 2009 so that problematic issues could be fixed in the program prior to further extension. In other words, just like the Auto Bail Out....He punted the issue to the incoming Obama Team! Which proves George cannot only fumble....
He can Punt too!
So what does this mean for cigar smokers and Cigar Retailers, and Wholesalers?
Well folks the picture is not real rosy. Late last fall it looked like the industry had worked out what they thought was an acceptable compromise from the original bill that called for as much as a 10,000% increase in the cost of cigars. The compromise was rumored to be a 53% tax based on the cost of the cigar with a cap of $3.00 per cigar. At the last minute the deal fell apart and now we are looking at a Democratic President and a Democratic Party in control in Washington! While the Cigar Association and our lobbyists are working to negotiate something lower....my guess is that the above will be the low end of the potential increase! I think the $3 per cigar number will get lowered to $1.50, but I think the 53% could go higher to raise the price of the machine made cheaper cigars.....But then what do I know....Who thought my Detroit Lions would finish 0 - 16 this year!
So the bottom line is real simple.....sometime between Inauguration and my guess is June 1st, there will be an increase on the price of cigars to help fund the S-Chip Bill. I also think something else like Beer will be taxed to assist in the funding before it is done. The only thing you can do is plan ahead and make sure you stock up prior to the increase.
Once we know for certain what the increase will be and when it will take place we will notify you ASAP. We anticipate that you should have plenty of notice to stock up on your favorite cigars at that time! The increase will not go into effect overnight, so there is no need to listen the BS of the other suppliers in the industry that are playing the FEAR card on you at this time telling you BUY now! As of today everything is just speculation, the date of the tax increase is unknown, the amount is unknown, and for that matter if there will even be a tax increase is not 100% for certain. In this economy raising taxes on anything is dangerous.
However, as things heat up and the timeline of the current funding expiration date moves closer, the one thing that could happen unexpectedly would be another price increase on the part of the manufacturers. It is my guess that they will do this in anticipation of the tax increase and then at the time of the actual tax increase they will not raise prices the full amount of the tax! If it happens, look for about a 10% increase in February some time.
Ok, now there you have it! You are now as smart as me when it comes to the S-Chip. I wouldn't go around bragging to anyone that you are as smart as me though, but if you are on the ball, you might want to start thinking about where you are going to store an extra 6 months worth of cigars!
Happy New Year and you can count on us keeping you informed.
Cigar Dan
Quality Fresh Cigars, Inc.
CigarFox.com
Over the past year you have heard me refer to or write about "SCHIP". While I thought that everyone knew about S-Chip, I continue to get questions about what it is and what it means to Cigar Smokers. So I am going to put it in as simple terms as I can....
The State Children's Health Insurance Program (SCHIP). This is and was a 10 year program that ran from 1997 to DEC 2007 that provided Health Insurance for children of low income families. A low income family under the original bill was a family earning up to 200% of what was determined to be the national poverty level. In 1997 this meant a 2 Parent Family with 2 children under the age of 19 were considered eligible for SCHIP if they earned less that $41,300. As the bill neared expiration in 1997 the Senate introduced legislation to greatly expand the limits. The new S-CHIP that was proposed increased the qualifying income level to 400% of the national poverty level and included children under the age of 25. This would have meant that a 2 Parent Family with 2 Children under the age of 25 earning less than $82,600 would have been eligible for S-Chip benefits!
While there was not much that President Bush did that I agreed with, I will give him credit for this....He Vetoed the legislation twice after it was passed by the Senate.....At the end of 2007, President Bush signed an extension of the current program to cover current enrollment levels through March 2009 so that problematic issues could be fixed in the program prior to further extension. In other words, just like the Auto Bail Out....He punted the issue to the incoming Obama Team! Which proves George cannot only fumble....
He can Punt too!
So what does this mean for cigar smokers and Cigar Retailers, and Wholesalers?
Well folks the picture is not real rosy. Late last fall it looked like the industry had worked out what they thought was an acceptable compromise from the original bill that called for as much as a 10,000% increase in the cost of cigars. The compromise was rumored to be a 53% tax based on the cost of the cigar with a cap of $3.00 per cigar. At the last minute the deal fell apart and now we are looking at a Democratic President and a Democratic Party in control in Washington! While the Cigar Association and our lobbyists are working to negotiate something lower....my guess is that the above will be the low end of the potential increase! I think the $3 per cigar number will get lowered to $1.50, but I think the 53% could go higher to raise the price of the machine made cheaper cigars.....But then what do I know....Who thought my Detroit Lions would finish 0 - 16 this year!
So the bottom line is real simple.....sometime between Inauguration and my guess is June 1st, there will be an increase on the price of cigars to help fund the S-Chip Bill. I also think something else like Beer will be taxed to assist in the funding before it is done. The only thing you can do is plan ahead and make sure you stock up prior to the increase.
Once we know for certain what the increase will be and when it will take place we will notify you ASAP. We anticipate that you should have plenty of notice to stock up on your favorite cigars at that time! The increase will not go into effect overnight, so there is no need to listen the BS of the other suppliers in the industry that are playing the FEAR card on you at this time telling you BUY now! As of today everything is just speculation, the date of the tax increase is unknown, the amount is unknown, and for that matter if there will even be a tax increase is not 100% for certain. In this economy raising taxes on anything is dangerous.
However, as things heat up and the timeline of the current funding expiration date moves closer, the one thing that could happen unexpectedly would be another price increase on the part of the manufacturers. It is my guess that they will do this in anticipation of the tax increase and then at the time of the actual tax increase they will not raise prices the full amount of the tax! If it happens, look for about a 10% increase in February some time.
Ok, now there you have it! You are now as smart as me when it comes to the S-Chip. I wouldn't go around bragging to anyone that you are as smart as me though, but if you are on the ball, you might want to start thinking about where you are going to store an extra 6 months worth of cigars!
Happy New Year and you can count on us keeping you informed.
Cigar Dan
Quality Fresh Cigars, Inc.
CigarFox.com
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