As the TPE International Trade Show approaches, TPE is putting out information about impending tobacco restrictions. They hosted experts from TMG and NATO to speak about their work to lobby the federal and state governments.
They spoke about the health of the industry during a pandemic. Some manufacturers closed shop but sales increased in the second half of 2020 to make it a good year for cigars. Right now, the big issue with sales is back orders but speakers reported that most manufacturers are up and running and are working their way to get back.
BILLS in 2021
Federal movement include banning mail-order sales, doubling the tax on all tobacco and many states have introduced bills that 20 states where bills have been introduced in state legislatures to raise cigarette and/or tobacco product tax rates. 19 states to adopt a new tax on cigarette or vapor products or raise current rates.
The FDA has put together a committee to determine what a premium cigar is, and how is it marketed. They have discussed defining a premium cigar at a price point of $12 or higher. All the Tobacco organizations are working to prevent this from happening.
TAXES ON TOBACCO
According to Chris Newbry, Cigar Association of America VP of State Relations, they defeated all attempts at raising taxes in states last year.
“The FDA is not going to go away,” Craig Williamson, president of CAA said. “They’re going to be looking for every penny. Durban’s bill would double our tax. We are getting the word out that we cannot afford another hit.”
All tobacco products would be taxed in this bill.
“It essentially would double the tax on cigars, pipe tobacco, just like it would double the tax on cigarettes,” Williamson said. “There is no one in the tobacco world who goes unscathed in the Durban bill. We are just saying we can’t take another tax even though the last tax increase was in 2009, which makes us very vulnerable when they are looking for revenue out there for all the project they are passing and doing on the hill.”
At the end of the month Williamson said will see what they are going to do with menthol and the flavor bans. 18 states have considered either all flavored tobacco products or all flavored vapor products.
“Flavor bans are the most restrictive and harmful to retailers because it takes products out of store shelves,” Tom Briant, National Association of Tobacco Outlets Executive Director and Legal Counsel, said. “There are about 600 traditional flavored tobacco products and there are thousands of electronic cigarette products. We know the importance of these products to a retail operation.
“Your local politicians need to hear from us,” he said. “Those on the other side are always contacting and emailing their legislators. It’s all about educating and engaging with lawmakers. There are challenges out there, to protect that business, you need to engage.”
Flavored Tobacco bans bills were introduced in 17 states this year. Most have been defeated. Four states the bills are still alive; Minnesota, Maine, New York and Illinois.
On the other side, five states are pushing bills that would preempt local governments from regulating the sale and marketing of flavored tobacco.
“Roughly 70 percent contain some flavoring additive,” Newbry said. “The ban can capture almost all product. When you are talking about taking these products completely off the market, it is substantial.
“What you are really doing is telling an adult consumer what they can and cannot purchase, at a time when more and more states are legalizing the recreational use of marijuana,” he said. And if you follow up and ask the question, if we are banning the flavored tobacco because it allegedly appeals to youth and minors, then what are we doing about flavored marijuana products? Legislators don’t often have a good answer when you pose that question.”
California and Massachusetts adopted state bans, but California Ban is on the 2022 Ballot and is not currently being enforced. They ban all pipe tobacco, flavored pouches, hookah, flavored cigars and menthol cigarettes.
Massachusetts ban took effect in May of 2020 and the state has lost $72 million in cigarette excises taxes alone. And the surrounding states have seen single and even one had double-digit increases.
A bill to ban mail-order sales could get traction but the real worry is the laws that some states have passed and are passing for online retailers to collect tax for their states.
Last June, the U.S. Supreme Court handed down a decision, eliminating the requirement that businesses must be physically present in a state before their sales can be taxed and granting states the ability to collect taxes from out-of-state
“The state statues are antiquated,” Newbry said “As far as Mail order sales as it relates to the states, what we are attempting to do is prevent industry wide disruption on the mail order side with mandates to collect tax without a path to comply with remitting that tax.”
State stimulus funds and revenue from 2020 are two tools the organizations are using to convince the states not to raise taxes on tobacco.
Along with the $1400 per person payout, the March $1.9 trillion stimulus bill included money for the states. $195 billion for the states, minimum $1 billion per state. These new funds negate the need for states to raise any taxes.
20 states where bills have been introduced in state legislatures to raise cigarette and/or tobacco product tax rates. 19 states to adopt a new tax on cigarette or vapor products or raise current rates.
The majority of states collected the same tax in 2020 as they did in 2019 and 21 states showed revenue growth.
State-wide restricted smoking in public places and in some cases even outdoor public places. They are targeting cigarette butt trash and there are cigar exemptions in most states.
The public health advocates who are pushing these are very well funded, pretty well organized and it’s an industry for them. They will continue to push to eliminate these products from market. And we’ve got to push back and do as hard and as strenuously as we can.
“We are not a large industry,” Williamson said. “We are a small industry and we have a lot of mom and pop industries out there that we would like to protect, and we can protect. We have quite a few very small cigar manufacturers and quite a few small suppliers that we represent. We will always do our best to protect everyone in the industry.”