28 June 2010

NY Legislators pass Increase in OTP tax

Despite the tireless efforts of the New York Tobacconists Association, New York State Legislators foolishly and irresponsilbly passed an emergency "extender bill" on June 21, 2010 that raises the OTP (Other Tobacco Tax) from its current 46% of wholesale to 75% of wholesale.  Just over a year ago, the same tax was raised from 37% at the time to the current 46%.  Although it was clearly outlined to the State Legislators that this tax is not only revenue negative but would be devastating to the countless small businesses throughout New York State, they decided to turn their back on New Yorkers and push the tax through anyway.

It should be noted that taxes are collected in the state in which the consumer takes ownership of the goods.  TO OUR LOYAL CUSTOMERS outside of NY State, this type of ridiculous over-taxation can no doubt mislead other State Leaders into thinking this is actually a good idea, so please be sure you are following the budget discussions in your state.

If you have not already done so, you should also consider joining the CRA.  The Cigar Rights of America, though still relatively new organization, has been a driving force to helping states form their own organizations, as well as spreading the word on a national level as to what's happening state to state. http://www.cigarrights.org/


Even today, a final budget is still not passed and Governor Paterson continues to threaten Legislators and New Yorkers with a Government shutdown if a final budget... actually, his budget... isn't passed.

On June 18, the New York Tobacconists Association held a press conference at our sister store, De La Concha.  Here is the coverage from that event. http://gothamgr.com/new-york-tobacconists-speak-out-against-increased-otp-tax/

Rest assured, we have not given up our battle against this egregious taxation.  We will continue to show the negative impact this tax has on State revenue, and will hold these legislators accountable for that loss as well as the loss of jobs this tax will cause state-wide as small business will be forced to close their doors.

REMINDER! IT IS NEVER TO LATE TO CONTACT New York's "Leaders".



Sheldon Silver, Speaker

Email:  Sheldon Silver 

Telephone: 212-312-1420

Postal Address: 

250 Broadway

Suite 2307

New York, NY 10007

John Sampson, Senator

Email: John Sampson 

Telephone: 718-649-7653

Postal Address: 

1222 East 96th Street

Brooklyn, NY 11236

Governor David Paterson

Email: Governor David Paterson 

Telephone: 518-474-8390

Postal Address: 

State Capitol

Albany, NY 12224

Pedro Espada, Senator

Email: Pedro Espada 

Telephone: 518-455-3395

Postal Address: 

Capitol Building Room 420

Albany, NY 12247

Carl Kruger, Senator

Email: Carl Kruger 

Telephone: 718-743-8610

Postal Address: 

2201 Avenue U

Brooklyn, NY 11229

Malcolm A. Smith, Senator

Email: Malcolm A. Smith 

Telephone: 718-528-4290

Postal Address: 

205-19 Linden Boulevard

St. Albans, NY 11412

Jeffrey D. Klein, Senator

Email: Jeffrey D. Klein 

Telephone: 718-822-2049

Postal Address: 

Capitol Building

Room 427

Albany, New York 12247

Eric Adams, Senator

Email: Eric Adams 

Telephone: 718-284-4700

Postal Address: 

572 Flatbush Avenue

Brooklyn, New York 11225

19 June 2010

Governor Paterson's Proposed Tax Hike on Tobacco is Outrageous, Irresponsible and Revenue Negative.

Ignoring once again the crippling financial burdens facing New York’s small businesses, the newest proposal by Governor Paterson to increase the Other Tobacco Products (“OTP”) tax from its current 46% of wholesale to 75% is outrageous, irresponsible and revenue negative for the State.



Just over a year ago, the State of New York implemented an OTP tax increase from 37% of wholesale to 46% of wholesale. This increase put New York State’s OTP tax significantly higher than the OTP tax of neighboring states. Comparing the first quarter of 2010 to 2009, Professional Tobacconists across the state of New York lost a devastating 20-30% in customer transactions. But don’t be fooled, these customers have not quit enjoying their premium cigars or pipe tobaccos, rather they simply buy their tobacco elsewhere, either in a neighboring state or online. Further increasing the OTP tax will only continue to drive customers away from New York, resulting in a loss of not only OTP tax but also sales tax, as well as much needed revenue for already struggling small businesses, many that are small family owned shops passed down through generations.



Nationally, the average price of a premium cigar is between $8.00 and $12.00, but for New Yorkers a $10 cigar costs $12.30, 23% higher because of current tobacco taxes (46%). With the proposed tax increase, that same cigar will cost New Yorkers $13.75. If that doesn’t seem significant at first glance, this increases the cost of a box of these cigars (25 cigars per box) from $307.50 at the current rate to $343.75 at the proposed 75% in New York State. But here’s the kicker; drive to Connecticut (27.5% OTP) and that same box of cigars will cost $284.38; a savings of $59.37 for New Yorkers. Worse, with a visit to nearby Pennsylvania (0.00% OTP) the very same box of cigars costs just $250, which saves the consumer $93.75 per box at a 100% loss to New York State and its small businesses. Add to that the aggressive discount tactics by out-of-state retailers for high volume purchases, and Governor Paterson’s proposed revenue will disappear; taking with it hundreds of small businesses and more than a thousand much needed jobs.



Once this proves to be revenue negative, which industry’s small businesses will New York State target next? It is time for New York State to think responsibly, economically and long term. More importantly, it is time to think competitively as a state. And as a State we need to tax in a manner that will cultivate existing customers and attract new customers to our local businesses so that they can survive and thrive for years to come. We can’t keep allowing our government -- OUR government-- to continue to raise taxes with impunity on the legal products we enjoy, in short-sighted and ill-conceived attempts to make spreadsheets more attractive, and kick the ball of problems forward to next year only for the State to implement another tax on another industry, which will once again fail, and leave us in the same situation… broke.

CRA is urging all members contact the legislative leadership noted below, and the governor's office, to voice your opposition to this tax increase on cigars.

Sheldon Silver, Speaker
Email:  Sheldon Silver 
Telephone: 212-312-1420
Postal Address: 
250 Broadway
Suite 2307
New York, NY 10007

John Sampson, Senator
Email: John Sampson 
Telephone: 718-649-7653
Postal Address: 
1222 East 96th Street
Brooklyn, NY 11236

Governor David Paterson
Email: Governor David Paterson 
Telephone: 518-474-8390
Postal Address: 
State Capitol
Albany, NY 12224

Pedro Espada, Senator
Email: Pedro Espada 
Telephone: 518-455-3395
Postal Address: 
Capitol Building Room 420
Albany, NY 12247

Carl Kruger, Senator
Email: Carl Kruger 
Telephone: 718-743-8610
Postal Address: 
2201 Avenue U
Brooklyn, NY 11229

Malcolm A. Smith, Senator
Email: Malcolm A. Smith 
Telephone: 718-528-4290
Postal Address: 
205-19 Linden Boulevard
St. Albans, NY 11412

Jeffrey D. Klein, Senator
Email: Jeffrey D. Klein 
Telephone: 718-822-2049
Postal Address: 
Capitol Building
Room 427
Albany, New York 12247

Eric Adams, Senator
Email: Eric Adams 
Telephone: 718-284-4700
Postal Address: 
572 Flatbush Avenue
Brooklyn, New York 11225


Michael Herklots