December 6, 2013 (Columbus, Ga.)–The IPCPR state affiliate, the New York Tobacconist Association (NYTA), in a joint effort with the Cigar Association of America (CAA) was able to work with the New York State Department of Taxation and Finance to release a new technical memorandum outlining an alternate method for calculating tax on premium and large cigars.
This change has the potential to save IPCPR members in New York millions each year. Under current law, cigars in New York are required to be taxed based on their purchase price at a rate of 75%. However, depending on where in the distribution chain one looks at the purchase price, the prices can be drastically different.
Last year, the New York State Department of Taxation and Finance invited the NYTA and CAA to help develop a tax policy that would be more simple for retailers and simpler for the state to apply.
Under the new NY Dept of Tax rule (click here for the memo), retailers will be able to use an “industry standard adjustment ratio” to determine the wholesale price of cigars when an established price or manufacturer’s invoice price is not available. Retailers will now multiply the distributor’s pricing by 0.38 to estimate the manufacturer’s sales price, and then multiply that figure by 0.75 to calculate the amount of taxes owed.
For example, a retailer who purchases $1,000 worth of cigars from a distributor will estimate a manufacturer’s cost of $380 ($1,000 x 0.38). The appropriate tax would be $285 ($380 x 0.75).
Our members in New York deserve the relief that this alternative taxation method will provide. This change will save the state’s cigar retailers millions each year, boost sales and increase the job creating capacity of these small business owners.
IPCPR, NYTA, and CAA will continue to work with state policymakers in New York and nationwide to help develop common sense tax policies that are fair to the cigar industry and its consumers.