How do these FDA cigar tax regulations affect you?
- All 50 states in America have some form of smoking ban; governments at the local, state, and federal levels are now free to continue to work on passing even more restrictive legislation.
- Forty-seven states in America have enacted cigar taxes, with some having gone as far as taxing cigars at a rate of 95%. (CRA)
Cigar Taxes by State
Source: halfwheel.com. Last updated: Aug. 12, 2015.
*New York’s cigar tax is set at 75 percent, but the state has established an “industry standard relief” that can be applied in some instances. This rate is effectively 28.5 percent of the wholesale price. More details on the industry standard can be found here.
These new restrictions are changing the way you’ve been able to enjoy cigars. Here are just a few of the ways:
- FDA approval of all cigars sold – cigars that were introduced after February 16, 2007 but before August 8, 2016 must be tested by the FDA for “substantial equivalence”; meaning that cigar “has been found by the FDA to either have the same characteristics as a predicate tobacco product; or has different characteristics than the predicate tobacco product but the information submitted demonstrates that the new product does not raise different questions of public health [fda.gov].”
- If the cigar is introduced after August 9, 2016, it will have to go to FDA for premarket approval – meaning it can’t be sold until the agency approves it.
- Cigar makers will be mandated to disclose the ingredients of their proprietary blends to FDA, as well as their plans on how they intend to advertise it.
- Prices will go up: in addition to the costs of FDA testing, cigar makers wil be required to pay “user fees” to the FDA to help pay for the cost of tobacco regulation and research.
- Cigar boxes will be required to carry warning labels that cover at least 30 percent on the top and front areas.
- A ban on free samples: this means cigar shops and cigar makers will no longer be able to offer you a free sample of a cigar you might like to try.
How do these FDA cigar regulations affect the companies that make your favorite cigars?
- The tradition of Innovation by cigar makers will be stifled. While the cigar industry and its customers have largely relied on new products each year, the imposed verification process will radically slow the rate of new cigars going on shelves as well as the number of new cigars in general. Meaning, you won’t be able to go into your favorite cigar shop and ask, “what’s new?” simply because there will be so few new releases.
- Scott Drenkard, a writer for the Tax Foundation, reported that by the FDA’s own appraisal, the “new regulation would wipe out somewhere between 10 and 50 percent of [cigar] products as it will not be cost effective to put many of the products through review.” This includes highly-desired and often-talked about limited-edition cigars and seasonal blends (runs of 50,000 cigars or fewer).
- They’ll all go away – and so will most of the small businesses that produce them, as they don’t have the resources to comply with the FDA regulations. The worst part is, the agency is unwilling to accept responsibility for driving these established companies out of business.