California tobacco retailers and wholesalers are going to more than double the tax rate they pay for their products starting July 1.
After Proposition 56 was passed by voters in November, the tax rate on tobacco products other than cigarettes will increase from 27.3 to 65.08 percent. These products include cigars, smoking tobacco, chewing tobacco, snuff and e-cigarettes.
Taxes increased for cigarettes in April.
While the tax increase directly affects retailers, Board of Equalization Public Information Officer Venus Stromberg said this price increase will likely carry over to consumers.
“If you are a consumer of those products, you will likely see a ripple effect,” Stromberg said. “Once it gets paid, it likely gets passed down.”
As prices have increased, the tax rate percentage has “trended downward” up until this point, according to Stromberg.
This rate will stay in effect for a full year before it is adjusted again by the Board of Equalization.
According to Ramy Hatoum, owner of Cig 4 Sale, he is not worried about the tax increase affecting business, though he said he would prefer not having the increase.
“I have been in this business for 10 years and there have always been new taxes, but that’s not preventing people from smoking,” Ramy Hatoum said.
“Smokers are smokers. If you’re going to smoke then you’re going to smoke.”
In fact, Hatoum said sales have recently gone up after the April cigarette increase because those who were buying their cigarettes at gas stations and liquor stores have started shopping at his store.
“We definitely didn’t lose any business from existing customers,” Hatoum said.
The tax rate on packs of cigarettes increased by $2 to $2.87, effective April 1. For a pack of 20, this equates to $0.1435 per cigarette.
Victor Iskaros, Tobacco Plus’ owner, said he anticipates the cost increase will have an impact on business.
“For sure in the beginning it is going to have an effect,” Iskaros said.
He’s endured price increases prior to this one, but never one this large.
“This is the first really high increase. Before, it was average,” Iskaros said.
This is not the first time tobacco products have seen a tax increase as a result of a California proposition. In 1998, California passed Proposition 10, which placed a $0.50 tax increase on cigarettes and up to a $1.00 increase on other tobacco products.
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