February 26, 2008 15:40 ET

Maryland Tobacconists Say Premium Cigars at Risk With Proposed Excise Tax Increase

BETHESDA, MD--(Marketwire - February 26, 2008) - Proposed higher excise taxes on premium cigars could crush the businesses of state tobacconists, says Steve Castro, co-owner of the state's largest private chain of cigar stores.

"It's bad enough that Maryland consumers now have to pay another one percent in sales tax on most products -- including premium cigars," said Castro, who, with his brother David, own Davidus Cigars Ltd, headquartered in Monrovia with six tobacco stores in cities throughout the state including Frederick, Olney, Ellicott City, Potomac, Gaithersburg and Urbana.

"The proposed increase in taxes on other tobacco products (OTP) will crush the premium cigar business in Maryland and the businesses of dozens of tobacconists throughout the state," he said.

Castro explained that the current tax on OTP is 15 percent of the wholesale price. Currently under consideration in the Maryland legislature are SB 513 and HB1095 which would increase that tax to 25 percent.

"If you have a convenience store where OTP represents only four percent of sales, it's not as much of a problem as it is if up to 90 percent of your sales is OTP, including premium cigars, as in a cigar store," he said.

Castro, a member of the International Premium Cigar & Pipe Retailers Association, offered more reasons why the proposed tax increase on OTP and hand-made cigars would be harmful to Maryland tobacconists.

"Premium cigars, unlike cigarettes, are highly sensitive to price increases because they are more a choice than a habit. They are adult products that make ordinary moments special and special moments extraordinary," he said.

"If this tax increase is enacted, our customers will likely buy fewer cigars and purchase them less frequently, or they will go to adjacent states where taxes are lower or non-existent or they will resort to mail order and internet purchases, or all of the above.

"Any way you look at it, we lose and the state of Maryland loses," said Castro.

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