December 1998
Volume 25
Number 6


WWhy does the Golden State continue to spread such anger throughout the retail tobacco industry?

With the formal passage of California's Proposition 10, that state's tobacco retailers can ring in the new year with a brand new 35.36% floor tax on all retail inventory in stock as of December 31, 1998. That's above and beyond the current 26.17% tax they've already paid.

On January 1, 1999, consumers will no longer pay the current 26.17% OTP tax on their favorite cigars, but instead face a 61.53% tax, soaring up to 97.59% as of July 1, 1999.

As you may have guessed, the election may be over, but the fight has just begun. At issue is whether the authors of the initiative intended to tax OTP at a higher rate than cigarettes or whether "duplicate language" in the initiative is to blame. A review by California's Business Taxes Committee determined that the language of Proposition 10 (as well as that of Proposition 99, a 1988 initiative that affects the calculation of state tobacco taxes) could be changed by a majority vote of the California Legislature without the approval of the electorate, provided that any changes are "consistent with their intent." In other words, there may be much that is open to interpretation, and a strong fight will be necessary to successfully plead the retail tobacconist's case.

That will be just one avenue that the newly-formed California Association of Retail Tobacconists, Inc. (CART) will pursue in its attempt to undo some - if not all - of the damage. It has launched a major membership drive to fund its attack, and is investigating whether legal action to block the measure based on Constitutional grounds is warranted. If you are a California retailer, (or a distributor manufacturer that does business in california,) we urge you to join CART to help them raise the necessary money to fight back (see story, page 18.)

Meanwhile, news from the Central American nations of Honduras and Nicaragua continues to sadden the cigar industry. The incredible loss of life and the hardships endured by the survivors of Hurricane Mitch stands in stark contrast to the festivities of the holiday season here at home and the busy retail business that is so important to retailers this time of year. Anyone who has ever visited these nations feels a sense of bewilderment reading of the devastation the storm has imparted on the lives of the nation's residents, and the severe blow to their economies. Although the storm struck in October, its effects will be felt for years to come as these poor countries attempt to rebuild roads, bridges, schools, hospitals, and water supplies, all while attempting provide basic necessary services.

I can think of no better way of embracing the spirit of the holiday season than to take a few moments to make a contribution to one or more of the relief funds that are currently providing assistance. A number of companies in the cigar industry have rushed to help channel aid - both money and supplies - to needy victims, most working through local relief agencies or churches in Central America. Many have made sizable contributions, or are matching donations that they collect (see story, page 96.) We have included a listing of industry relief funds and other agencies on page 94.

From all of us at Smokeshop Magazine, we extend our best wishes to you for a successful holiday at the store, and a happy and healthy new year at home.

E. Edward Hoyt III