Franchot: I won't bust online premium cigar buyers
A few days ago Comptroller Peter Franchot said he didn't want to enforce the ban on online sales of premium cigars. He asked legislative leaders and the attorney general for their opinions. Now he has decided that he will refrain from enforcing the law until the legislature has an opportunity to fix it, probably in the fall's special session. Here is the entire letter:
Dear Concerned Citizen: Please be advised that effective immediately, the Office of the Comptroller will temporarily defer enforcement of the online sales ban on premium cigars, as defined in Business Regulation Article 16.5-101 (p), until the Maryland General Assembly has had an opportunity to consider legislation that would permanently repeal the ban.As you may know, Comptroller Franchot expressed a preference to take this action --which would apply as well to telephone and mail orders of premium cigars --in a June 13 letter to the
presiding officers of the legislature. His authority to do so was confirmed by a June 20, 2011 letter from the Office of the Attorney General, which states that "the Comptroller is fully empowered with the discretion to enforce or decline to enforce the online sales ban against buyers ofpremium cigars."As you may know, the online sales prohibition was a provision of House Bi1l88, which was passed and signed into law in 2010, with an effective date of May I, 2011. This legislation was introduced as a response to, and a remedy for, the widespread incidence of tax avoidance and illegal sales activity associated with "other tobacco products" (OTP), which includes cigars, little cigars, pipe tobacco, chewing tobacco and moist snuff. The legislation established a long-overdue process for licensing those who distribute and sell these products in Maryland. Since this legislation was modeled to a large extent after existing cigarette statutes, it also included a prohibition on Internet sales.
It was not until this new law had been enacted that we were made aware of an unintended consequence -the ban on the online sale and distribution of premium cigars. Contrary to the other products that are included in the statutory definition of OTP, these are unique, high-end products that are customarily sold within a community of aficionados. These products typically are not sold at convenience stores and other general retail outlets. Moreover, it is not uncommon for consumers to desire a particular brand of cigar that isn't readily available at local specialty shops.
Simply put, our concerns about the illegal trade practices that motivated the introduction and passage of House Bill 88 are not pertinent to premium cigars, but it is the consumers of these products who are unintentionally, and disproportionately, affected by this provision in law. It was based upon his longstanding commitment to the principle of consumer choice, and his desire to devote the finite resources of his agency to far more critical priorities, that Comptroller Franchot has pursued this temporary stay of enforcement.
However, our concerns that these products have routinely been sold in the State of Maryland without the appropriate collection and remittance of taxes are wellfounded. In order to ensure a climate of tax fairness for Maryland-based businesses, and to ensure that the State of Maryland receives the revenue to which it is entitled, I must remind you to exercise due diligence in remitting the appropriate sales, use and orp excise taxes resulting from the sale of these products.
Finally, it is worth restating that this is simply a temporary stay of enforcement. It is Comptroller Franchot's hope that the legislature will enact a remedy that will permanently restore consumer choice in this area, while ensuring that we have the tools to collect the taxes owed. Should the General Assembly have an appropriate opportunity to do so, and choose instead to leave the terms of the current legislation intact, our office will once again act to enforce the letter of the law.
Should you have any questions about this action, or need additional information, please do not hesitate to call.
Comments
Let's just hope that the legislators allow this provision of the bill to die, and not try to enforce out-of-state cigar vendors to collect MD sales tax. They don't require out-of-state vendors of other products/services to collect taxes, so don't single out cigars.
Posted by: Bruce | June 23, 2011 2:24 PM
A tyrannical government picks and chooses which laws it has passed to enforce.
Anarchy is when the citizens decide which laws they want to obey.
Posted by: Anonymous | June 23, 2011 2:28 PM
"Ensuring that we have the tools to collect the taxes owed."
you arent "owed" shit. stop looking at taxes as a piggy bank to steal from and start budgeting properly. Maryland in the past 10 years has changed into the "Go F yourself and give me your money" state.
Posted by: anony | June 23, 2011 3:39 PM
So instead of a bad law, we will have a bad law with a loophole for the wealthy? The entire law, not just the part that annoys rich people, is absurd and should be scrapped.
What about premium pipe tobacco? The same conditions apply: it's not carried by general retailers, it's hard to find in Maryland, and it's not big with children. When was the last time you saw a kid walking down the street smoking a bowlful of imported British tobacco in his big, pricey Sherlock Holmes calabash? The average Maryland tobacco shops carry a mere handful of the hundreds and hundreds of premium pipe tobaccos on the market. Why are pipe smokers being thrown under the bus in favor of cigar smokers?
Not to mention higher end machine made cigars that cost more than the average "drugstore cigar," but less than $2 each, and are impossible to find in Maryland, such as Topper, Muniemaker, Finck, and John Hay cigars? And don't forget the snus users, real Swedish snus is a very hard to find product despite being the least harmful tobacco product on earth.
If the state needs money, perhaps it should do what Pennsylvania and Florida did and abolish cigar taxes altogether. Both states have a thriving internet cigar industry which has created many jobs.
Posted by: Firecured | June 23, 2011 5:14 PM
A week or so ago one of the National headlines brought up the issue of States going after taxing the various internet transactions taking place to ease their financial troubles. The States simply need to be more fiscally responsible especially Maryland which continues to pander to the special interest voter base groups. Maryland is going to implode on its own liberal Democratic tax and spend policies.
Posted by: DHarri | June 23, 2011 5:19 PM
Dear Comptroller Franchot:
Thanks once again for looking out for small Maryland businesses. I am a retailer of premium cigars and required to collect Maryland Tobacco Taxes which jack my prices into the stratosphere. We have hung in there as long as we could, but the OTP FREE internet and mail order has killed us, along with your generous help. I expect to be locking my doors for good soon. Consider what your short sighted decision has accomplished: You have destroyed another Maryland tax paying businesse and given free reign to non-tax paying out of state businesses. Once again it shows the foolishness of attempting to do business in Maryland. The playing field is not level, especially when you legislate that my prices be at a minimum 21% higher than mail order and internet. Politicians do not understand business and especially the senstivity of price in purchasing decisons (price never matters to politicians - they're not spending their money, they're spending ours!). Maryland politicians conveniently now change the rules on a whim. Since the Constitution guarantees equal protection under the law, I expect to be getting a letter this week informing me that I also no longer have to collect OTP taxes from my customers. I mean, fair is fair, right Mr. Comptroller?
Posted by: Bankrupt Retailer | June 23, 2011 9:26 PM
I beg to differ with Bankrupt Retailer. While I most certainly do order cigars from out-of-state vendors, in many instances, it because the retailers in my area do not carry the product I want/need. Price is not the only reason cigar smokers are using out-of-state vendors.
Also, my experience is that the retailers that actually care about their customers and provide excellent service seem to thrive and prosper.
Don't forget, Bankrupt Retailer, that you are the last bastion of indoor smoking in the state. Granted, I'm doing most of my cigar smoking outside now, but I also know that during cooler/cold months, I'm spending a lot of time and $$$ at some local shops. That is, those that are customer-friendly enough to have a smoking lounge that consists of more than just one or two chairs and a few old newspapers scattered about.
What you need to do is to separate yourself from those on-line retailers. Hold special events at your shop, make it know that you can and will special order if you are able to, provide a comfortable and clean area for your customers to relax and, most importantly, keep a clean and well maintained walk-in humidor. Nothing burns me more that to see over-humidied cigars with mold in a shops humidor.
Posted by: Bruce | June 24, 2011 1:40 PM
I beg to differ with Bankrupt Retailer. While I most certainly do order cigars from out-of-state vendors, in many instances, it because the retailers in my area do not carry the product I want/need. Price is not the only reason cigar smokers are using out-of-state vendors.
Also, my experience is that the retailers that actually care about their customers and provide excellent service seem to thrive and prosper.
Don't forget, Bankrupt Retailer, that you are the last bastion of indoor smoking in the state. Granted, I'm doing most of my cigar smoking outside now, but I also know that during cooler/cold months, I'm spending a lot of time and $$$ at some local shops. That is, those that are customer-friendly enough to have a smoking lounge that consists of more than just one or two chairs and a few old newspapers scattered about.
What you need to do is to separate yourself from those on-line retailers. Hold special events at your shop, make it know that you can and will special order if you are able to, provide a comfortable and clean area for your customers to relax and, most importantly, keep a clean and well maintained walk-in humidor. Nothing burns me more that to see over-humidied cigars with mold in a shops humidor.
Posted by: Bruce | June 24, 2011 1:44 PM