2014 Premium Cigar Legislative Initiative

Aloha Hawai‘i Cigar Association Members,

The 2014 Hawai‘i legislative session is approaching, and there’s much to report after having spent the last several months meeting with various legislators. The HCA is addressing two main initiatives: 1) an exemption from the self-service cigar display ban set to take effect on July 1; and 2) the creation of a flat-rate tax of $.50 per premium cigar.

As you recall we ended last year’s session with the Senate’s passage of SB188, Hawai‘i’s first premium cigar tax bill, and legislators were continuing to fight hard in committee to exempt premium cigars from the self-service display ban. SB188, which creates a flat-rate tax on premium cigars, passed by a vote of 25-1. The House deferred, and the HCA has since been working closely with over twenty House members, including its leadership. We’re confident that these meetings will ultimately lead to SB188’s passage in 2014 as well as an exemption from the self-service display ban. Purveyors of “premium cigars” as HCA has defined them are not targeting children, and there’s little risk that underage consumers would come to possess them; we believe, therefore, that our industry should be exempted from regulation aimed at keeping tobacco products out of the hands of young people. SB653, which became law, was intended to mirror federal legislation and FDA efforts; it was aimed at cigarettes and the smokeless tobacco industry. However, SB653 included language that would sweep all tobacco products, including premium cigars, into one large regulatory net. This only encourages local consumers to shop online for cigars, harming the premium cigar industry in Hawai‘i and losing revenue for the state.

We intend to meet with the remaining House members over the next two months, and we feel that the momentum on both of these initiatives is with us.

While the HCA supports the version of SB188 SD2 currently with the House, we are sensitive to the concerns of various legislators, public health officials, the Attorney General and industry stakeholders, and we have recommended several amendments to improve and strengthen bill. The following changes outline our recommendations:

 

  1. The creation of a “premium cigar-only” tax category within the Hawai‘i tax code, and not the deletion of the “large cigar” tax category.
  2. Replacing the phrase, “artificial flavor” with the phrase, “characterizing flavor” in the definition of a premium cigar.
  3. The removal of “wholesaling for $2.00 or more per cigar” in the proposed premium cigar definition.
  4. The creation and addition of Section 245-3 (a) (13) that would devote all revenue from taxes on premium cigar to the Hawai‘i cancer research special fund.

 

We feel that SB188, the creation of a definition for premium cigars and establishing an independent tax category all make sense. The problem stems mainly from semantic confusion: Premium and traditional cigars have been lumped together with inferior cigar-like products, and though the two are very different, both are subject to the same regulatory regime. To protect the premium cigar industry, it’s essential to develop language that clearly distinguishes premium traditional cigars from other tobacco products—products that many of us agree should be regulated. Flavored cigar-like products that target youth and machine-made blunt cigars that conceal drugs are among the worst examples of such products. It’s unfortunate that over past seven years or so the traditional and premium cigar industry has allowed itself to become associated with these products. In so doing it’s exposed itself to tighter regulation—a side effect of the common sense effort to regulate more pernicious cigar-like products. To complicate matters, loopholes allow many mass-produced, machine-made flavored products to find tax refuge and regulatory exemption because they fall within the “large cigar” category. 

It’s crucial to note that traditional premium cigars represent a mere 200 million units of the nearly 2 billion “large cigars” sold annually in the United States. The vast majority of these 200 million premium cigars are sold to legal age adults, a demographic that comprises well-educated and affluent consumers. Hardly teenagers.

We believe that the premium cigar definition in SB188 should accurately represent the traditional and premium cigar industry in Hawai‘i. This new language should more precisely define what most people understand to be a traditional premium cigar, a definition that some have sought to cloud. And while we can expect pushback from some within the tobacco industry, there’s little doubt that the average citizen would support more precise language if it leads to fairer treatment of premium cigar manufacturers and distributors.

Please take a moment to review SB188 SD2 as it stands today as well as the amendments the HCA is recommending. While there is room for improvement, the Hawaii Cigar Association will support SB188 SD2 as it stands today.

It is imperative for the cigar loving public of Hawai‘i to voice their opinion to elected officials over the next two months. We are providing a list of House and Senate members so that everyone’s voice may be heard. http://www.capitol.hawaii.gov/members/legislators.aspx?chamber=all It is easy to meet with your elected official by calling the office and scheduling an appointment. At the very least a short email, or telephone call to individual Senate and House members voicing support for our two causes will suffice. The HCA encourages you to get involved before taxes run our businesses out of Hawai‘i and our freedom to purchase and enjoy a premium cigar go up in smoke.

A special night of celebration to rally support for our premium cigar initiatives has been planned for December 13.  Please join us from 7:30 p.m. to 9:30 p.m. at the Row Bar for cigars, drinks and live music by Son Caribe. The event is free to the public and is sponsored by the Kauai Cigar Company. We look forward to sharing a great time with our extended cigar family and good friends. The Row Bar is located in Restaurant Row at 500 Ala Moana Blvd., Honolulu.