Thursday, September 23, 2010

The Wall Street Journal: Congress Examining Whether Tobacco Manufacturers Are Avoiding Taxes

WSJ Reports: Congress is looking into accusations that some tobacco manufacturers are exploiting a tax loophole by increasing the weight of their "little" cigars to avoid paying the recently increased excise tax on such products. By changing the weight, these cigars can be classified as "large" cigars, taxed at lower rates. Interestingly, the federal Alcohol and Tobacco Tax and Trade Bureau found in the 14 months following the tax increase, sales of "large" cigars have quadrupled and sales of "little" cigars have plummeted, reports WSJ.
The House Energy and Commerce Committee is not only looking at these accusations to see if tobacco manufacturers are indeed avoiding taxes, but they are also examining whether or not these flavored tobacco products are in violation of the Food and Drug Administration's rules against marketing cigarettes to youth. According to WSJ, this rule could apply to "little" cigars if they meet the definition of a cigarette. The picture above compares "little" cigars to an actual cigarette.

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