Alhamrah Corporation is a family run Tobacco Company located in Dunmore, Pennsylvania. The business started in 2003 and since their start, has expanded to a national wholesale retailer and distributor. Alhamrah Corporation sells to customers, distributes to convenience stores and small retailers as well as to big wholesalers. Their products include over the counter medicine, batteries, lighters, and normal merchandise in addition to their main products: cigars and smokeless tobacco. They sell e-cigarettes and e-liquids and other non-perishable, general products, too.
Alhamrah Corporation is currently located in Pennsylvania, one of the two remaining states to avoid implementation of state tax on cigars. However small cigars are included in the cigarette tax. Pennsylvania started taxing cigarettes in 1935. Florida is the only other state that does not tax cigars but does tax all other tobacco products.
Cigars have been excused from most of the marketing regulations, to which cigarettes must adhere. The Public Health Cigarette Smoking Act of 1970 exempted cigars from its advertising ban; cigar ads, unlike cigarette ads, need not mention health risks. Cigars were also taxed much less than cigarettes up until 2007, in every state except Pennsylvania and Florida. Prior to 2007, a pack of little cigars cost less than half a pack of cigarettes.
The Treasury Secretary recommended a tax on distilled spirits and tobacco in 1862. The House Ways and Means Committee thought it would be better to tax more items, but at lower rates. Most states wanted to keep taxes low on items produced in their state. In 1864 all tobacco products were charged at a higher rate because manufactures were mis reporting some of their tobacco products to be taxed lower. Cigars were heavily debated. The law of 1862 allowed cigars to be taxed according to their value. They established five different taxes, broadly covering cigars selling for a penny to 15 cents. Initially the tax was essentially forcing cigar makers to pay tax on the tax but by the end of 1863, the House-Senate Committee wrote a new law stating “the valuation of cigars herein mentioned shall in all cases be the value of cigars exclusive of the tax.” However there were still issues with the five tier tax system; at some rates it was more profitable for a cigar maker to sell his cigars at a cheaper price. In 1865, the tax law removed the five tier tax system and set uniform tax rates. Low priced cigars were hit the hardest. Penny cigars were only sold in the black market or Pennsylvania.
How has Pennsylvania managed to avoid the state tax? The CEO of the American Lung Association of the Mid-Atlantic, Deb Brown, found that “Pennsylvania falls short of its potential in promoting clean air and in adequately funding prevention programs that help keep our kids off tobacco.” The state funds its tobacco-control programs at only 11% of the level recommended by the Centers for Disease Control. She argues that it seems state lawmakers are more concerned with Pennsylvania’s cigar industry than with the health of their people. The cigar industry has been a mecca in Pennsylvania, providing jobs for employees and growing each day.
However, there has been debate on a cigar tax among Pennsylvania lawmakers since 2010. Former Governor Ed Rendell proposed a tax on premium cigars but his proposal was not pleasantly received. Current Governor, Tom Wolf, is proposing a $1 per pack increase on cigarette taxes as well as a 40% tax on the wholesale value of smokeless tobacco, large cigars, loose tobacco and e-cigarettes. States including Maryland, New York and New Jersey have tried a tax rate at a level like 40% but found themselves backtracking because it decreases the revenue from tobacco products. Some states have a tax rate of a penny per cigar, which is reasonable. If Wolf’s proposal passes, it will not only affect Alhamrah Corporation but will have great implications on the whole cigar industry for the state of Pennsylvania.