As a long time smoker, the issue of tobacco taxes has always been of interest to me. I’ve written here before about how I avoid all tobacco taxes and save huge amounts of money as a result. However, I just today learned about another hidden tax on tobacco that we seldom hear about: Cigarette Tax Bonds.
According to JW Bond Consultants, a family owned surety bond company: “Cigarette Tax Bonds are required to guarantee taxes are paid from a seller of tobacco to the government requiring the bond.” In other words tobacco sellers need to pay a private company, such as JW Bond Consultants, 1%-20% of their expected tobacco tax bill, in order to ensure the seller will actually pay the government the exorbitant “sin” tax it applies to cigarettes and other tobacco products. The bond company then promises to handle collection of the debt should the tobacco seller default.
Since this cost can’t be added into the taxes themselves it is, of course, passed on to the consumer in the form of higher prices for every pack of cigarettes or individual cigar purchased. No wonder the European cigarettes I purchase cost me less than even the taxes I’d pay when purchasing at my local corner store, thus actually keeping U.S. dollars here in the United States.