Cigar shop fired up about lower tax rate

March 18, 2019

What a reversal of fortune.

Just three months ago, the owners of Primo Cigar Shop faced the possibility of a 76 percent state tobacco tax on their products. They now pay a tax of 25 percent upfront, an amount they say makes it impossible to compete with cigar retailers on the internet.

Tripling the state tax would have turned off Primo’s lights and closed its doors, said Jack Sweeney, who 10 years ago founded the business.

But bizarre turnabouts can occur in the blur of New Mexico’s 60-day legislative session.

One of the more improbable tax cuts was included in a complex and wide-ranging proposal, House Bill 6. Legislators approved the measure Saturday during the final 40 minutes of the session.

It calls for cigars to be taxed at a surprising new rate.

“Fifty cents a stick,” said David Salazar, who once owned El Farol Restaurant and now is a proprietor of Primo Cigar Shop.

It’s true. Owners of cigar bars were among the big winners in a legislative session they feared.

Lawmakers had arrived at the Capitol two months ago eyeing that proposed new tax rate of 76 percent for tobacco products. For one of the fine $20 cigars at Primo, the tax would have run $15.20.

Instead, the tax on that same imported, hand-rolled cigar will be half a buck, provided that the governor signs the sweeping bill.

Sen. Clemente Sanchez, D-Grants, doesn’t smoke cigars. But he wrote in the tax cut for Primo and a handful of stores that specialize in cigars.

“I wanted to help them out,” Sanchez said. “These are small businesses trying to make it.”

Sweeney’s customers were elated by Sanchez’s understanding that a tax increase would have killed the store.

The regular clientele at Primo Cigar Shop consists of people typically from their 50s to their 80s. Most have smoked cigars for decades.

Ted Stein, who practiced law in Chicago for half a century before moving to Santa Fe, calls Primo a social club. He could purchase good cigars on the internet, but where’s the fun or fellowship in that?

Zack Stalberg, who was the longtime editor of the Philadelphia Daily News, is another regular at Primo.

“I value the uncommon open dialogue that takes place there,” he said.

Primo didn’t hire lobbyists to plead or prod the powerful. Its customers appealed to legislators, saying the existing 25 percent tax is bad enough. A 76 percent tax on cigars would snuff out their favorite hideaway.

And the store’s owners became familiar figures to legislators.

“When we were working the halls, they’d see us and say, ‘I know, I know,’ ” Salazar said.

Sanchez estimated the tax cut on cigars will save Primo and other businesses that sell cigars $4.1 million a year. Critics would say the state gave away the same amount.

Sanchez told colleagues during floor debate that perhaps three premium cigar bars exist in New Mexico, but Sweeney said the accurate number is eight.

As legislators cleared their desks and headed for home, Sweeney and Salazar were talking about expanding Primo Cigar Shop.

With the lower tax rate that would take effect in July, they see new possibilities.

“It’s going to increase our business because we can put more product on the shelves,” Sweeney said. “We’re going to hire more people.”

Salazar said Primo will be able to compete with internet cigar companies for the first time. Tourists who have visited the store will be able to patronize it electronically. This alone might necessitate the hiring of another employee or two, he said.

Had the 76 percent tax on cigars become law, Sweeney would have closed his store and retreated to golf courses.

He didn’t want to shutter his business.

“We’re an institution in town,” Sweeney said. “If we were gone, there would be a hole in the city.”

Ringside Seat is an opinion column about people, politics and news. Contact Milan Simonich at msimonich@sfnewmexican.com or 505-986-3080.