Tax_wars

1863-1868 Tax Wars

A National Cigar Museum Exhibit

The U.S, Civil War (aka: War Between the States) initiated a century of countless pages of tax-related legislation that plagued cigar makers, including the requirement that all cigars leave the factory in consumer-size packages. Imposing those laws on an industry known for its independence was not easy. This exhibit is a look at how it all began.

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NCM Home Cigar History Dating Cigar Boxes Advertising Themes

Between 1760 and 1960 more than 125,000 cigar factories similar to the one pictured opened. They were very difficult to regulate. Old timers have reported operating illegal unlicensed home factories, selling cigars out of the back of a pick-up truck on Saturday mornings at farmer’s markets, right up to World War Two.

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Congress cared about collecting taxes, and every one of those rules (and others not mentioned) was designed to help IRS officials do exactly that. Neither Congress nor the IRS placed restrictions on cigar quality, ingredients, selling price or on what could be said, claimed or pictured on a box of cigars. When examining any cigar box, today’s collectors and historians must always keep in mind that only the ID, CN, Revenue stamp and tax-class notice (after 1917) are required by law to be true. Everything else on a box is part of an unregulated million-man free-for-all, the most democratic explosion of marketing creativity and advertising in the history of the world.

At the close of the War Between the States the processing, packaging and marketing of food, drink and tobacco products was in its infancy. In the business-driven atmosphere of the post-War world, tradition was out the window. Every manufacturer of consumer products sought newer, better, faster and cheaper ways of doing things because to do so meant you would survive, perhaps prosper, and maybe even strike it rich.

The concept of consumer size packaging was still new, as was the technology to make it happen. Mass produced paper, cardboard and bottles were recent developments. The capability of printers to put color text and pictures on those packages even newer. Commercial life became a giant experiment in production, quality control, distribution, package design, packaging materials, advertising, marketing, delivery, storage, theft prevention, tax evasion and bribing government officials. With no great body of experience to learn from, the cigar industry tackled those problems with style and ingenuity that has never been equaled.

The U.S. cigar industry single handedly turned the first few decades after the Civil War into the most important period in the history of advertising and package design. Selling cigars became an outrageous free-for-all involving hundreds of thousands of entrepreneurs, each convinced he had the best ideas for separating smokers from their nickels. The inside of cigar boxes evolved from blank paper to a magnificent billboard upon which every ploy used by modern advertisers was first tried. Before World War One, all the themes, concepts, gimmicks, designs, styles, patterns, wordings, and novelties of modern advertising had been tried and proven. No product in history has been packaged in greater variety than the cigar.

Signs

Government regulations didn’t stop there. Because cigar factories were tiny, scattered through rural areas, tax inspectors had a hard time finding them. The government responded by requiring cigar factories to hang large, readable, conspicuous signs. Though regulations were later relaxed, early laws legislated the wording, the color, and size of the lettering.

This sign not in the NCM collection.

Licenses

Licenses are a traditionally effective means of control used by governments for millennia. The post-Civil War battle resulted in Licenses being issued for Cigar makers and Dealers, Tobacco Manufacturers and Dealers, Brewers, Distillers, Retailers, Leaf Dealers, as well as various classes of Peddlers (stationery and horse & wagon). Cigar makers were required by Federal law to hang their license in a conspicuous spot in their factory. For a while in the 1870’s and 1880’s the government sold unused expired licenses to collectors, flooding the market, making mint condition unused licenses easier to find than used ones.

Unused licenses are cancelled by holes.

Inventory

The shooting War Between the States ended in 1865, but the tax war raged on. After conducting hearings concerning abuses by both impound-happy bribe-taking tax inspectors and their tax dodging adversaries, Congress overhauled and expanded the law over the next few years to the point where cigar makers became the most highly regulated craftsmen in America. Employees were bonded. Tax Laws of 1868 added pages of rules so strict and specific that if you carried an armful of cigar tobacco from one room in your home or shop to another, you were required to fill out a federal form recording that you did so. Daily inventories of tobacco, cigars and cigar boxes were required.

FORM OF BOOK TO BE KEPT BY CIGAR MANUFACTURERS: “The Cigar Manufacturer is required to make daily entries in this Book, under a fine of not less than $500, and imprisonment not less than six months, for refusal or wilful neglect.--Section 3390, U.S. Revised Statutes.” “RECORD OF ARTICLES on hand, as per inventory, on the first day of January of each year or at the time of commencing or concluding business; and articles purchased or received into the Factory; and Cigars, Cheroots and Cigarettes manufactured, sold or removed; materials sold or returned, and Cigar Boxes and Stamps purchased and used, by ______[name]______ Factory No._______ District of _______”

Left hand page: “Articles on hand on the first day of January, or at the time of commencing or concluding business, articles purchased, and goods manufactured.” Columns left to right: Date / Pounds of Leaf Tobacco, Actual Weight / Pounds of Leaf Tobacco Resweated / Pounds of Cuttings, Scraps, &c, to be used for Fillers / From Whom Purchased / Business Location / Cigars, Cheroots and Cigarettes, over 3 lbs. per Thousand Manufactured / Cigarettes, not over 3 lbs. per Thousand Manufactured / Cigar Boxes: 25’s / 50’s / 100’s / 200’s / 250’s / 500’s / Segar Stamps: 25 / 50 / 100 / 200 / 250 / 500 / Cigarette Stamps: 10 / 20 / 50 / 100. Bottom of left page: Total for this month / Total to be accounted for / Sold, Consumed, Returned, &c. / On Hand, last day of month.

Right hand page: “Materials sold or returned; Cigars, Cheroots and Cigarettes Sold or Removed and Cigar Boxes and Stamps Used.” Columns left to right: / Pounds of Leaf Tobacco, Actual Weight / Pounds of Leaf Tobacco Resweated / Pounds of Cuttings, Scraps, &c, to be used for Fillers / Pounds of Stems, Scraps, and Waste Unfit for Cigar Stock / To Whom Sold or Returned / Business Location / Cigars, Cheroots and cigarettes, over 3 lbs. per Thousand Sold or Removed / Cigarettes, not over 3 lbs. per Thousand Sold or Removed / Cigars, Cheroots and cigarettes, over 3 lbs. per Thousand Removed in Bond for Export / Cigarettes, not over 3 lbs. per Thousand Removed in Bond for Export / Cigar Boxes: 25’s / 50’s / 100’s / 200’s / 250’s / 500’s / Segar Stamps: 25 / 50 / 100 / 200 / 250 / 500 / Cigarette Stamps: 10 / 20 / 50 / 100. Bottom of right page: Number of new hands employed during month _____ / Number of hands discontinued during month _____ / Number of hands employed on the last day of the month _____.

The six-year tax war (1863-1868) between cigar factories and the Federal Government pitted a government eager for money against thousands of large and small cigar factories determined not to give it to them. This ultimately one-sided war covered a few dozen major battles involving deceit, ruse and run-around by the cigar makers and ever-tightening regulations by the IRS. The cigar makers lost every battle, and eventually joined the ranks of the law abiding... at least most of them. Thousands of small makers, especially rural part-timers, continued to evade the tax man for another 80 years.

Hard to read a century and a half later, but the tax assessor made his computations on the box as the law previously required. LA FLORA, 1866 NWO box of 100.

At first, excise tax collecting was a primitive process, requir-ing personal on-site inspection, hand calculating taxes right on the box and collecting taxes in cash.

When a tax man walked in the door and began to physically count the factory’s inventory, cigar makers protested, “Hey, you collected taxes on those last month.” Given that tax collectors were patronage appointees, good ol’ boys who had helped or were related to some politician, it’s no surprise they were befuddled by masses of cigars that all looked pretty much alike. Many tax collectors found it impossible to know which cigars were tax paid and which were newly made. Many others found the confusion a convenient cover for bribery and pay-offs.

Congress responded with an 1864 law requiring cigars to be put in “boxes or bundles” so they could be counted. Cigarmakers countered with an assortment of oddly shaped bundles containing heaven knows what and how many. The government ended that nonsense in 1865 by requiring that every domestic cigar be packed in boxes of 25, 50, 100, 250 and 500, whether the factory rolled 50 cigars each day or 50,000. The American cigar box was officially born. Legislated to life. Cigars became the first product to have a federally mandated consumer size package, the law specifying not only the number of cigars but the form and material of the package. Before that law was passed, as few as one in ten domestic cigars appears to have passed from roller to smoker in consumer-size boxes.

Tax stamps & Caution Notices

Cigar factories were required to pay a tax on each box of cigars, due when the box left the factory, payment indicated with a revenue stamp. Not only were taxes outrageous (a half cent cigar had almost a penny in tax, more than doubling its price), stamps had to be pre-purchased at the tax office, often a substantial distance away. Some cigar men glued stamps on boxes in a manner permitting retailers to open the box without breaking the stamp, sell the cigars, return the box for credit, so the cigar factory could refill the box with untaxed cigars. The govern-ment responded by stipulated the tax stamp must be broken when opening the box and “utterly destroyed” when the box was emptied. And to make sure that everyone remembered to follow those rules, starting in 1868, for the next 100 years cigar makers were also required to paste a Caution Notice (abbreviated CN) on the box to remind retailers to break the revenue stamp when opening the box and not to use the box for cigars again. Inspectors were required to hand sign each stamp when sold.

Revenue stamps and Caution Notices remain a requirement until the late 1950’s. Because government constantly fiddled with tax laws, revenue stamps were changed about thirty times during that period, making them very useful in dating a box.

See Dating Cigar Boxes for examples of stamps and CN.

GEN. U.S. GRANT, re-used box with 1866 and 1868 stamps.

CHOICE, illegal use of two 1872 50 count stamps on box of 100.

EL TELEGRAFO, illegal application of stamp, unbroken when opened.

I.D.’s

One of many 1868 regulations stipulated that each box of cigars must be branded or incised with the name of the maker (later his factory number), state and tax district in which the factory was located, and the number of cigars packed in the box. This is called a box’s “ID” and is very useful to identify what is and what isn’t a cigar box. An I.D. is important information when describing a box to collectors as many seek boxes from a particular state, region or factory. The first ID’s were somewhat freehand, branded in the manner of the days when cigars were shipped in crates and barrels. Later laws made them circular, the size of a quarter. These and future laws further changing I.D.’s are discussed in detail in Dating Factory ID’s.