Monday, April 20, 2009

Cig sales down afta tax increase

http://www.csnews. com/csn/news/ article_display. jsp?vnu_content_ id=1003964156
CUMBERLAND, R.I. and TREASURE COAST, Fla. -- It's not a hard concept to grasp -- as taxes on cigarettes goes up, sales of cigarettes go down—but the latest tax increases on the products are once again hitting many local convenience stores hard, according to area news reports in The Valley Breeze and Hometown News.

Rhode Island's latest tax increase on nicotine places the nation's smallest state at the top of the tax heap—and the effect is hurting retailers including Steven Biron, who owns a Sunoco Gas station and Stop 'n Save Neighborhood Store in Burrillville, R.I. Biron told The Valley Breeze his weekly order was 25 cartons fewer than normal, following a slow weekend during which a pack of cigarettes hit a record price of $8.35, up from $6.50 in the state.

Ken Bousquet, co-owner of Consumers Propane and Gas Station in Woonsocket, R.I., said he would guess the station's convenience store has seen a 50-percent drop off in cigarette sales since a week ago. Tobacco products account for more than 50 percent of his overall sales.

"I don't know what's going to happen, where this is going to end," said Bousquet, who has two employees who quit smoking since the taxes went up. "I think [state leaders] have gone beyond what people are willing to pay, if you want to call it a breaking point."

Biron said it is too early for convenience store owners to know the true impact of a $1 increase in the state's excise tax—to $3.46 a pack—because many of those who vowed to quit smoking due to the price hike, may yet return to their old habits. Many customers also stocked up prior to the newly approved tax, which itself is subject to the state's 7 percent sales tax going into effect.

Biron, who serves on the New England Convenience Stores Legislative Committee, and is a town council member in North Smithfield, said the committee will wait until the end of May to do a survey of stores across the state, which will determine how much overall sales have been hurt by a general assembly-approved increase on cigarettes. That increase, he said, has
joined a higher gasoline tax as formidable obstacles for Ocean State convenience store owners to overcome.

The increase has pushed Rhode Island's cigarette tax to nearly $1 more than neighboring Massachusetts, and $1.50 more than Connecticut, creating huge competitive disadvantage, which Biron and others said could put them out of business.

When a customer buys a pack of cigarettes, said Biron and Bousquet, he or she most often also purchases coffee, soda, food and lottery tickets. The lottery is a huge source of revenue to the state, which could be hurt in the coming weeks as customers cross the border into neighboring states for gas and cigarette needs.

Judging by the answers given at Biron's store in a survey last week, many smokers were either quitting or planning to buy cigarettes elsewhere.

Biron said when a state like Rhode Island or Massachusetts makes a significant change to the way it taxes residents for goods, the impact is immediately felt in both the state where the change is made and in surrounding states.

In June 2008, when Massachusetts raised the excise tax, said Biron, he sold 560 extra packs of cigarettes the next month.

Biron and others have repeatedly told state legislators they need to help local business instead of hurting it through their actions—or inaction—on measures such as taxing items sold on the Internet.

Solving a problematic line item with a new tax can no longer be the way Rhode Island leaders do business, if they expect to stay in business, said Biron. "I'm fighting to keep my business right now. Sometimes I think I might as well turn my keys in to the state and give up."

Meanwhile, in Treasure Coast, Fla., some small c-store owners are seeing decreases in cigarettes sales ranging from 10 percent to 25 percent, following the new federal tax rate increase.

Mike DiTerlizzi, a former Martin County, Fla., commissioner who owns a gas station and convenience store in Palm City, told Hometown News he noticed a change in his customer's buying habits.

"Sales are going to decrease over the long run," said DiTerlizzi. "It's just one of those things you deal with in business, and you deal with it the best you can."

Lisa Malfregeot, manager of a Shell gas station and convenience store in Jensen Beach, Fla., told the newspaper her cigarette sales have seen a drop, but it's too early to project how bad the damage will be.

"It's across-the-board on cigarette tax, not just on Winston or Marlboro, and it's even worse because now Florida is looking to add another dollar on top of everything," she said.

In Tallahassee, lawmakers in the Senate are considering raising the state cigarette tax from 34 cents per pack to $1.34 per pack.

A Senate committee of three Republicans and two Democrats approved the tax increase, but no date has been set for a full Senate vote, reported Hometown News.

Loyal customers still patronize the Shell station for cigarettes, but their attitude is a little different, said Malfregeot. "You see a look of shock on people's faces when you tell them how much a pack of cigarettes cost."

Before the new tax, a pack cost around $3.50, but now, that same pack costs more than $4, and if the Florida tax is imposed, the price will jump to more than $5.

Because of the rising cost, customers have begun to make adjustments to their smoking habits, according to Malfregeot. "I'm seeing more people trying to quit as a result. More people are looking for bargains," she said.

Currently, Florida is ranked 46 out of all states in terms of cigarette taxes, according to the Campaign for Tobacco Free Kids.

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