Minnesota Cigarette Tax Hike Affects Businesses

Published On: 5th November 2013

From the internet

Figures show that the Minnesota cigarette tax might be costing the state rather than helping it.

One Minnesota state senator said that businesses have lost sales and the expected income is $50 million below projections. At the same time, the state has collected more tax revenue than they did over 2012. The revenue falling short of projections has affected the big picture. In July and August, the projections fell short by $7 million.

Everywhere from gas stations to grocery stores are experiencing declines in sales. Where a person may want to stop at a gas station and pick up cigarettes, it is being found that smokers are not buying. In some cases, they go across the state boarder to Wisconsin to buy their cigarettes and sometimes that means they buy their gas there, too. This is costing businesses their customers. It is also costing the state tax revenue.

Gas station managers have said that their customers are not stocking up on cigarettes like they used to. They said this is costing them revenue. Gas stations tend to become involved in communities, donating to causes. With decreased revenues, they are finding it difficult to donate.

In Worthington, town promotion is a big deal and they like to keep shopping local. In fact, many of the residents have been dedicated to keeping their business local. The increased cigarette tax has made it difficult to keep all business local.

The total cost of the per pack tax increase is $1.60 and it took effect on July 1. This made the total tax $2.83 per pack.

The initial numbers recorded by the Minnesota Department of Revenue showed that cigarette sales dropped over 35 percent in July 2013 compared to July 2012. In August, sales were down 12 percent compared to August 2012.

One worker at a store that sells just tobacco products in Maplewood said that some people who would buy a carton now only buy around five packs. It seems individuals are cutting back on the number of cigarettes they are smoking.

Even more workers are saying they are hearing complaints.

One cigar and cigarette store in Minneapolis has numbers that show they have not been as busy as they were before. The company is still selling around $1 million in cigarettes per month, but they state they have lost 1/3 of their sales. Some of the stores are selling more “roll your own” tobacco products and there has been an increase in electronic cigarettes.

The solution for some is not laying off their employees. Instead, they are looking to bring in new products that won’t be subject to the tax.

Some people are simply starting to stop smoking. Websites that help people stop smoking are seeing more visits than before. The increase over last year is as much as 240 percent.

Sources: http://minnesota.publicradio.org/display/web/2013/09/25/cigarette-tax-revenue-up-sales-down