06:35, 2008-Jul-14
Local retailers are already feeling the effects of the state’s recent cigarette tax hike, with some businesses seeing tobacco sales decline by as much as 35 percent.
Justin Le, owner of B & K Liquors at 1212 Washington St. in Weymouth, said weekly cigarette sales in his store have dropped by as much as 20 percent compared to a typical week since the $1-per-pack tax increase went into effect on July 1.
Le said some customers have told him they will go to New Hampshire to purchase cigarettes. Others have said they will buy cigarettes on the Internet and others yet are promising themselves they will quit or cut down – or at least switch to a cheaper brand – from Marlboro to USA Gold or Sonoma, saving $1.25 a pack.
“The first week was very bad, but now they’re getting used to it,” Le said.
Le also said because the bill was signed late in the day, many customers were not aware of the increase and complained when he tried to collect the extra dollar tax – so he sold them cigarettes at the old price. But now he will have to pay the additional $1 tax on each pack he sold at the old price – even though he didn’t collect it.
Before the tax went into effect, Gary Patel, of Brennan’s on Hancock Street in Quincy, said he would sell a couple of cartons of Marlboros a week. Now he said that judging from traffic in his store, a lot of people have quit – or at least quit coming in. He said his weekly cigarette sales have fallen by as much as 35 percent from a typical week.
Brian Tenore, owner of Beale Street News in Quincy’s Wollaston section, said many of his younger customers are teaming up and going across the state line.
“They’re getting their buddies together and one guy will take a list and money and drive up to New Hampshire,” Tenore said.
Cross-border sales and Internet traffic are both issues that retailers have to deal with when facing a tax increase such as this, said Bill Rennie, vice president at the Retailers Association of Massachusetts.
The organization opposed the tax and sent out a grass roots call-to-action urging its members to contact their legislator and voice their opinions, Rennie said.
While Rennie said he expects retailers on and around the border to feel the sting more sharply, he said, it’s not tough for most Massachusetts residents to drive across the state line to shop.
“Many people live within an hour’s drive of any border,” he said.
Pravin Patel, who owns Butts and Bets on North Main Street in Randolph, said while he has only seen a slight drop in business so far, he expects it go down further still.
“Business is still hard to figure out right now but I think it is going to go down 20 to 30 percent,” Patel said. “People are coming in and saying it is going to be their last pack or that they are going to switch to a cheaper brand.”
The state Department of Revenue traditionally
sets a minimum price for cigarettes. The new tax, at $2.51 per pack, has pushed
the state’s minimum price of Marlboros up to $6.35 a pack for chain retail
stores and $6.44 a pack for non-chain stores.
The New Hampshire revenue department, meanwhile, doesn’t set minimums. That, along with New Hampshire’s comparatively low cigarette tax – $1.08 per pack – and the state’s lack of a sales tax, makes it tough for Massachusetts retailers to compete.
Philip Blatsos, commissioner of the New Hampshire Department of Revenue Administration, said each time Massachusetts increased its cigarette tax and New Hampshire didn’t, his state saw a corresponding increase in its sales of cigarettes.
Blatsos said past studies have shown that 40 percent of New Hampshire’s tobacco revenue comes from nonresidents. The majority of those are from Massachusetts. New Hampshire also draws tobacco sales from residents of Vermont, Maine, New York and, to a smaller degree, Connecticut and Rhode Island.
Cigarette sales have been on the decline nationwide for about eight years. But this year, New Hampshire officials expect to see an increase in its tobacco revenue because of the $1-per-pack tax hike in Massachusetts.
Leo Vercollone, president of Duxbury’s Verc Enterprises chain of 20 gas station and convenience stores, said 40 percent of his retail store income is derived from the sales of tobacco products – excluding gasoline and lottery sales. Vercollone said before the new tax took effect, sales of cigarettes in his company were on the decline.
“When the cost of a product goes up 20 percent, in this economy, it’s going to have an effect,” Vercollone said. “But, from my perspective, if people are going to stop using it (tobacco), I look at it as a plus. If they are driving to other states to purchase it, I look at it as a negative.”