Cigarette Sales Drop Sharply Under New State Excise Tax

August 11, 2010 Updated Aug 11, 2010 at 11:17 AM EDT

By WKBW Internet

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Cigarette Sales Drop Sharply Under New State Excise Tax

August 11, 2010 Updated Aug 11, 2010 at 11:17 AM EDT

ALBANY, NY (WKBW/readMedia) - The first six weeks of increased cigarette tax rates in New York showed a sharp drop in sales at convenience stores statewide, according to the New York Association of Convenience Stores.

The state increased the cigarette excise tax to $4.35 per pack on July 1, the highest state tax rate in the country, shooting the price of a pack of cigarettes to between $9 and $12.

The association believes many smokers have taken their business to tax-free tribal smoke shops and border states with lower taxes.

Reporting for the NY Association of Convenience Stores indicate that convenience stores have suffered an average drop in sales of 25% to 35% in cigarette packs during July, with stores in close proximity to tribal outlets and state borders experiencing losses up to 45%. They also report that Indian reservation and border-state 'tax havens' are enjoying sales up as much as 300% in some outlets.

"New York State has now increased its cigarette excise 691% in the past 10 years without closing off readily available channels for dodging that tax," said NYACS President James Calvin. "As a consequence, we're approaching the point where two-thirds of the cigarettes consumed in New York are purchased without collection of any New York State tax whatsoever. Law-abiding stores like ours lose enormous amounts of business, state and local governments lose hundreds of millions in tax revenue, and public health loses because the financial incentive to quit is easily and routinely circumvented. So what did the Governor and Legislature accomplish with this tax hike exactly?"

New taxes went into effect on other tobacco products, such at cigars and smokeless tobacco, on August 1, which could mean the loss of even more sales for tax-collecting stores in the state.

The association of convenience stores is urging Governor Paterson to follow through on the scheduled September 1 start of tax collection on Native American sales of cigarettes to non-Indian customers, as they fear the tobacco taxes could cripple smaller, independent convenience stores.