N.Y. Cigarette Sales Plummet

C-stores bear the brunt of tax hike, see 25%-35% drop in volume.
Interesting article related to recent tax increase in the State of NY.
What are your thoughts?
How can the situation at hand be corrected?

ALBANY, N.Y. — The first six weeks following a cigarette tax-rate increase in New York showed a plunge in sales at convenience stores statewide, mainly because most smokers are finding ways to dodge the tax altogether, according to a report from the New York Association of Convenience Stores.

On July 1, Gov. Paterson and the Legislature increased the cigarette excise tax in New York State from $2.75 a pack to $4.35, the highest state tax rate in the country. As NYACS predicted, the 58% jump unleashed a new wave of cigarette tax evasion, as tens of thousands of additional smokers—shocked at $9 to $12 pack prices—shifted their purchases to tax-free tribal smoke shops, the black market, and border states with lower tax rates, according to NYACS.

Field reports indicate convenience stores have suffered an average drop of 25% to 35% in cigarette packs during July, but that those in closest proximity to tribal outlets and state borders experienced losses of up to 45%. Meanwhile, Indian reservation and border-state “tax havens” are flourishing, with sales up as much as 300% at some outlets, NYACS reported.

“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?”

The upswing in tax evasion heightens the urgency for Gov. Paterson to follow through on the scheduled Sept. 1 start of tax collection on Native American sales of cigarettes to non-Indian customers, currently the busiest avenue of cigarette tax avoidance in New York, costing the state $1.5 billion in lost revenue, according to NYACS.

The state law enacting the tobacco tax increases also set forth a plan to exercise New York’s right to collect these taxes by requiring wholesale distributors, beginning Sept. 1, to certify that they are prepaying the tax before delivering cigarettes, so that the tax is built into the price paid by customers at both Indian and non-Indian stores.

Calvin said anyone who tries to attribute the 25% to 35% drop in sales to smokers quitting “is in La-La Land. Two or three percent, maybe as many as 5% have quit smoking. The rest just quit coming to our stores but continue to smoke cigarettes they found cheaper elsewhere.”

On Aug. 1, the situation got even worse for New York convenience stores, which have traditionally relied on tobacco as a major product category. Dramatic increases in state excises taxes on other tobacco products, such as cigars and smokeless tobacco, took effect, chasing even more of their customers to no-tax or lower-tax venues.

The one-two tax punch threatens to cripple many c-stores—especially mom-and-pop independents and those closest to Indian reservations and the Pennsylvania border, NYACS said.

“It’s not just the loss of sales revenue from cigarettes themselves,” Calvin said. “It’s fewer customers coming through the door to buy cigarettes and other merchandise. For example, many stores have seen a corresponding drop in lottery sales.”

The Post-Standard newspaper reports a pack of Marlboros hovered around $6 or $7 a pack at convenience stores before the tax hike. Now, a pack costs $9.60. A pack of Senecas are $3.50 at the Onondaga Nation Smoke Shop. That’s $2.52 less than the tax alone on the average pack of non-Nation cigarettes. A pack of Marlboro’s costs $6.50 there.

Article from CSP Information Group, Inc. 2010

8 comments ↓

#1 Native Son on 08.13.10 at 11:55 AM

I really get so annoyed by those who blame my fellow native americans. I ask this question – Who are the brilliant ones to base the financial liguidity of the state on taxing a product to death? Pretty stupid! I really can’t say what we would say in our native tongue!

#2 NO Saint on 08.27.10 at 2:22 AM

Wow what are they thinking. And I thought folks in new Orleans were crazy! The legislators have gone wild in NY.

#3 OTP Kid on 09.23.10 at 1:19 PM

Jim Calvin and NYACS have pursued a path of self-destruction, which is built around allowing the state to raise taxes on cigarettes (sold through brick and mortor retailers) and simultaneously eliminating Native and Internet sales. This strategy is built upon having his constituency of brick and mortor stores enjoying a monopoly on cigarette sales.

Calvin and his cronies can eliminate Native and internet sales, and it will never amount to anything, as this is not the problem. The problem that NYACS and NACS have is they do not understand that if you get in bed with the government and raise taxes/prices on a product above the tolerance level for the average consumer, that consumer will find product somewhere, somehow, legal or illegal – and his retailers will not be the ones selling it.

Calvin should resign for his naive understanding of economics, his creation of Native Americans and the internet as his evil straw men, and the millions of dollars he has cost his retailers in sales. It’s time for a new NYACS director who can see the world in real terms. I would urge all to support his resignation.

#4 NY Retailer on 09.23.10 at 11:17 PM

I seem to recall that the major tobacco companies years ago helped the reservations get sales going. I stopped giving funds to NYACS because I saw what OTP Kid has stated many years ago. This has nothing to do about Indian reservations and all of it is due to a state that is so mismanaged and Jim Calvin is just a farce of a leader. He should have turned his efforts against the state’s desire to raise taxes on cigarettes. He has lead his followers off the plank to a slow death by attacking the wrong group. I stopped attending his ridiculous trade shows. Nothing ever productive. To have to listen to the same flawed reasoning for so many years is absurd. Maybe he showed be fired!

#5 vhv tarifrechner autoversicherung on 11.03.16 at 6:54 AM

Well no longer is NY the Nanny state, it’s now the Ninny state. Let’s everyone wrap ourselves in bubble wrap and stay in a closet, drive a nerf car and never hurt anyone’s feelings or allow your feelings to be hurt, only wear soft clothes and talk only in a very, very low voice and one day you’ll grow up to be… a Man, I mean Woman, I mean Man… I mean… well anyway, you’ll be some type of fat encapsulated carbon based life form.

#6 http://www./ on 12.14.16 at 9:43 PM

Hi Ryan–You’ve hit on the key to the whole blogging thing–fill a need. Give away information, become a source. In a way that makes you a leader of sorts, and people will find a way to you then invite their friends. I agree, money flows into that dynamic, but it doesn’t usually happen quickly.

#7 http://www./ on 12.30.16 at 9:53 AM

That’s a skillful answer to a difficult question

#8 http://www./ on 02.11.17 at 11:56 PM

Seriously, what part of SoCal did you visit?  Because I rarely experience these things (the spandex type stuff) outside of the Westside.  In fact, I see more spandex and fake breasts and things like that on midwestern tourists walking around Hollywood…

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