Monday, March 21, 2005
Tax increase hurts stores badly.
Stores see drop in tobacco sales
By Bill Kramer
The Oklahoman
TULSA - An Oklahoma convenience store chain spokesman said the Sooner State's 80-cent-a-pack cigarette tax increase noticeably cut its tobacco sales.
Tax rebates disappoint some officials
Mike Thornbrugh, manager of QuikTrip's public and government affairs division, said his company suspects many smokers are buying their tobacco products at American Indian tribal smoke shops. QuikTrip, a Tulsa-based convenience store chain, operates 450 regional locations, company officials said.
"There's no question about it," Thornbrugh said. "Unfortunately, the way ... the contracts were drafted gives tribes a better advantage.
"We knew tobacco sales would shift from nontribal retailers to tribal retailers. Our tobacco sales are down 20 percent."
Janet Coles, financial forecast analyst for the city of Tulsa, said she thinks convenience stores are losing out on more than tobacco sales.
Sales of other items go down because customers who come in to buy tobacco also buy other taxable items, such as beverages and snacks, Coles said. When overall sales drop, so do sales tax revenues.
Thornbrugh said QuikTrip store operators have noticed.
But not everyone agrees smokers have shifted their business to the state's tribes.
Julian Fite, general counsel for the Tahlequah-based Cherokee Nation, said tribal smoke shops are not experiencing increased sales.
"A number of our stores have been complaining," Fite said. "Part of the problem -- first of all -- there's been a gigantic tax increase, which was figured to impact cigarette sales. There's some people who are likely shopping online or going across the state line, particularly to Missouri, which has by far the lowest tobacco tax around."
State health officials pushed the tax increase as a way to persuade people to quit or cut back on smoking, but they said they can't tell yet how much impact it is having.
Doug Matheny, chief of the state Health Department's tobacco use prevention service, said the general rule is that a 10 percent tax increase causes a 4 percent decline in smoking. Oklahoma's tax increase was 20 percent, so officials are expecting to see an 8 percent smoking decline.
Wayne Stull said tobacco product sales are stagnant at the four Cherokee and Osage smoke shops he operates in the Tulsa area.
Stull contends the tobacco tax increase has hurt all retailers.
"When they raised this tax to $10.30 (per carton), everybody that smokes immediately is going to start looking for cheaper cigarettes," Stull said.
The cheapest low-end cigarettes now sell for between $18 and $19 a carton at tribal smoke shops, Stull said. Name brands cost between $30 and $31.
Stull said the tax is an unfair burden on tribal shops.
"We don't sell gasoline and have no grocery products, and we're in hard-to-find locations," Stull said.
By Bill Kramer
The Oklahoman
TULSA - An Oklahoma convenience store chain spokesman said the Sooner State's 80-cent-a-pack cigarette tax increase noticeably cut its tobacco sales.
Tax rebates disappoint some officials
Mike Thornbrugh, manager of QuikTrip's public and government affairs division, said his company suspects many smokers are buying their tobacco products at American Indian tribal smoke shops. QuikTrip, a Tulsa-based convenience store chain, operates 450 regional locations, company officials said.
"There's no question about it," Thornbrugh said. "Unfortunately, the way ... the contracts were drafted gives tribes a better advantage.
"We knew tobacco sales would shift from nontribal retailers to tribal retailers. Our tobacco sales are down 20 percent."
Janet Coles, financial forecast analyst for the city of Tulsa, said she thinks convenience stores are losing out on more than tobacco sales.
Sales of other items go down because customers who come in to buy tobacco also buy other taxable items, such as beverages and snacks, Coles said. When overall sales drop, so do sales tax revenues.
Thornbrugh said QuikTrip store operators have noticed.
But not everyone agrees smokers have shifted their business to the state's tribes.
Julian Fite, general counsel for the Tahlequah-based Cherokee Nation, said tribal smoke shops are not experiencing increased sales.
"A number of our stores have been complaining," Fite said. "Part of the problem -- first of all -- there's been a gigantic tax increase, which was figured to impact cigarette sales. There's some people who are likely shopping online or going across the state line, particularly to Missouri, which has by far the lowest tobacco tax around."
State health officials pushed the tax increase as a way to persuade people to quit or cut back on smoking, but they said they can't tell yet how much impact it is having.
Doug Matheny, chief of the state Health Department's tobacco use prevention service, said the general rule is that a 10 percent tax increase causes a 4 percent decline in smoking. Oklahoma's tax increase was 20 percent, so officials are expecting to see an 8 percent smoking decline.
Wayne Stull said tobacco product sales are stagnant at the four Cherokee and Osage smoke shops he operates in the Tulsa area.
Stull contends the tobacco tax increase has hurt all retailers.
"When they raised this tax to $10.30 (per carton), everybody that smokes immediately is going to start looking for cheaper cigarettes," Stull said.
The cheapest low-end cigarettes now sell for between $18 and $19 a carton at tribal smoke shops, Stull said. Name brands cost between $30 and $31.
Stull said the tax is an unfair burden on tribal shops.
"We don't sell gasoline and have no grocery products, and we're in hard-to-find locations," Stull said.
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