Minnesota stores face loss of revenue after cigarette tax hike

MOORHEAD – The Legislature gave Josh Larson a huge incentive to quit smoking.
“I am currently working on that,” said Larson, store manager at Oasis Convenience store in north Moorhead.
His timing couldn’t be better. The Minnesota Legislature recently raised taxes on cigarettes $1.60 a pack, bringing state taxes to $2.52 per pack.
Larson said he’s not the only smoker he knows who is thinking of quitting. He said many of his friends plan to quit because the taxes have made a pack so expensive on this side of the Red River.
“I think people will definitely go into Fargo to buy cartons,” said Larson, adding that the tax will very likely cut into the Oasis’ cigarette sales. “The ones that are serious smokers, they’ll buy them every once in a while.”
The increase in cigarette taxes has convenience store owners in Moorhead worried that most of their customers will stop at Fargo convenience stores, said Chuck Chadwick, executive director of the Moorhead Business Association.
North Dakota hasn’t raised its taxes on cigarettes since 1993, where the state tax is 44 cents per pack.
“The devastating piece is, once the traffic patterns change … it’s really difficult to break a customer’s habits,” Chadwick said.
Convenience stores already operate on low margins, Chadwick said, and with the loss of customer traffic, stores won’t only lose the money from cigarette sales, which is a relatively small percentage of their overall sales. They will also lose impulse buys that go with cigarettes – coffee, sodas, candy and other incidentals customers bring to the counter with their smokes, he said.
Bobbi Orona, assistant manager at the Holiday Station in north Moorhead, said her boss isn’t looking forward to the increased cigarette tax.
“A lot of our regular customers – over half – are smokers,” she said.
Orona said she’s been hearing a lot of complaints recently, first about high gas prices and now about the cost of a pack of cigarettes.
A single pack of Marlboros at the Holiday will set you back about $7, Orona said.
At the Oasis, Larson said he thinks business will be saved by the fact that they’re one of the few stores around to sell bait. There are also the scratch-off lottery tickets, which he describes as the store’s No. 1 selling item.
Larson’s bigger concern these days is figuring out how to continue selling cigarettes at the same time he’s trying to quit.