As Minnesota cigarette tax spikes, Moorhead retailers feel the burn

MOORHEAD – The cheapest pack of cigarettes at Brady’s Service Center located off Interstate 94 here jumped to $6.50 on Monday, the first day of a new per-pack tax increase in Minnesota.
Just a few miles away at Fargo’s Gateway Service Center-Cenex along Main Avenue, that same pack of Pall Malls was $3.79.
A pack of Marlboros at Brady’s totaled $8.30 after taxes, more than $3 more than the $5.15 being charged for the same brand at the Cenex station.
On the first day cigarette sales in Minnesota drew an additional $1.60 in taxes per pack, Brady Olson, owner of Brady’s Service Center, said the disparity is another disadvantage for Minnesota convenience stores that have no way of lowering their prices to compete.
“It puts a very unfair advantage for North Dakota because we’re also at a disadvantage on the gas tax, sales tax and whatever other taxes,” he said. “It’s just getting worse and worse.”
The per-pack cigarette tax in Minnesota jumped to $2.83 – the nation’s sixth-highest. North Dakota ranks 46th among the states with a tax of 44 cents per pack, which hasn’t changed in more than a decade.
Olson said the high state tax, in addition to the $1.01 of federal taxes on each pack, leaves little wiggle room for Moorhead retailers – especially when it comes to courting cigarette smokers, the top convenience store customer.
“They do more volume and more dollar sales than anybody on average,” he said. “They also shop more, so they stop more often.”
Moorhead resident Jeremy Myers said he wasn’t even aware of the latest tax hike in his home state because he’s been buying cigarettes in North Dakota for years.
“They’re just cheaper,” he said.
Even before Monday’s increase, the average pack of cigarettes was about $1 cheaper in North Dakota than Minnesota, he said. Myers said the only time he buys in Minnesota is if he has to, and then he’ll just buy one pack to hold him over until he can stock up at a North Dakota store.
Manager Shari Bettenhausen said that’s been common for years at the Cenex station just blocks from the Red River in downtown Fargo.
“I think we’ve always gotten customers from Moorhead just because North Dakota’s always been a little bit cheaper,” she said.
But she said the latest tax hike in Minnesota hadn’t been much of a boost to business in Fargo, at least through Monday morning.
“A few more cartons are going out the door today,” she said.
Olson said he’s been frustrated with the idea behind Minnesota’s latest tax increase, especially after years of hearing politicians talk about the need to make the state’s taxation fairer across all income levels. He also said statements from public health officials that the tax hike will prevent kids from starting smoking and motivate current smokers to kick their habit could be overly simplistic.
“It’s $15 in Las Vegas and over $10 in New York, and they’re still smoking,” he said. “If you want something, you’re going to do it whether you like to pay for it or not.”