Are You a Retailer/Wholesaler?

Retail and wholesale employees’ safety could be in jeopardy
A truckload of cigarettes could be worth up to $2 million. And a tobacco tax increase means that cigarettes will become even more valuable, making cigarette theft and burglary more common at every stage of distribution. From convenience store robberies to warehouse break-ins to truck hijackings, cigarette crime is expected to increase – putting the men and women who work with cigarettes in danger on the job.

Retail/wholesale jobs and paychecks will be threatened
State excise tax (SET) increases on cigarettes can bring about disastrous financial results for retailers, wholesalers and their employees. For instance, after a hike from $2.75 per pack to $4.25 per pack in July 2010, NYACS said mom-and-pop stores lost 25 percent to 45 percent of their cigarette unit sales, virtually all of it because of the ensuing wave of cigarette tax evasion. In convenience stores, which depend on tobacco for one-third of their sales volume, employment is definitely threatened.

When a state legislature raises cigarette taxes, sales declines generally lead to job cutbacks at many local convenience stores and for wholesaler sales and delivery jobs.

Higher cigarette taxes increase gang-related and other organized crime
An increase in tobacco taxes will escalate an already thriving underground market, making it more lucrative for gangs and other organized crime outfits to steal, smuggle and funnel black-market cigarettes to consumers. In fact, the higher the tax increase, the more lucrative the illicit profits made by criminals and the less legal profit made by retailers and wholesalers. Illegal sales also cut into revenue projections by state governments.

An increase in illegal tobacco sales also takes up the time and resources of law enforcement officers and results in further demands from the public that states spend more on protection issues.

Smokers may go out of their way to purchase less-expensive cigarettes
Studies show that revenues from increased state cigarette taxes often fall short of projections, partially because smokers will go out of their way to purchase less-expensive cigarettes via untaxed channels: international websites, Native American reservations and even the black-market. In addition, revenue and sales for in-state merchants are lost when smokers travel across borders into states with cheaper cigarette taxes. And local store owners don’t lose just their tobacco sales. When customers travel to other stores, they will also make food, gas, beverage and other purchases at the same place they buy cigarettes. Retailer associations estimate that the loss from these extra sales alone is about 20 percent.

This tax avoidance often leads to state revenue projection losses for both cigarette excise taxes and sales taxes – making tobacco tax increases an inefficient means of creating revenue.