Retailers: cig sales up before tax hike

Retailers: cig sales up before tax hike

	Published : Fri, 29 Jun 2007 23:31 By : Agencies Print this Story

NASHVILLE, Tenn. (AP) - Smokers are buying up cigarettes before the cost increases by 42 cents per pack on Sunday, retailers say, but they don't expect customers to go cold turkey.

'I think they are going to continue to pay, but not without a lot of grumbling and complaining,' said Gregory Peevey, manager of the Arcade Smoke Shop in Nashville. 'I don't think smokers are going to cut back.'

Tennessee's cigarette tax will more than triple on July 1, from 20 to 62 cents to pay for a half-billion dollar plan to improve Tennessee's schools.

Since the tax hike was approved earlier this month, retailers have been stocking up on cartons and individual packs in anticipation of a last-minute run on cheap cigarettes, said Jarron Springer, president of the Tennessee Grocers and Convenience Store Association.

'I know retailers were ordering product immediately after and trying to get as much in as possible, because they knew they were going to see an increase in sales,' Springer said.

Smoke & Save cashier James Alrwza said they have had trouble restocking the shelves at the Nashville tobacco store.

'We are out of lot of stuff because we can't get anymore,' he said Friday. 'Everybody is out.'

But retailers are more worried than thrilled about the short-term sales increase, said Springer. Smokers will just turn to cheaper alternatives instead of quitting and cut into retailers' profit margin, he said.

'Tennessee's tax is still going to be below the national average, but it will be the highest in the Southeast,' Springer said. 'Their customers are still going to smoke, but the customers are going to go elsewhere.'

The Arcade Smoke Shop makes most of its profit from more expensive items like cigars and pipe tobacco, but cigarette smokers bring in foot traffic, said Peevey.

'I'd imagine they are going to discount shops instead,' Peevey said, adding they could also switch to less expensive brands or start rolling their own cigarettes.

Springer is concerned that in cities like Memphis, Chattanooga and Clarksville that are close other state borders, customers will take the extra time and effort to purchase cigarettes out-of-state.

'I suspect Kentucky retailers are going to see a 15-25 percent increase in cigarette sales,' Springer said.

But smokers cannot bring more than two cartons of cigarettes into the state, said Sara Jo Houghland, a spokeswoman for the Tennessee Department of Revenue.

Last fiscal year the state collected $125 million in cigarette taxes.

'This year we are expecting $220 million and this does account for a reduction in smokers,' Houghland said.

Peevey, a smoker himself, said the tax increase and the smoking ban in one year was a surprise to him.

'You are victimizing one section of the population so that another section benefits,' Peevey said. 'It doesn't make any sense to me. I never thought this state would do what it has done.'