She said she hopes that isn't the case but that she isn't sure. "That's why [image-nocss] everybody is a little bit confused at this point," Messina told the newspaper.
Cigarette sales account for about 15% of her business, and she anticipates a decrease in business because of the higher prices, she said. But "the heavy-duty smokers will pay no matter what," Messina added.
The increase in the federal cigarette tax from 39 cents a pack to $1.01 a pack is a result of the State Children's Health Insurance Program (SCHIP) Reauthorization Act signed into law on February 4. The tax increase is to pay for an expansion of health care benefits primarily for low-income children.
R.J. Reynolds Tobacco Co., Winston-Salem, N.C., increased its wholesale price by as much as 44 cents a pack as of March 16, spokesperson David Howard told the paper. He said the new price incorporates the additional federal tax. The company also has reduced its costs by decreasing some discounts offered to retailers. R.J. Reynolds increased prices a couple of weeks early, Howard said, to give customers a chance to adjust their prices in advance of the new tax. He said retailers and wholesalers might want to generate additional revenue to cover the "floor tax" the government will levy on existing stocks as of March 31, which basically applies the tax increase to existing inventory.
According to the National Association of Convenience Stores (NACS), Messina is not alone in her uncertainty about the increase. Some of the main questions involve the floor tax, Chris Tampio, an association lobbyist, told the paper. Cigarettes account for a third of the sales generated inside convenience stores, the association said.
The percentage is lower for QuikTrip Corp., which has 74 stores in the Kansas City area, but spokesperson Mike Thornbrugh declined to specify for the Business Journal how big a chunk it is of the company's sales. For several years, the company, based in Tulsa, Okla., has been diversifying to depend less on cigarette sales.
Thornbrugh said the impending tax increase will a have more dramatic effect on QuikTrips and other c-stores on the Kansas side of the state line as customers become even more price-conscious. Kansas has a state cigarette tax of 79 cents a pack, said the report, and Missouri's is 17 cents.
"If you're on the Kansas side," he added, "your stores are going to get killed. [Customers] are just going to go across to Missouri to make their purchase. That one we know will happen immediately."
Dr. Rex Archer said he does not see the increase as anti-business. The director of the Kansas City Health Department, Archer said that most companies should be happy about the prospect of a healthier work force and lower health insurance costs that would result if the higher prices prompt people to kick the habit.
"For 95% of the businesses out there," Archer told the paper, "this is great."
Click on the following links for a "CSP Special Report: Tobacco on Fire":
Part 1.Part 2.Part 3.Part 4.And for more about SCHIP and its impact on c-stores, see the April issue of CSP magazine.
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