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Cigarette tax affecting area businesses

It’s been one month since Minnesota’s new cigarette tax — which increased state taxes by $1.60 per pack — went into effect July 1. That brings the total Minnesota tax to $2.83 per pack.

Now, the owner of Red Wing’s only smoke shop is saying the tax’s impact has “absolutely” been felt by his business. Moe Wazwaz said cigarette sales have dropped about 60 percent at Red Wing Smoke Shop in four weeks.

“The store is a lot slower,” he said.

Currently, a pack of cigarettes in Minnesota costs upward of $6.50 per pack, with name-brand cigarettes reaching $7 or $8 a pack.

“I think cigarettes are extinct,” he said. “When we’re talking a $2 per pack increase, that’s a big jump. That’s big sticker shock right away.”

Wazwaz said many of his customers were unhappy that the new tax could help fund the new Vikings stadium.

“A lot of them can’t even afford tickets to a Vikings game,” he said. “They don’t want to support it.”

For other Red Wing cigarette retailers, the tax has had less of an effect. Mark Robinson said cigarette sales at House of Wines, which has locations in Red Wing and Hastings, have stayed fairly steady.

“I guess I’ve seen maybe a little bit (of a decrease) at first, but it still seems like people are buying them,” he said.

But Robinson added that the majority of the House of Wines’ sales come from beer and liquor — not cigarettes.

“It’s more for people’s convenience,” he said of the store’s full selection of cigarettes.

He added that the new tax wasn’t really a worry for him before it went into effect and it’s proving not to be an issue now.

Across the river in Wisconsin, cigarettes are taxed at $2.52 a pack. But, according to Randy Thom of the Woodshed Pizza Liquor Store in Hager City, Minnesota smokers aren’t causing any sales spikes.

That’s a change from previous Minnesota cigarette tax hikes, he said. In the past, the bar would go through 200 to 3000 cartons of cigarettes a week. This time around, the Woodshed isn’t seeing those types of sales.

Thom said the reason could be because many smokers bought cigarettes in bulk before July 1.

“A lot of them stocked up for a month,” he said.

Back in Red Wing, Wazwaz said his smoke shop has found what he calls “a silver lining” in the tax increase. Instead of buying cigarettes, he said his customers are buying more loose tobacco and e-cigarettes, neither of which were affected by the increased tax. Those sales have almost made up for the decrease in cigarette sales, he said.

“E-cigarettes are a trend that’s going to continue,” he said.

Still, Wazwaz said his e-cigarette customers are not completely escaping state sales taxes. Currently, Minnesota is the only state in the nation to tax e-cigarettes. That’s something Wazwaz said he strongly disagrees with.

“People are going to go alternative with e-cigarettes. That’s more healthy, then why are you taxing it?” he said. “So much for healthy smoking.”

Sarah Gorvin
Sarah Gorvin has been with the Republican Eagle for two years and covers education, business and crime and courts. She graduated from the University of Minnesota-Twin Cities in 2010 with a  journalism degree.