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With higher tax, Florida cigarette sales are down, but revenues climb

Cigarettes sales are down 27 percent in Florida during the past four months, thanks to a new $1-a-pack tax designed to balance the budget and cut down on smoking.

But despite the drop in sales, tobacco tax collections in Florida are high and holding steady. That's because state economists accurately factored in the sales decrease when they forecast revenue from the surcharge that went into effect July 1.

The new tax, which helps fund Medicaid, will raise $881 million this year and $907 million the next, the economists forecast Thursday when they analyzed cigarette sales data.

"This is working exactly the way we had hoped," said Sen. Nan Rich, a Weston Democrat and leading proponent of the tax. "We wanted to cut down on smoking and keep health care programs from being cut."

The money raised by the new tax far exceeds the estimated amount of revenue lost due to the overall decline in cigarette sales.

Not everyone is cheering the success of the tax.

James E. Smith, spokesman and lobbyist for the Florida Petroleum Marketers & Convenience Store Association, said cigarette sales decreases hurt small stores. He said tobacco products — mainly cigarettes — trigger convenience store visits that account for 34 percent of in-store sales of items such as snacks, drinks and bread.

"Any time you reduce sales by big percentages, you eliminate a significant portion of profit that retailers use for things like payroll and rent," Smith said. "If you're a customer and you're not going in for cigarettes, you're not going to go in at all. And a lot of sales at convenience stores are impulse buys. That cuts into the bottom line."

Some North Florida cigarette buyers may simply drive across the state line. Smith said his counterpart in Georgia is boasting of a nearly fivefold increase in overall sales in some stores along the border with Florida.

Florida's state tax now stands at nearly $1.34 per pack — about 91 cents more than Alabama's tax and about 97 cents more than Georgia's tax, which is among the lowest in the nation.

In the 14 Florida counties that border the other two states, cigarette sales have decreased an average of 34 percent a month since July, compared to the same four-month period last year, according to statistics released Thursday from the state's Department of Business and Professional Regulation.

The decrease in the border counties exceeds the average statewide percentage drop: 27 percent, or 112,000 packs.

In the six counties where Indian tribes operate — including Hillsborough and Miami-Dade — sales have fallen off by a smaller amount, 23 percent. Tribes collect the tax for non-Indians, though tribal members can buy untaxed cigarettes for personal use in an amount equal to five packs a day per tribal member.

In Broward County, home to the Seminole Hard Rock, sales have dipped just 9 percent. Only two counties, Osceola and St. Johns, had increases in sales. Seminole County had the biggest drop, 54 percent.

But the declines aren't all due to the new state tax, said Frank Lester, spokesman for Reynolds American Inc., which makes Camel, Winston, Kool and Pall Mall cigarettes. He said a new federal tobacco tax this year — which he says forced a Tampa cigar factory to close — has hit the industry hard. And smoking has long been on the decline in the United States, where there are now more ex-smokers than smokers.

Also, he said, cigarette buyers are changing their shopping habits.

"A lot of people aren't quitting," Lester said. "They're buying cheaper brands. They're going to the Internet. They're going to other states."

The state's premier manufacturer of low-cost smokes, Dosal Tobacco, also has experienced a decline in volume, said spokeswoman Sarah Bascom.

The Opa-locka company has been fighting major national manufacturers like Reynolds and Altria, which want the Legislature to impose a fee on cigarette manufacturers that weren't part of a landmark tobacco settlement against the big-name brands.

Marc Caputo can be reached at mcaputo@MiamiHerald.com.

Cigarette tax goes up, sales go down

Since the state increased the tax on cigarettes by $1 in July,

Florida sales of smokes have decreased overall.

CountyPacks sold

July-Oct. 2009
Packs sold

July-Oct. 2008
Percent decline
Pasco9,456,376 13,312,969 -29%
Pinellas19,147,935 27,269,817 -30%
Hillsborough18,682,815 24,167,844 -23%
Hernando2,940,027 4,161,034 -29%
Statewide305,379,208 417,706,468 -27%
Counties that border Alabama or Georgia24,381,122 36,711,601 -34%
Counties

with Indian tribes
72,832,12794,807,410 -23%

Source: Department of Business and Professional Regulation

With higher tax, Florida cigarette sales are down, but revenues climb 11/19/09 [Last modified: Thursday, November 19, 2009 11:26pm]
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