Convenience Store News

DEC 2016

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56 Convenience Store News | DECEMBER 2016 | WWW.CSNEWS.COM Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP TOBACCO states where this type of tax increase has taken place." Amendment 72 also offered few guarantees that the $315 million in new tax dollars would be spent appro- priately, according to the Smoker Friendly executive. Facing a similar fate was a proposed initiative to raise the state excise tax in North Dakota. Officially known as Initiated Statutory Measure 4, the proposal set out to increase the tax on cigarettes from 44 cents per pack to $2.20 per pack. The tax on other tobacco products, including liquid nicotine, would have gone from 28 per- cent to 56 percent of the wholesale purchase price. With the measure defeated, North Dakota's tax will now remain at 44 cents for a pack of cigarettes and 28 percent of the wholesale purchase price for other tobacco products. In Missouri, a ballot initiative to generate new rev- enue from increased tobacco taxes — two versions of the ballot initiative, to be exact — also failed during this year's election. Voters rejected Amendment 3, which would have increased the cigarette tax by 60 cents per pack. It would have been phased in through 2020, and created a 67-cent-per-pack "equity" fee increasing annually for inflation on certain off-brand cigarettes. Missouri voters turned down Proposition A, too, which would have gradually hiked the tax by an addi- tional 23 cents per pack by 2021. This measure would have taxed non-cigarette tobacco products by 5 percent of the manufacturer's invoice price, paid by the seller. If both measures had passed, the one receiving the most votes would have been implemented. THE NEXT 'LEGAL' FRONT While state tobacco tax hikes are an old, common theme every time Election Day rolls around, a new theme that gained traction this year was legalized mar- ijuana. Voters in five states were asked to pull the lever on proposals to legalize recreational marijuana. As of press time, the measures were approved in three states: California, Massachusetts and Nevada. Voters rejected the issue in Arizona. Meanwhile in Maine, the votes were still being counted as of press time — with the yays carrying a slight majority (50.2 percent vs. 49.8 percent). "It looks as though the number of states with legalized recreational cannabis doubled to eight after [the Nov. 8] election. What is more, the percent of Americans living in a state with legal recreational can- nabis increased nearly four times to over 20 percent," Cowen and Co.'s Azer said. CSN behavior in other states, Herzog noted, though she added that Wells Fargo Securities does not believe this is a real risk at this time. "Bottom line: We continue to believe the industry will be able to mitigate any elasticity-driven volume declines from tax pressures with pricing power, as it has through past tax cycles," she said. THE NAYS HAVE IT Tobacco tax hike proposals did not fare so well in Colorado, Missouri and North Dakota on Election Day 2016. In Colorado, Amendment 72 was rejected by 54 percent of the voters. The measure attempted to increase the state's excise tax on cigarettes by $1.75 per pack, for a total tax of $2.59 per pack. If approved, it would have also raised the levy on other tobacco products from 40 percent to 60 percent of the manufacturer's price. At least one retailer with a significant presence in Colorado spoke out against Amendment 72 in the days leading up to the election. In an op-ed piece in a local newspaper, Mary Szarmach, vice president of trade marketing and government relations and a co- owner of Smoker Friendly International, called the tax "disastrous for our business." Smoker Friendly is a Boulder, Colo.-based family business that operates 102 gas, tobacco and convenience stores. "The last time we weathered a tax increase of this magnitude, we had to close 19 percent of our stores and lay off over 70 hard-working employees," Szarmach explained. "Tax increases such as these also make for a less safe work environment. Break-ins and armed rob- beries have grown between 10 and 20 percent in other

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