Rapid City Journal: South Dakotans going over the line to dodge the taxman

The Rapid City Journal is reporting tonight that South Dakotans out in the Hills are going over the state line to dodge the increase in Tobacco Taxes:
Two weeks after the state’s new $1-per-pack tax increase on cigarettes took effect, vehicles with South Dakota license plates — Lawrence County mostly, but also Pennington and Butte — came and went from the Stateline Station often enough to keep manager Kathy Drentlaw hustling throughout the morning and into early afternoon.

“They’ll start in the morning and come as late as 9:30 at night. It’s an all-day event,” Drentlaw said.

It’s also a money maker for the Stateline convenience store. Drentlaw has had to increase her normal cigarette orders to keep pace with increased demand. She typically ordered about 100 10-pack cartons a week for the store but had been increasing that level leading up to the Jan. 1 effective date of the new law. And last week, she ordered 900 cartons.

“I know I sold at least 700 or 800 (cartons) last week,” she said. “I had to do two emergency orders because I was totally out of Marlboros and Camels, and some different odd cigarettes.”

Kristie Gibbens drove from Deadwood on Monday to buy three cartons of cigarettes rather than pay the higher tax at home. She expects to make the trip about once a week to buy smokes for herself and her husband.
Read it all here.

It's part of an interesting debate on the issue - will those that can avail themselves of another state's lower level of taxes continue to do so on a long term basis? Or is it a bunch of short term hype?

Comments

Anonymous said…
No I would not say it is hype! People will band together to purchase in groups.
It is a shame that this tax passed. Another shame is that the monies then are not going to prevent smoking it is being split. Most of the cost of cigs is tax anyway.
So now you know I was am and am opposed to this higher taxation!!
Anonymous said…
Sorry for the double "am" in there
This issue was brought up prior to the election and was rejected by pro-cigarette taxes issues despite several studies suggesting otherwise.

All of you who want to use taxes to do social engineering, the demand for cigarettes is inelastic. If you do not know what elasticity means, you have a very uninformed opinion on cigarette and tobacco taxation.
Anonymous said…
Obviously it is some of both. Of course cigarette sales will go down, but not enough to make the tax increase a net-loser for the state. And of course some people will drive over the line a few times, then get sick of it, while others will do so as a matter of course.

And to "economics," the demand for cigarattes is not completely inelastic. There will be someone, somewhere, who quits smoking because of the increased cost. The state will not lose tax revenue, and we will be making smoking more expensive and inconvenient. And that means, in the long run, that fewer people will do it.
Anonymous said…
I am a non-smoker, but I know of 4 smokers (friend and relatives)who have made the decision to quit as a direct result of the new tax. Say what you want about social engineering and economics, but for me it means 4 more people I know who may live a little longer, which for me, makes it worth the debate.
Anonymous said…
If you think the taxes on cigs are high here, go to Europe!

Wny people want to waste their hard-earned dollars on smokes is beyond me anyway. There are new methods out there to help people quit, and they surely can't be as expensive as buying those packs of cigarettes. Chantix is one stop smoking aid that is popular with docs. If you don't like paying the high tax, check it out. It sure beats driving a long ways just to get that package of smokes, having tobacco breath, and most certainly ending up with some disease (pulmonary, cardiac, or cancer) that will kill you or seriously impair your life.

Wouldn't it be wonderful if the naysayers were right - that just about everyone quit smoking and then we wouldn't have the tax revenues to play with?!
Anonymous said…
Price does matter. Why is Wal-Mart so successful? They are perceived as the low price leader.

Now I hear people saying people will quit or will only drive to lower prices for a few weeks.

The state better not spend the anticipated new tax money yet. I have an estimate of my own and that is the tax will fall short of the $40MM plus that is projected. Any takers on that bet?

Another factor. Tribes are not adding the $1 a pack tax so you can still buy cigs in SD for the lower price at over 50 locations on the reservations around the state. Just ask MN and ND what happended with leakage of cig sales to the reservations in their states.

Initiated measures are rarely well thought out and this is another case and point.
Anonymous said…
The problem is and will continue to be those in the party that believe they have a monopoly on understanding God's will and continue to thrust that understanding on others in a nearly deranged state. Anyone at the 06 and 04 state convention can attest to that. Unfortunately, when you speak with God, you can't believe you might be wrong or there is anything other than black or white.
Anonymous said…
This was stupid legislation but those who wanted it didn't want to hear about the effects from the cause.

People will go to where they don't have to pay the tax if it is at all financially beneficial to do so. Reservations and cities near the borders will see lots of cigarette sales. The tax may get some people to quit. Both of these lower the revenue over all coming in. It remains to be seen if there is a net gain over time or not as people quit or make a habit of buying outside the normal sales tax applicable venues.

What still bothers me is how much of this additional revenue is not going to anti-smoking measures. The state offers some stop smoking help but it is not well known, they don't advertise it. The program also only offers only certain free materials. You could get zyban or the patch but not other stop smoking aids. The person I spoke with at the state program said they DID NOT HAVE THE MONEY to offer more stop smoking aids to the public at a discount. Many people can't use the patch due to a reaction and some people can't use zyban because of medicine conflicts. I also know at least one person who had a horrible reaction to zyban and it left them with a permanent minor memory and speech problem. The extra dollar should be going to stop smoking FIRST and when that is fully funded then the legislature can get their grubby little mitts on the rest.
Anonymous said…
I would bet that a lot of the people who spend a fortune on a nasty habit (that hurts not just them but also the the health of others who have to breathe second-hand smoke) are the same ones who don't have the proverbial pot
to p--s in. I don't see anything wrong with taxing something like cigarettes that's not a necessity.
Anonymous said…
Anon 8:47,

So if this was stupid legislation I would assume you think wasting $58 million every year on tobacco related Medicaid in SD is wise? Or that spending a collective $250 million every year in SD in increased insurance, medicaid, PTO, etc is also wise?

You don't see the advertisements for the SD Quitline? You have got to be kidding me. They are on all the time and that's with their pre-tax budget. The Dept. of Health's plan for the extra $5million they are receiving will be a great resource to helping people quit.

But I guess we should have listened to you and watch our Medicaid and insurance rates steadly increase year after year instead of trying to do something about it.
Anonymous said…
8:47 you are right on!
9:42 if you are such a goody goody and know what is so good for us why aren't the funds earmarked for health education and paying for medicaid!

What I don't like about taxing a certain "sin" is WHAT'S Next? I hear taxing fast food?

Anyone with an eye and an a------ knew people were going to get things at the cheapest cost. Next will be internet orders or Indian Reservations.

The net result will be NO INCREASE in revenue.
Anonymous said…
I am by no means a goody-goody. I'm just sick and tired of paying taxes for someone elses stupid decision. It's about time you paid for your own mistake.
VJ said…
Don't know for sure how taxes on products purchased on the internet works, but my neighbor buys just about everything he can off of the internet. And he buys a lot!

He claims you can buy just about anything and you don't have to pay any state tax. He says it's costing our State government millions in sales tax dollars lost!

He doesn’t smoke so he doesn’t know for sure, but he doesn’t think you can buy cigarettes off of the internet. Is that right?

A wild claim of his that I don’t think is true: that you can buy something in Rapid (off of their internet site) and have it delivered to your site outside of the city limits and not have to pay city sales tax. Now he has never done that but he claims it can be done. I think he is totally wrong. Just simply can’t be done.

Any of you know much about taxes and internet sales?
Anonymous said…
I attended a cracker barrel a couple years ago where Rep. Hal Wick talked about internet sales and it's damage to all SD sales tax. I believe he was on the taxation committee at the time.

He gave an example of someone going to the MegaMall in the Cities and shopping to avoid paying the sales tax. He said if that person didn't report their purchases to the state so they could collect sales tax they could be fined. I'm no expert, that's just what I remember him saying to the audience.
Anonymous said…
I would be very careful if I were purchasing large quantities of cigarettes and transporting them back to SD. Remember, the Governor and the legislature want the money, don't be surprised if there is legislation trying to curb it.
Anonymous said…
Sin taxes are an excellent idea. The revenue just needs to be linked to the costs on government programs (e.g. medicaid paying for smoker's health care). By all means, tax the crap out of cigarettes and alcohol, but take that tax money and put it into medicaid, quitline, the courts, rehab, etc. Can we figure out a way to tax gambling?
Anonymous said…
11:40 am - I purchase a lot of things online because I hate to shop and prefer the convenience of purchasing from my home.

My experience is that companies that sell online and also have stores where people can buy merchandise (e.g. Penneys, Best Buy, Staples) have to charge sales tax. Companies like amazon.com and drugstore.com that do not have physical stores do not charge sales tax.

Some small businesses, such as gift shops, also sell on eBay. They only charge sales tax to people who reside in their state. I don't know why or what the laws are; this is only based on my observations.

I would be surprised if cigarettes could be legally purchased online since there are age limits for smokers. I suppose there are people out there trying to do that though, just like the ones who sold Viagara to kids.

I will add that I also purchase medicine online from Canada. I prefer to give our local pharmacist as much business as possible, but this particular medicine is not covered by our health insurance. I can save 34 percent by buying it in Canada, which for me is about $80 a month.
My doctor gives me the prescription, which I scan and e-mail to the company. I think they check with the doctor to make sure everything is on the up and up because I had to supply all sorts of contact information to them.
economics should be mandatory said…
It is not perfectly inelastic, but inelasticity refers to an elasticity of less than one, so my statement was not incorrect.

Most studies suggest an elasticity of between -.20 and -.30 for caucasians smokers.

This will help a few people quit (probably more so in the short run than long run), but it will not have the lofty effects most of the proponents think.
Anonymous said…
Wouldn't it be refreshing for the media to focus on a positive rather then the negative, but then again positive news doesn't sell.

2 of the 3 smokers that work with me have quit smoking because of the tax going up. Again, that wouldn't make for much of a news story.
Anonymous said…
The problem is that legislators are talking about spending the new tobacco tax revenue, when it may not all materialize.

The state should not be spending money that will not materialize.

If border stores are experiencing a 800% - 1000% increase in sales SD is missing out on lot of tax revenue that voters were told to expect if the increase passed.
GOP come home said…
for those of you who are agonizing over the tobacco tax here's the deal:

Rounds and a few others don't need that tax to materialize. He only needs to be able to present a balanced budget using those numbers based on projections of current smokers.

That way he can validate his increased spending while taking less from the the reserve fund and balancing the budget and saving the world all in one day.

Besides if you anti smoking folks are so against it why not a 50 dollar tax on cigs? That would virtually eliminate smoking. It would also slowly but surely eliminate all of the attending medical costs associated with it.

The tobacco tax was a giveaway to education and other industries while using sin as political cover.

I want to see the tobacco tax back next election cycle asking for several more dollars until smoking is all but a myth. Won't happen though because this is not about making people healthy its about taxing and spending those who are willing to pay for it.

Maybe it's time to implement a voluntary income tax. All those who are for it simply send in your SD 1040 to Pierre with a percentage of your income on it.

I wonder if Jack Billion or Heideprim would do it?
Anonymous said…
The smokers are buying big time from the tribes. Dakota Sioux Casino sells a carton of smokes for $18.00. That is cheaper than what the smokers were buying at the local supermarket. The tribes are going to clean house with the $1.00 per pack state tax, the state thinks they will get. Sorry, the smokers will drive to the casinos when you are talking about saving more than $10.00 per carton. If the state wants to spend the millions that they hope to collect, they will be in for a major surprise. No Sales Tax and no $1.00 Tax either.
Anonymous said…
Yeah, some people are going to quit, but those who want to smoke are going to continue . . . but now the state is forcing them to go over state lines, go to reservations, etc. The proponents don't want to admit this is happening, but I know it is, because I am doing it. And there are usually a couple of other cars with SD plates in the parking lot doing the same thing. I'll keep doing it just to keep SD from getting my tax dollars.
The Big B said…
Here is my humble report from the streets of Sioux Falls, which, if combined with $1.50, will get you a 20 oz. bottle of pop pretty much anywhere:

*I have not yet spoken to a smoker who plans on quitting (about 15 so far). One has even joined a "buying group" of about 10-12 smokers. They plan to rotate going to Larchwood, IA the second Saturday morning of every month to purchase for all in the group.

*Among the convenience stores I patronize, they all are reporting initial decreases in sales ranging from 10-40%. I will concede that it is early in the process, but many have said that their regular customers have indicated that they have already secured other sources of obtaining smokes. In addition, they are also reporting OVERALL REVENUE LOSS. When gas is $2.21 in Sioux Falls and $2.13 in Larchwood, well, you get the picture.

*Don't forget that in addition to the many Indian casinos that provide tax-free smokes, there are also at least 2 military exchanges in the state that provide the same thing.

*Finally, someone needs to explain to me how you can tax a product in order to try to cut down on consumption of that product and then earmark and project revenue. Isn't it kinda like your wife putting out a $1 "swear jar" and then expecting you to take her out for supper on Saturday night with the proceeds?????

Okay, I'm done.
Anonymous said…
Let's clear things up a little bit. 5 out of 7 tribes have tax compacts with the state of SD for tobacco. Sisseton Wahpeton and Standing Rock do not. So if you are from Sioux Falls don't bother driving to Flandreau and if you are from Yankton don't bother with the reservation there.

75% of cigarette purchases are point of purchase sales meaning one pack at a time. You can't tell me that all these high school and college kids are going to start creating pools to drive somewhere to buy cartons.

Let's come back to this topic in 6 months and we'll see how it's working. This legislation wasn't meant to get the die-hard smokers to quit, it was meant to keep the young kids from ever starting to smoke and the high school/college/ready to quit/casual smoker to rethink their poor decision.
Anonymous said…
When people cross the state lines it sounds like they are buying way more than one pack at a time.

Sioux Falls stores have been reporting a sharp decline in sales of cigarettes and other tobacco products. Border states sales have increased ten fold.

I'm sure buying one pack at the time works when there is a not large price disparity between SD and neighboring states. The tobacco tax increase is giving people an incentive to cross the border in large numbers and proving your statistic wrong anon 9:17.
Anonymous said…
Again, let's have this discussion in 6 months. Iowa will raise their tax before April when their session ends.

Before you say my statistics are wrong try calling the Dept of Revenue. They know along with the Governor that the first 3 months of a new tax causes people to alter their behavior. Come April or May let's see how many people are still driving.

The fact of the matter is most people by cigarettes conveniently at a gas station or grocery store. Yes, no one is arguing that there will be a few stubborn people with the means to do so that will drive 30-60 miles to save $40.

Also, to repeat, this legislation was meant to keep young children from starting by making it more expensive and increase the money spent on tobacco control from $750,000 to $5 million along with getting the high schoolers/college/casual smokers to quit.
William said…
Cigarettes CAN be purchased online & even with shipping cost substantially less than buying in SD, plus they deliver to your door. Not a lot of hardship to purchase online. Here's a couple of links:
http://indiansmokesonline.com/printform.html

http://www.cigarettesexpress.com/index.htm

Most of the smokers I know that swore they would quit have already started smoking again or they're bumming from me. I roll my own, so the $1 per pack doesn't affect me.

Since making marijuana illegal has kept teenagers and young people from using it, I'm sure this tax on tobacco will work just as well.
Anonymous said…
my biggest gripe is the fact that the government is trying to tell me how to live. I pay for health insurance, plenty, so i feel that i will not be a "burden" on the state. I don't object to paying a "sin" tax...but if we are going to tax sin, lets tax all kinds of sin, not single out one.
if second hand smoke bothers you, stay away from smokers!

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