Aspen tobacco tax revenue smokes predictions in first month
March 9, 2018
The first month of collections on a new tobacco tax shows that the city of Aspen is ahead of its revenue predictions.
City tax auditor Anthony Lewit said his office collected $31,664 for January, and there is one establishment that has yet to file.
He declined to say which retailer hasn't submitted tax revenue because of proprietary reasons, but said he expects that number to go up significantly.
When considering the new law last spring, City Council expressed hope that it would act as a deterrent to smoking. But the high dollar amount collected in the first month indicates it hasn't affected consumers yet.
Assistant City Manager Sara Ott surmised that the X Games may have had something to do with the high volume of nicotine sales in January.
"It's unfortunate that the revenues are this high in the first month," she said.
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City financiers had estimated that it would collect about $325,000 annually when legislation was enacted last year and voters approved the tax.
City Council voted unanimously last year to raise the legal purchasing age of tobacco products from 18 to 21, making Aspen the first place in the state to do so.
As a result of that legislation, the city realized it would surrender about $75,000 in tax revenue it traditionally collected from the state for tobacco sales.
To make up for that and then some, the city put a question to voters this past November asking them to approve taxing cigarettes. It passed by almost a 3-to-1 margin.
The new law went into effect Jan. 1. For buyers of tobacco, the tax means they must pay a $3 Aspen tax on a pack of cigarettes, while other tobacco and nicotine products have an additional 40 percent tax. The cigarette tax will increase 10 cents annually until it reaches $4.
Ott noted that the city is poised to surpass the state contribution within the first few months. But that remains to be seen until the first half of the year is over.
There are several outlets that sell tobacco within city limits. Beyond applying the taxes to customers, they all had to pay the city a one-time license fee of $500.
It was first suggested by Pitkin County Medical Officer Dr. Kimberly Levin as part of what is being billed as the Tobacco 21 Initiative — a nationwide effort that's aimed at matching the legal tobacco-purchasing age with that of liquor.
There is a special line item in the general fund for the new tax revenue. It must be used for "health and human services, tobacco-related health issues, and addiction and substance-abuse education and mitigation."
Ott said staff will wait until halfway through the year to assess how much money has been collected, and then seek nonprofit partners and possibly create intergovernmental agreements to administer those programs.
"We will check in in mid-summer and get serious about how to distribute the funds in 2019," she said. "This is about the city supporting people who have an addiction."
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