Abstract
I investigate the supply side incidence of commodity taxes. My empirical analysis employs a unique panel dataset of nearly 35,000 retail establishments that directly captures pricing behavior (markup) and profits generated from cigarette sales. Higher cigarette taxes drive down profits of convenience stores but not of grocery, drug, and liquor stores. Because a higher proportion of convenience stores are small businesses, my findings suggest that cigarette taxes are regressive on the supply side of the retail market.
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