 
Balwinder Singh, vice president of Smoker”™s Haven in Yonkers.
Tobacco retailers are fuming over a new fee in the state budget that will raise their registration fees from 900 percent to 4,900 percent depending on their respective sales volume.
The retailers have been paying $100 per year since 1990 for the right to sell tobacco products. Under the fees adopted in the New York State 2009-10 Enacted Budget Financial Plan, retail registrations will rise to as high as $5,000. The new fees would raise nearly $17 million.
What has retailing associations incensed is that the fees are based not just on the sales of tobacco products, but on the overall sales volume of a store. For example, a convenience store attached to a gas station would be assessed a fee based on the amount of fuel it sells.
Fuel sales typically account for two-thirds of gross sales of convenience stores offering gas, according to the New York Association of Convenience Stores (NYACS).
For a retailer with gross sales under $1 million a year, the fee will be $1,000; those with gross sales exceeding $1 million but less than $10 million will pay $2,500; and those with gross sales of $10 million or more will have to pay $5,000.Â
“Tenfold to fiftyfold fee increases on small business are never justifiable under any circumstances,” said Jim Calvin, president of Albany-based NYACS.
Dexter Ordinario, owner of Bread ”˜N Butter in Orange County.
“Registration fees should reflect the state”™s administrative costs, not business volume, and certainly not sales of products unrelated to the license,” Calvin said. “They should not be designed to punish the licensee for selling a legal product in accordance with regulations governing such commerce.”
State Sen. John Bonacic called it another “business killer” for New York.
He said the legislation was ill-conceived and punitive: “Three New York City men in a room created this budget. We got it two hours before we were supposed to vote. All the Republicans voted no; all the Democrats voted yes. And now we are seeing another fee that will kill the small mom-and-pop stores in our rural areas. Smoking may be unhealthy, but small businesses have the right to sell cigarettes. This is just one more example of the ”˜tax and spend”™ policies of Gov. David Paterson.”
Retailers feel that they have been unjustly burdened by these new fees while retailers on Indian reservations have not. Indian tribes are sovereign nations and not subject to state taxes. However, according to Section 471-e of New York Tax Law, “all cigarettes sold on an Indian reservation to nonmembers of the nation or tribe or to non-Indians shall be taxed, and evidence of such tax will be by means of an affixed cigarette tax stamp.”
“It”™s disgraceful for the state to sock licensed retailers with exorbitant fees while allowing Native American stores ”“ many of which do 50 times the volume of cigarettes we do ”“ to sell tobacco to New Yorkers without even obtaining a license in the first place, paying no fee at all,” Calvin said.
He suggested that the state”™s tax laws be administered more equitably. He said the likely outcome will be that thousands of small retailers would have to stop selling tobacco products.
“Rather than reducing tobacco consumption, fewer licensed tobacco retail outlets would merely drive more smokers to buy from unlicensed sources of tobacco, further reducing our sales and the state”™s tax revenue,” Calvin said.
Fewer customers will also be detrimental to the state via lottery sales, he said, with less state revenue for education.
On any given day, up to 100 million Americans visit mom-and-pop convenience stores nationwide, either to buy gas, milk, coffee or cigarettes, according to NYACS.
“Right now, we”™re trying to convince the Legislature to roll back fees to a more reasonable level,” Calvin said.
With the state Senate in chaos, there is not much time to act. The registration fees for 2010 must be paid to the Tax Department by Sept. 20.
Nine associations have launched Operation Rollback, which aims to modify the new fees.
In addition to NYACS, the coalition consists of: Gasoline and Repair Shop Association of New York; Food Industry Alliance of New York State; Small Business Congress; National Association of Tobacco Outlets; Long Island Gasoline Retailers Association; New York City Newsstand Operators Association; United 7-Eleven Franchise Owners of Long Island and New York; and National Federation of Independent Business/New York.
The group set up a Web site, www.votervoice.net/groups/nyacs, that lets retailers send a pre-written message to their state Senate and Assembly members calling for action.
For new business owner Dexter Ordinario, Bread ”™N Butter may be the name of his delicatessen on Route 17M in Monroe, but the bulk of his business comes from cigarette, tobacco and beer sales. Ordinario estimates he orders at least 30 cartons a week and is well-stocked with dozens of brand-name beers.
“This new fee is a total shock to me,” he said. “On top of the taxes on cigarettes and the new fees being added to alcohol, this is going to kill me.” Ordinario bought Bread ”™N Butter in late 2008 and keeps it open 16 hours a day, seven days a week.
“This is my first business, and I had no idea what I was walking into,” he said. “Does anyone understand how tough it is to pay the bills and not be socked with all these additional fees?”
Balwinder Singh is vice president of Smoker”™s Haven on Tuckahoe Road in Yonkers. His  store, like most that rely on tobacco sales for income, is on the mom-and-pop end of the retail spectrum, occupying the corner slot of a mini mall.
 “It”™s going to be more expensive if something like this goes through,” said Singh of the proposal. “An increase in price hurts our customers. It costs them money and it costs us business.
“We sell cigarettes on a low profit margin,” he said. “We are already paying too much in taxes. If the customer says, ”˜Why $7 for a pack of cigarettes?”™Â I tell them, ”˜It”™s the tax.”™ Then the customer starts questioning what tax I”™m talking about. What can I say ”“ that”™s a good question! I pay $3.75 per pack in taxes, plus a sales tax of 8.375 percent.”Â
The fees come at a time when cigarette smoking has decreased. Calvin believes the drop is attributed to the lack of sharing the taxes and fees with Indian reservations.
“These enormous increases come at a time when our cigarette sales have dropped 65 percent or more over the past eight years, mainly due to the epidemic of cigarette tax evasion sanctioned by the state of New York,” he said.
Earlier this month, the state Health Department attributed a major decrease in adult smokers to last year”™s $1.25 hike to the state”™s cigarette excise tax. The tax per pack is now $2.75. An additional 61-cent federal increase took effect in April.
“Keeping the price of cigarettes high is a proven intervention that has helped 310,000 New Yorkers become ex-smokers,” Health Commissioner Richard F. Daines said.
“While we respect public health efforts to reduce tobacco consumption, the virtue of that cause does not justify using license fees as a weapon,” Calvin said.
The American Lung Association of New York, the American Cancer Society and the American Heart Association in November set up a Web site ”“ www.alany.org/tobaccotaxticker ”“ that shows the amount of tax dollars the state loses by not collecting tax on cigarette sales by Indian reservations.
The organizations said the state would lose more than $600 million per year from the uncollected taxes.
(Associate Editor Bill Fallon and Reporter Kathy Kahn contributed to this report.)
