Convenience Stores Applaud Focus on Cigarette Tax Evasion Epidemic, Urge Passage of Follow-up Legislation

ALBANY, NY (08/18/2008)(readMedia)-- James Calvin, President of the New York Association of Convenience Stores, today issued the following statement:

Struggling convenience store operators are pleased that Albany finally is focused in on the hundreds of millions of dollars in taxes that are escaping due to cigarette and motor fuel tax evasion that the executive branch of state government has allowed to reach epidemic proportions.

The bill passed June 24 by the Assembly and August 8 by the Senate and (A.11258a/ S.8146b) was a symbolic expression of the Legislature's resolve to meaningfully address a deepening crisis that is crippling small businesses, robbing taxpayers and local governments, and thwarting anti-smoking efforts.

NYACS was a leading supporter of the original version of this bill, which overwhelmingly passed the Legislature in 2006 but was vetoed by Governor Pataki. Undeterred, the sponsors - Assemblyman William Magee and Senator Michael Nozzolio - re-introduced the bill this year. However, amendments made at the behest of the Paterson administration prior to its recent passage weakened it to the point where we doubt it would have any effect whatsoever if enacted. NYACS therefore withdrew its support, citing these specific problems:

- It removed the notification provisions authorizing the Attorney General, the City of New York, or the Tax Department to order a tobacco manufacturer to stop supplying a wholesale distributor who is selling untaxed cigarettes to a tribe in violation of existing law. This would have been a straightforward way to stop the flow of untaxed cigarettes.

- It relies on the Tax Department to create an official form for cigarette wholesalers to use in certifying that they're not selling tax-free product to tribes. Since the Department has never issued the Indian tax exemption coupons that it was supposed to produce under the tax fairness law that took effect in March 2006, there is no reason to expect they would carry out this simple ministerial task either, and its inaction would preserve the status quo.

- It leaves too much wiggle room. If a wholesaler were to file a certification with a cigarette manufacturer that was less than truthful, how would the manufacturer know? If they suspected it was untruthful, without knowing for sure, would they be on solid legal ground to cut off supply, or would there be due process to drag it out for months, or years? Would they turn the questionable certificate in to the Tax Department for action against the wholesaler? Does recent history offer any reason to believe the Tax Department would take action?

- By pushing the responsibility onto wholesalers and manufacturers, it absolves the State of any accountability whatsoever for alleviating the cigarette tax evasion crisis that the State created and the State made far worse by enacting the June 3 cigarette tax increase. Let's remember, there's already a law on the books that the Tax Department is supposed to be enforcing.

While we commend Assemblyman Magee and Senator Nozzolio for their persistence, and respect those who heralded this legislation as a breakthrough, based on our tormented experience with this issue we believe it lacks the teeth necessary to accomplish the objectives.

However, we fully support follow-up legislation just introduced by Assemblyman Magee (A.11834) and now under consideration by the Senate leadership. Building upon S.8146b/A.11258a, it would go directly to the heart of the issue, by requiring every wholesale distributor to prepay the state excise tax on cigarettes delivered to Indian and non-Indian retailers, and providing a mechanism for reimbursing Indians purchasing them on the reservation. That way, taxes on purchases by non-Indian customers will be collected as intended, while the undisputed tax exemption on Indian sales to members of the same tribe will be preserved. It's fair, clear, and effective.

If the Legislature is serious about collecting these taxes, restoring a level playing field for non-Indian small businesses, and maximizing the benefits of anti-smoking programs, it will follow through and adopt these additional provisions at this week's special session. We strongly urge the Legislature to pass, and Governor Paterson to sign, A.11834.

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