Court Blocks Astronomical Increase in Tobacco Registration Fee

ALBANY, NY (09/18/2009)(readMedia)-- A judge has put a hold on New York's attempt to penalize tax-collecting New York retail stores for selling legal tobacco products by charging them astronomical registration fees.

On Wednesday in Nassau County, State Supreme Court Justice Thomas Feinman issued a temporary restraining order barring the state Tax Department from implementing -- for now -- an increase of 900 percent to 4,900 percent in the retail tobacco dealer registration fee enacted as part of the 2009-2010 state budget. Instead of $100 per year, the fee was increased to either $1,000, $2,500, or $5,000 depending on the store's annual gross sales of all products, not just  tobacco.

Co-plaintiffs in the court action against Gov. David Paterson, Attorney General Andrew Cuomo, and Acting Tax Commissioner Jamie Woodward were the New York Association of Convenience Stores, the New York State Association of Service Stations and Repair Shops, Long Island Gasoline Retailers Association, Service Station Dealers of Greater New York, and the United 7-Eleven Franchise Owners of Long Island and New York. Together these associations comprise more than 10,000 retailers statewide.

They are represented by Andrew E. Curto and Andrea Tsoukalas of the Uniondale law firm of Forchelli, Curto, Deegan, Schwartz, Mineo, Cohn & Terrana LLP. Mr. Curto argued that there was no rational basis for the fee hike.

Under the restraining order, granted pending a future court decision on the lawsuit, retail stores that sell tobacco are instructed to file a 2010 renewal application with the Tax Department and pay the previous fee of $100 per store. The application and fee are due this Monday, September 21.

The exorbitant fee increase was a public health initiatve designed to compel 40% of the state's 24,000 licensed tobacco outlets to stop selling tobacco. Anti-smoking groups theorized that fewer outlets would mean fewer smokers. "But that theory is all wet," said James Calvin, President of the New York Association of Convenience Stores, "because most of the displaced smokers would merely shift their tobacco purchases to Indian reservations, the Internet, and the black market, making things worse for small business, tax revenue and public health." He noted that the State allows those thriving outlets to ignore tobacco taxation, regulation, and registration fees, granting them enormous unfair advantages over licensed stores.

"Any increase in this fee needs to be done in a rational way that enables small businesses to survive while preserving the state's tobacco excise tax and lottery revenue," said Calvin. Specifically, he said his group supports a bill sponsored by Assemblyman William Magee and Senator William Magee that would double the old fee to $200 per store, plus a $100 surcharge for every mark the store has on its tobacco enforcement record.

The text of Judge Feinman's decision is available at www.nyacs.org/documents/TobaccoFeeTRO.pdf

-30-