Insult to Injury: Cigarette 'Floor Tax'

ALBANY, NY (04/07/2008)(readMedia)-- If the proposed cigarette tax hike goes through, New York State is planning to strong-arm warehouses and retail stores into paying a tax differential on millions of packs of cigarettes they have already bought and prepaid the tax on.

The so-called “floor stocks tax” on millions of packs of existing cigarette inventory as of the June 3 effective date of the tax hike would be a revenue one-shot for the State but a potential cash-flow nightmare for the businesses.

“The State would say poof, the tax on every pack you have on hand just went up by $1.25, and now you owe us that money,” said James Calvin, President of the New York Association of Convenience Stores. The State has imposed a floor stocks tax before, sometimes permitting wholesalers and retailers to pay it in installments.

“If the Tax Department were to follow its protocol from 2002, the last time the cigarette tax increased, it would send inspectors to retail stores to look over their shoulders Gestapo-style and make sure they accurately report their inventory for floor stocks tax purposes,” he said.

“The Department can’t seem to muster the courage to enforce the March 2006 law requiring them to collect taxes on Indian sales of cigarettes to non-Indians, but they are gung-ho to get out there and harass the non-Indian retailers that have been dutifully collecting and remitting these taxes for years,” said Calvin. “It should be renamed the Department of Double Standards.”

NYACS strongly opposes the proposed $1.25-a-pack cigarette tax hike because rather than achieving the state objective of compelling people to quit smoking, it will merely drive millions more smokers to readily available tax-free outlets, crippling convenience stores, draining state and local revenues, and defeating anti-smoking efforts.

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