Lottery Aid to Education at Risk in Tobacco Fee Hike Proposal

ALBANY, NY (03/27/2009)(readMedia)-- Millions of dollars in lottery aid to education would be jeopardized by the Paterson administration's proposal to sharply increase registration fees for retailers of tobacco products in New York State.

Currently, retailers pay $100 a year to register. Under Paterson's proposed budget, this fee would skyrocket to $1,000, $2,500, or $5,000 a year based on the store's gross sales - of everything, not just tobacco. The administration predicts these astronomical fees would reduce the number of stores selling tobacco by 40 percent.

However, 60 percent of New York Lottery merchants also sell tobacco. If 40 percent of them dropped tobacco, around 24 percent of all existing lottery outlets would lose customer traffic, and therefore lottery sales, since smokers would no longer be entering the store.

"Fewer customers means lower sales," said James Calvin, President of the New York Association of Convenience Stores, which has been leading the fight against the fee increase. "Even a tiny drop in lottery sales - less than one percent - would wipe out the projected $18.5 million in new revenue from the tobacco fee increase.

"But based on our industry's experience, we expect the impact on lottery sales would be far greater, which would create a hole in the general fund - not just this coming year, but every year after that."

NYACS also argues it's unfair to charge tax-collecting tobacco retailers a $1,000 to $5,000 fee when their Native American competitors, who have lured away millions of non-Indian customers with dramatically lower "tax free" cigarette prices, don't have to register or pay any fee at all.