Nassau County Cigarette Tax Would be Self-Defeating

ALBANY, NY (05/06/2009)(readMedia)-- Imposing a county-level cigarette tax would backfire on Nassau County taxpayers, retailers and public health initiatives by feeding Long Island's epidemic of cigarette tax evasion, according to New York convenience store operators.

"Regrettably, given the scourge of readily available 'tax-free' cigarettes, it's a self-defeating proposition," said James Calvin, President of the New York Association of Convenience Stores.

On Monday, the Nassau County Legislature voted 10-8 to ask the state Legislature for authority to levy a tax of up to $2 per pack on cigarettes, on top of the $1.01 federal tax and $2.75 state tax.

Millions of New York smokers routinely dodge the existing state and local taxes on cigarettes by purchasing them from untaxed, unlicensed, unregulated sources - mainly, Native American stores, the Internet, and black market entrepreneurs.

Calvin said the annual loss of New York State cigarette tax revenue attributable to "tax free" Native American sales to non-Indian customers has grown from $100 million 15 years ago to $1 billion today, most of it due to excise tax increases. New York raised the tax from 56 cents a pack to $1.11 in 2000, to $1.50 in 2002, and to $2.75 in 2008.

"Nassau County Executive Tom Suozzi himself has acknowledged that the county already loses a 'staggering' amount of revenue due to the sale of untaxed cigarettes," said Calvin. "Doesn't he realize that an additional $2-per-pack tax will make the situation far worse by driving thousands more smokers to the tax-free side of the street?"

Calvin emphasized that he is speaking on behalf of law-abiding, tax-collecting shopkeepers, not the few who cheat by obtaining tax-free cigarettes themselves and selling them under the counter. Last week, Nassau County and the state Tax Department arrested 21 store owners on charges of illegally selling untaxed cigarettes. He commended the enforcement agencies for their initiative, and said he hoped the Tax Department and local authorities would turn their attention next to the vast quantities of untaxed cigarettes being sold by Long Island's Shinnecock and Poospatuck tribal stores in violation of state law.

"Because it's so easy for New Yorkers to obtain cigarettes without paying any tax at all, a county-level excise tax would actually drive away more state and local tax revenue, drive away more business from neighborhood mom-and-pop stores, and drive more cigarette purchases beyond the reach of the county's system for detecting and punishing sales to minors," said Calvin.

"Further, it creates a logistical nightmare for wholesale distributors, who prepay the state excise tax before delivering cigarettes to the retail store. They affix a tax stamp on each pack verifying that the state tax has been prepaid. If distributors had to affix a separate tax stamp to each pack destined for Nassau County stores, they would incur added cost to create separate warehouse space, and make separate deliveries for Nassau-only product."