By ALEX COSTELLO
Paterson is proposing an increase to the Cigarette and Tobacco Retail Registration Fee. As the fee stands now, stores pay $100 for the right to sell tobacco products. Paterson proposed increasing the fee 10, 25, or 50 times that amount, depending on the gross sales of each store. And such a sharp increase has some retailers questioning whether or not it would still make sense to sell tobacco.
"If it goes into effect, I'll be discontinuing cigarettes," said Fred Rigel, president of Levin's Pharmacy in Oceanside. "I don't [sell] a ton of cigarettes to begin with. It's not a profit-maker, it's really just a service for those customers who want to buy them."
Paterson's proposal puts a strain on stores that are already feeling the pain of the poor economy. If the proposal passes, the flat $100 annual registration fee would jump to $1,000 for stores with gross sales of less than $1 million, to $2,500 to stores with gross sales between $1 million and $10 million, and to $5,000 to stores with gross sales of more than $10 million.
According to Rigel, Levin's Pharmacy would fall into the middle area, having to pay a fee of $2,500 a year to sell cigarettes. And for the amount of cigarettes that Rigel sells, the fee just wouldn't be worth paying.
"If I sold 10 cartons [of cigarettes] a week, that's a lot," he said. "I debated the $100. I don't even make $50 a week on cigarettes. So it just wouldn't pay."
According to Matt Anderson, a spokesman for the New York State Division of the Budget, the increase in the retail registration fee is expected to bring in about $18.5 million to the state, all of which will go to the Healthcare Reform Account, which finances many of the state's healthcare programs.
"It finances everything from Child Health Plus (which is funding for insurance for children) to anti-smoking initiatives, anti-obesity initiatives, as well as just normal Medicaid expenses," said Anderson.
For some retailers, like Rigel, the increased fee makes them question whether or not to sell tobacco products. But for specialty tobacco stores, deciding to not pay the fee and stop selling tobacco isn't an option.
"I would not want to pay $1,000 or even $2,500," said Marc Ivler who, along with his wife Cheryl, owns the Tobacco Connection in Oceanside. Ivler, who works about 15 hours a day, has been at the helm of the Tobacco Connection for less than a year, so he doesn't yet know what his gross sales would be.
"I would not want to increase my fees when you're making so little per item anyway," he said. "People wouldn't think so, but it's a labor-intensive business with such a low margin."
In addition to the retail registration fee increase, Paterson is also proposing to increase the state tax on cigarettes from seven to eight percent, as well as the tax on cigars from about 34 cents per cigar to 50 cents. And now Nassau County, which had not before taxed cigarettes, is proposing to add a $1 tax to every pack of cigarettes, following in the footsteps of Suffolk County and New York City. "Every increase on tobacco products affects sales," said Ivler.
Ivler said that the retail registration fee increase could minimally affect his prices, but all of the new fees being levied on tobacco products will definitely cause his prices to go up.
"It's very nice for the government to give out lots of money to people," said Ivler, "but then those same people that are supposed to be benefiting from that money that's being given out, are going to pay them the money [in higher taxes]."
Anderson said that the $18.5 million the state is projecting to collect from the fee increase takes into account the possibility of some stores, like Levin's Pharmacy, deciding to not pay the fee and forgoing tobacco sales. "It's based on our economic forecast of the impact of it," Anderson explained. "It takes into account all potential economic impacts of the fee."
And while Ivler doesn't want to have to pay even more in fees just to run his business, he understands that, to make up the state's record-setting deficit, the money has to come from somewhere.
"On the other end, we do have to pay for healthcare, we do have to pay for education, we want things for ourselves. We're a great society," Ivler said. "So it is a Catch-22. But it's like always - taxing the sinners."
Comments about this story? ACostello@liherald.com or (516) 569-4000 ext. 207.
