Stores say new cigarette tax is killing sales
Group: State increase ‘unleashed a new wave of tax evasion’

Thursday, August 12, 2010
by Lee Coleman
Daily Gazette

CAPITAL REGION — Cigarette sales at convenience stores statewide have dropped as much as 45 percent since a new state tax was imposed last month.

But smokers are finding ways around the high prices, the state Association of Convenience Stores said Wednesday.

Bill McGovern of Mechanicville said, for example, that instead of paying $11 for a pack of Marlboro cigarettes, he now rolls his own using a bag of Bugler’s tobacco.

“We are both trying to quit,” McGovern said about he and his friend, Katelyn Spadafora, who were smoking outside a bar Wednesday on Caroline Street in Saratoga Springs.

Other smokers are turning to tax-free Indian smoke shops, online offers, the black market and lower-taxed cigarettes in Vermont to avoid paying the highest cigarette tax in the country, according to the Association of Convenience Stores.

The association said when the state increased the cigarette excise tax from $2.75 to $4.35 six weeks ago, the 58 percent increase “unleashed a new wave of tax evasion.”

“Field reports indicate convenience stores have suffered an average drop of 25 percent to 35 percent in cigarette packs during July,” the association said in a written statement.

But sales in stores near tribal cigarette outlets and state borders experienced losses up to 45 percent, the statement said.

“Meanwhile, Indian reservation and border-state ‘tax havens’ are flourishing, with sales up as much as 300 percent in some outlets,” the association said.

James Calvin, association president, said, “we’re approaching the point where two-thirds of the cigarettes consumed in New York are purchased without collection of any New York state tax whatsoever.”

The association maintains the upswing in tax evasion increases the urgency for Gov. David Paterson to “follow through on the scheduled Sept. 1 start of tax collection on Native American sales of cigarettes to non-Indian customers.” Calvin said the tribal sales are currently the chief avenue of cigarette tax avoidance in New York, costing the state $1.5 billion in lost revenue.

Tom Mailey, a spokesman for Stewart’s Shops, said the 318 Stewart’s convenience stores in New York state are seeing a dip in cigarette sales but nothing near the 25 to 35 percent decline in sales reported by the state Association of Convenience Stores.

“We are down a little bit,” Mailey said. He said at the same time Stewart’s 10 shops in Vermont have seen a small increase in cigarette sales because Vermont doesn’t tax cigarettes as much as New York does.

“It’s insane, it really is,” said James Kommer, owner of James & Sons Tobacconists at 360 Broadway in Saratoga Springs.

“This one industry is taxed so unfairly,” he said.

Kommer, who specializes in cigars, said he hasn’t raised his prices yet because he still has a backlog of cigars purchased before the tax increase went into effect Aug. 1 for cigars, smokeless tobacco and other tobacco products.

He said with the high tobacco taxes in New York state, “you will get a black market.”

He said people will go down to the Carolinas, load a van full of cigarettes and drive them back to New York for sale.

“They double their money. It’s better than dealing drugs,” Kommer joked.

He said he is collecting the names of state legislators who voted for the tobacco tax increase in June. He will soon list their names on his website, www.jamesandsonstobacco.com. Kommer will urge his customers to vote those lawmakers out of office.

Jason Bateholts, a supervisor at Minogue’s Beverage Center on West Avenue in Saratoga Springs, said the store has seen a “major drop” in cigarette sales and an increase in people buying bags of loose tobacco so they can roll their own.

“You can roll a carton of cigarettes for $30,” Bateholts said.