Tobacco Registration Fee Update:
Tax Dept. says it's sending retailers notices to pay retroactive fee increase,
as well as issuing refunds for excess payments made two years ago

The New York State Department of Taxation and Finance advised NYACS on August 16 that it is finally sending out Notices of Demand for Payment for retroactive tobacco registration fee increases, as well as refunds for excess payments made two years ago. Here are the details.

Retroactive Increase

Two years ago, despite NYACS’ opposition, public health advocates sneaked into the 2009-10 state budget an increase from the customary $100-a-year tobacco registration fee to either $1,000, $2,500 or $5,000 a year, depending on the store’s total gross sales (not just tobacco) – a cynical ploy designed to force 40% of the state’s tobacco retailers out of the tobacco trade.

However, NYACS and four other retail associations filed a legal challenge, winning a court order temporarily freezing the fee at $100 until the case could be argued and decided. This restraining order remained in effect for the 2010 and 2011 registration years. Many of you supported this lawsuit with contributions to our Legal Fund.

This year, with the court case still pending, more rational forces gained political control of the Governor’s Mansion and state Senate, creating an opportunity to settle the issue. NYACS felt that rather than risk losing in court, costing our membership millions of dollars annually – or loss of the tobacco category – we should pursue the certainty of a legislative compromise.

Ultimately, Governor Cuomo and the Legislature agreed to set the fee at $300 per store per year, but only if the increase was retroactive to the 2010 registration year. They incorporated these provisions into the 2011-12 state budget.

Therefore, those who paid $100 for 2010 and $100 for 2011 now owe the Department $200 more for each of those two years, hence the Demand for Payment notice they’re sending you for $400.

Refunds

Back in September 2009, some retailers did pay the higher $1,000, $2,500 or $5,000 fee amount for 2010 before NYACS obtained the restraining order. Ever since, NYACS has been trying to get the Tax Department to issue refunds for the excess, which for some chains totaled tens or even hundreds of thousands of dollars.

In this year’s legislation setting the fee at $300, the Tax Department was directed to refund the overpayments without interest.  They were slow to do so, citing an outdated data processing system that had to be reprogrammed to handle such transactions. In addition, the refunds had to go through an extra layer of processing – approval by the state Comptroller’s Office.

We are told by the Department that all payment notices and automated refunds went out last week or this week, and that the only refunds not yet issued are cases requiring “manual review” due to special circumstances.

Soon to Come

Right around the corner is the September 20, 2011 deadline for filing a tobacco registration renewal application with the Tax Department, and payment of the full $300 fee, for calendar 2012.

That means some stores will end up paying the Department $700 in tobacco registration fees within a 30-day period, but $400 of that is non-recurring.

Consider the alternative – a one-time whack of $2,800 to $14,800 in retroactive payments, depending on your gross sales, if the court had reinstated the astronomical fee schedule.

The $300-a-year compromise is not a perfect solution, but it gives most of our retail members the chance to remain in the all-important tobacco category without paying a king’s ransom in fees every year.

A Team Victory

We could not have achieved this victory without the determined leadership of Senate Majority Leader Dean Skelos and the members of his Senate Republican Conference, who embraced our cause and insisted it be part of the budget negotiations, and Assemblyman Bill Magee, who led the charge in the Assembly and worked with Speaker Sheldon Silver to accomplish this.

We also owe appreciation to Governor Cuomo, who understood the impact of this issue on 24,000 small businesses and partnered with Leader Skelos to ensure that the fee rollback was included in the enacted budget. 

This successful outcome would not have been possible without the leadership of NYACS' Legislative Committee, generous member contributions to our Legal Fund, grassroots lobbying by individual NYACS members, the initiative of allied retail trade associations, and the extraordinary work of our lobbyist, Scott Wexler.  It’s an example of what NYACS can accomplish when all of us unite around a common goal.