Pam Dudding Contributing writer
With much discussion and debate at the January Board of Supervisors meeting, the majority of the County Board of Supervisors voted to keep the 40¢ per pack tax that was imposed to start January 1, 2022.
County Administrator, Dan Collins gave a summary on the Cigarette Tax Amendment.
- August 5, 2021, meeting – conducted a public hearing as appropriately advertised
- Following the public hearing, the Board adopted the Cigarette Tax Ordinance at 40¢ per pack
- Ordinance became effective on January 1, 2022
The BOS approved the Cigarette Tax Ordinance to assist in funding Emergency Services with estimated revenues between $94,300 to $104,800.
The Board votes were as followed: Rusty Zimmerman (yes), Jason Matyas (no), Carl Bailey (yes) and Jesse Spence (yes).
“With increased demand for Emergency Services, the estimated revenues from the cigarette tax would offset the increased expenses for operational costs,” Collins shared. “Estimated new cost for emergency services is greater than $78,272, for three additional paid EMS staff.”
During the December 2 Board meeting, a request was made to reduce the tax rate from 40¢ to 30¢ per pack.
Collins noted that the average per pack in the surrounding localities is $37.71 per pack, a 7.71 cents per pack difference.
“As reported by the CDC, approximately 15 percent of all Virginians smoke,” he said. “That would be approximately 760 residents of Craig County (5,064 Population X 15 percent = 759.6).”
Following discussions with both the Commissioner of the Revenue and the Treasurer, Collins determined that the tax rate should remain at 40¢.
“The cost of reducing the rate would be approximately $7,000. In addition, I believe it would be wise to delay any adjustment to the rate until we have a 12-month history to reflect actual revenues,” Collins said. “When cigarettes cost approximately $7.40 a pack, I have doubts that an additional 40¢ would discourage a smoker from purchasing a pack of cigarettes.
It was added that additional cost to fund the additional three EMS positions would be greater than $78,272, including benefits.
“Offsetting funds are the proposed cigarette tax revenues which could be designated for public safety use,” he said. “The estimated annual cigarette tax revenue is $94,000 and $104,000 at the current rate and the proposed 30¢ per pack rate would be $75,000 in tax revenue.
Collins said he asked the Commission of Revenue, Elizabeth Huffman and the Treasurer, Jackie Parsons, how they would go about reducing the tax and refunding the money that had already been paid and the analysis came to approximately $7,000.
Huffman and Parsons submitted very detailed lists of costs from office supplies, Abatement mask setup, BAI abatement program development, training, mailings, audits and travel/lodging/meals. This did not include any possible overtime. Huffman’s estimate was $6,129 and Parson’s was $880. They also explained in great detail what their jobs would entail for each.
Collins continued, “My personal belief and two constitutional officers, the commissions of revenue and the treasurer all agree that we really should have a 12-month history, so we know how these taxes actually work. We barely have a month. Some of these stores and owners pick up the stamps and some are a little delayed. So, the physical impact of the $100,000 would drop to $75,000, as it is per quarter at the tax rate and that doesn’t include the $7,000 impact.”
“My recommendation is that we should have at least a 12-month history before we adjust any ordinance, not just the cigarette tax ordinance and see how it is working. It is another reason why we did it in January instead of making it effective immediately. We will have a half-years by July 1,” he said. “I don’t think that’s enough, so I recommend not to change the rates, however, the amendment does have two things: changing the rate from 40¢ to 30¢ and then adding the tax stamp. The attorney said we would fix that so that the Commissioner of Revenue would select approved stamps so no matter how it changes, she will be able to adopt that. I recommend approving the stamp portion of the amendment but leaving the tax the same.”
The public hearing was open for comments for or against.
Richard Carper presented a petition to the Board with 492 signatures of customers and citizens who requested that the tax be reduced.
“I can tell you that we are only two weeks into this, this week’s cigarette order was about $2,000 less than it typically is. That is just at one store, The Gopher Market,” Carper said. “We usually get about $10,000 worth of cigarettes and this week we got $8,000. We have had multiple customers that since they go to Roanoke anyway, that is where they get them.”
Jesse Spence shared that this was a process the Board started working on last year.
“At that time, we considered adopting the ordinance as a way to help us fund our emergency services costs because those have continued to increase annually,” Chairman Spence said. “Many people may or may not realize that most of the calls are run by paid staff now. Volunteer staff do help some, but the majority of the calls are covered by paid staff. And there really isn’t a lot we can do about that because when people call up and someone needs to be there to help them.”
Spence explained that he viewed the last few budget years.
“It cost the Emergency services ambulatory services $358,000 in 2018-2019 and last year $524,000,” he said. “That is probably not going to drop and likely to continue to increase gradually because we need a couple more people. Therefore, we adopted the ordinance solely with the intent to use the revenue for the emergency services and no one on this board was in disagreement and no one showed up at the public hearing. In July of last year, no one said anything one way or another that I remember.”
Board member Rusty Zimmerman said, “I know the Carpers are concerned of loss of revenue and loss of tax base and so on and so forth. But I know as the board, one of the things we are burdened with is how to pay for stuff and how to fund emergency services and other projects throughout the county. As much as we hate to raise taxes, it is a necessary evil. We come up with this idea as this became recently available due to some other legislation. Dan brought it to us, and we thought it would be a good way to generate some revenue without raising tax base for everything.”
He added, “It is unfortunate and for us as a board determined it was the lesser of two evils. This $100,000 that 40¢ per pack will raise will save us approximately two cents on the dollar on tax base. Yes, it will be an inconvenience and a burden to some, but they have the option not to buy them. But the rest of us that live in the county that pay taxes, it will relieve some burden from that. I personally feel we should keep the 40¢ and revisit at the 12-month.”
Collins did note that he had conversations with the county attorney who represents several towns and counties.
“He said that he knew of two jurisdictions, when they adopted theirs that the convenience store owners were concerned about sales loss,” Collins stated. “He said the managers of those two locations went back one year later and sales were virtually the same. No scientific data, but that is what he said.”
“I think personally a lot of it is education, as Roanoke County just went to 25¢. We are talking a 15¢ difference and Roanoke City and Salem is higher than us. I feel if we educate the public, I personally think it was kind of handled a little bit wrong. We are talking 15¢ and if the public knows this is going to emergency services and to provide for the county, as well as an effort to keep taxes to a manageable base, I think more people would be a little less upset about it,” Zimmerman added. “For the 492 names on there, I think if we could explain to them a little different way, maybe they would be a little less apt to sign that. It’s very disheartening to see things on Facebook bashing these five people when we are trying to make the best educated that we can. Not that I am concerned about Facebook, but people should be educated more before they have a reaction.”
“We did advertise this ordinance last year with our regular budget session,” Spence said. “It was a little bit surprising to see so much reaction after the ordinance has been adopted. I would expect this kind of reaction when we first proposed the ordinance.”
Discussion was made on the avenues the BOS took to advertise: the BOS website, the courthouse, and the newspaper, noting that out of the 492 signatures of Craig County citizens, only a handful frequented the courthouse, unless necessary, or visited the website or read the notices in the paper.
It was suggested that they use more direct avenues such as posters on the Food Country bulletin board, at the convenience stores, etc.; places where Craig County residents who this would affect would actually frequent, stressing that Craig County residents wish to work together on decisions and not create dissension.
It was also noted at the meeting that the merchants have contacted the town to see if it would like to have a tax as the code of Virginia allows them to have a tax, just like the county.
The code states, “Any county cigarette tax imposed shall not apply within the limits of any town located in such county, now or hereafter imposes a town cigarette tax. However, if the governing body of any such town shall provide that a county a cigarette tax, as well as a town cigarette tax, shall apply within the limits of such town, then such cigarette tax may be imposed by the county within such town.”
“So, I would request by the Board by motion for the town to consider putting that provision in their ordinance should the town adopt the cigarette ordinance,” Collins stated. “Without that provision, we cannot have ordinance.”
The Board then made a motion to make a request to the Town of New Castle, that if they adopt the cigarette ordinance that they will allow the county to leave theirs in place.
Collins added, “The administrative cost to run this thing is about $10,000 to $12,000 for the county, but would be less for the town. It is not cost-effective for the town.”
Another issue was the merchants having to individually put a new audit stamp on each cigarette pack which took a long time per pack, for cigarettes already in merchants’ inventory. Carper shared he had 9,634 packs as of December 31 that had to be individually stamped with a special gun.
“The way they are positioned, you can’t even put one on a package easily. You have to manipulate this sheet carefully, so you don’t accidently get two stamps,” he said. “It’s not about paying the money; you can take a check tomorrow for the whole thing for $3,900 for the tax.”
His concern was having to take days to stamp all cigarettes immediately. Also, at the time that many stamps were not available at the courthouse, but Parsons explained that the actual distributors were supposed to buy those and apply them to the packs, which they did not, therefore making our county merchants responsible for having to do this individually which was a much more difficult task with their types of stamps they were provided.
Parsons shared that this information was sent out in October and the stamps were in her office in November so that the distributors could have purchased and placed them on the packs by January 1.
“This distributor did not come to my office and buy stamps, so this is the reason why a couple of these stores have all this inventory with no stamps, because the distributor did not come to us and now the burden is on our local businesses,” Parsons added.
She is also working with the merchants in trying to make their mandatory stamping as easy as possible.
Collins reiterated that there was no grace period to put the stamps on and Spence added that it would take two months to change the rulings to add one.
Huffman took the podium quickly explaining that she thinks there is a way to solve the issue, reading an article in Section 38-349.
She and Parsons will be working closely with the merchants to help make the transition as smooth as possible.
However, moving forward, they shared, “The stamps have to be on the packs. It is the only audit trail without going back and making a huge inconvenience for both the merchants and our offices. To my knowledge, all the distributors that do business in our county have now purchased stamps.”
As of February 10, 2022, the Carpers have noticed a 20 percent reduction in their sales. Food Country added that they also have seen a drastic decrease in sales by an extreme and disappointing 35 percent.