By Pam Dudding Contributing writer
The implementation of a cigarette tax in Craig County has generated much discussion in the last few months.
At the February 21 meeting, the Town Council chose to implement a 20 cents per pack cigarette tax, therefore canceling out the county tax for those businesses within the town limits, including Gopher Market, Food Country and Family Dollar.
The county cannot charge their tax on these localities. However, with new information of neighboring county cigarette taxes, the county may consider reducing their county tax too.
Present members at the Town Council were: Mayor John “Bucky” Johnson, Vice-Mayor Tommy Zimmerman, Clerk and treasurer Nina Davis, Town Attorney Bruce Mayer and members Lenny McDonald, Karen Crush and Heather Duncan.
The main subject of the meeting was the adoption of an ordinance of a town cigarette tax.
Business owners Mike and Richard Carper of Gopher Market and IGA Express Exxon and David Stephens, Food Country store manager, attended.
“Our cigarette sales have dropped drastically,” Stephens said. “With the cigarette price increase, our retail sales are down around 30 percent. So that means people are going out of our county to buy their cigarettes.”
Stephens reported that since January 1, their sales loss was great.
Mike Carper noted that he read in last weeks’ paper of how much revenue the county was going to raise on the proposed cigarette tax.
“I know that our two stores sell 78 percent of the cigarettes in this county. I picked three random weeks and last week, we were down with the tax increase,” he explained, adding, “Last week, we received 116 cartons of cigarettes at Gopher and 114 at IGA Exxon. Before January 1, our total cigarette sales were 150 plus cartons every week, which is down 24 percent overall.”
The American Lung Association did a survey and Virginia’s average cost of a pack of cigarettes, before inflation hit, came to $5.25. If the Carpers lose 35 cartons per week in sales, which equals to approximately 150 per month, that is $7,875 a month in lost revenue per store. That does not include the loss of what those citizens would have bought in gasoline, food, lottery tickets, drinks, and beer or wine purchases.
Carper said, “It has also hurt our bottom line.”
Mayor Bucky Johnson asked if it had affected our overall store sales.
Carper quickly responded, “Absolutely!”
“I want to do what is right by the citizens of Craig,” Carper added. “If you guys are working for the citizens, we three have the most at stake,” referring to Gopher Market, IGA Express Exxon and Food Country.
“With 78 percent out of our two stores and another almost 20 percent at Food Country, that is almost everything,” he said.
Carper proposed, “We would like to see no higher than say $2.00 per carton. I know there is a provision request from the county to ride along with their ordinance and I ask that you not do that. If you are going to allow the county to do the other $2.00, then do the entire $4.00 for the town.”
Carper agreed that it is a revenue generator but stood firm with his and Food Country’s decreasing figures that, “we are running people off!”
Carper reiterated the words spoken at the BOS meeting that the county wishes to wait a year to see what happens. “But we already know. We lose business,” he said.
Tommy Zimmerman asked about the county’s tax and the town’s tax to see if then it would be a $6.00 per carton tax.
Mayer explained, “No, with our permission, we can allow them to also have their ordinance.” (Though he does not believe the total of both can go above the $4.00 per carton.)
“I’m begging you, don’t do that. Let’s start off small and let’s see what happens. Let’s give it six months and the cigarettes sales will be back up because they will be cheaper,” Carper shared. “It’s not a hard sale. It’s not hard to figure out. You guys are on the board because you are smart, not because you are just there.”
He added, “Give me six months and I will show you. If I’m wrong, it can be published in the paper that Mike Carper was wrong.”
Carper also informed them that stamps do not have to be purchased as a member had this concern.
“You do not need stamps, it is only for enforcement,” Carper explained. “You don’t need to go through the hassle of stamps. The wholesaler will pay you quarterly for any cigarettes that are bought. If you will have an enforcement officer, you can get the stamps. We are not going anywhere else to buy our cigarettes. We do not have time to do that. We get our cigarettes from one place, and they will pay you for the cigarette cartons that we purchase every quarter.”
Mayer then explained how the wholesaler buys the stamps and places them on the cigarette packs.
Carper noted the easiest was not to do the stamps, where the wholesaler pays for the stamps, but to get the quarterly payments from the local businesses buying from the wholesaler who in turn pay the town.
Explained Mayer, “My opinion is that we should have a stamp. There could be some kind of check-system, where we make sure they are not selling cigarettes without stamps. We can do some spot checking.
The county just got the authority to apply a cigarette tax, but cities have had it for some time.
He noted it takes up to five weeks to get the stamps, which would be different from the county stamp. They have to pay a discount to the wholesaler for putting a stamp on the individual packs.
Mayer stated $920 per week in tax to Town, $874 after discount paid, which equals $45,000 per year. Stamp costs are about $125 per month.
Davis shared they could call and set an appointment to purchase the stamps from her.
Carper reminded them that normally 15,000 stamps come on a roll for wholesalers.
Mayer expressed possibility of having an auditor.
Addressing Jesse Spence who was in attendance at the BOS meeting, McDonald shared, “The reason this happened in the first place is our EMS are slowly having to step away from volunteer services and pay EMS personnel. Also, this allows us to have them to have the correct certifications to take care of everybody and you needed $100,000.”
“Yes, there have been steady increases in the cost of EMS,” Spence said.
McDonald continued, “That is not going to go away with the cigarette tax. If we do a smaller cigarette tax in the town, they still need $100,000 and we have taken that source of revenue away from the county.”
Zimmerman also asked of how much of that $100,000 is raised by insurance costs of billing the insurance companies and Medicare for services rendered.
Spence shared that the EMS does bill, but is currently unaware of the exact amounts.
McDonald’s concern is that there is no infrastructure to implement and the county ending up looking for revenue through property taxes.
It was explained that would be all of Craig residents instead of just the few that smoke and the small businesses that take the revenue loss.
McDonald continued, “Inflation is up over seven percent and cigarette costs will go up significantly more from inflation than the tax the county has proposed. The sales of cigarettes since 2002 have dropped 12 percent. This is a piece of the business that is going away slowly. It is not something the convenience stores can rely on year after year, as it is going to drop. So, I am struggling to see where we would step into this as a town in that we would not have a mechanism in place to enforce, manage or audit it. My concern is that we are stepping into a potential storm that we really aren’t prepared for. I realize there is a competitive nature between Roanoke and Craig County on the tax that has been implemented. Just as our county has given a good faith saying, ‘we will look at it again as soon as we run out of these stamps.’ Roanoke County is also willing to reconsider where they are placing their taxes. I am empathetic to our business owners. You need the business. I also know you gain businesses by putting in those skill machines.”
Carper said, “To your point, cigarettes were down. It is the number two sales in convenience stores. Over 27 percent of our business comes from cigarettes. If you take that away, we won’t be here.”
Pam Dudding feels like one of the main points was that we have small businesses in Craig County.
“We don’t have what they have in Roanoke. They depend on the people to buy their cigarettes, who also at the same time purchase fast-food items, lottery tickets, gas and beer,” she said. “I set there one evening and watched people buy cigarettes. They aren’t just buying cigarettes when they come in. I know you are concentrating on the cigarette sales, but the cigarette sales that they are losing doesn’t include the gasoline sales lost, the small convenience items lost, the beer, wine or lottery tickets lost.”
McDonald did note that gas was cheaper in Craig County.
Speaking up, Carper said, “And why do you think? (As the Carpers have done this intentionally to keep business in Craig.) In Roanoke, they have multiple gas stations they drive by. Why do they come to us?”
McDonald answered, “Because it is three cents cheaper.”
Then McDonald added, “Ok, I get your point on the cigarettes.”
Dudding explained that if Craig businesses are losing 37 percent of their revenue, the county won’t be receiving “all that tax” that they were expecting, just like other counties that have done this exact thing in previous years and it boomeranged on them as well.
Zimmerman stated, “I don’t care what you are dealing with, if you keep the price down, sales go up.”
“I have my concerns that I don’t think we are in position to implement it,” McDonald said. “I feel the county says that they will in time reconsider.”
Several attendees chimed in quoting the BOS previous statement, “They may reconsider after seeing a years of tax implementation.”
Crush emphasized, “But if they hire these two EMS employees, they are then responsible, so how then would the county lower the cigarette tax? They aren’t going to lower it.”
Zimmerman made the motion to, “Enact at 20 cents per pack. Let the county have the entire revenue and take care of the implementation, etc. and it would be theirs.”
Mayer shared that he believes the town must collect the tax.
Carper shared that he feels like they are getting too deep into the implementation.
“The stamps come and get the huge roll, and you don’t see the wholesaler again until he is almost running out,” he said. “There are only three stores and you’re looking at 98 percent of the cigarette sales here.”
Stephens said, “This is only three stores that we are talking about in New Castle.”
Carper repeated the option of using no stamps and have the wholesalers to pay quarterly.
Mayer asked how they would know. If the stamps are there, then we can check.
Carper expressed, “Our inventory is closely the same all the time. As far as enforcement – two years from now, no one is going to come look and see if there is any kind of stamp on a cigarette and you know how that goes.”
McDonald said, “No, because we have never done it before.”
Carper said, “I have, and I know how it goes. I’m throwing it out there that you don’t have to do the stamps if you feel it is that big of a deal.”
Dudding reiterated, “Again, you are talking about a small town. Trust. We are talking about initially considering a trust factor.”
“We are just saying to give us a fighting chance as we have lost a lot in this new 40 cents per carton tax and not just cigarettes, it is across the board,” Carper added. “Our sales are down.”
Carper shared that he actually had a customer message him asking which store in town she should buy her cigarettes. He explained they were the same. She said, “Well, I’m going to Roanoke tomorrow.”
“Now that is just one customer that reached out to me, but how many others have not?” he said.
McDonald said, “Apparently another 26 percent.”
“Let us prove it to you,” Carper suggested.
Mayer suggested to hold off.
Zimmerman said he believed the longer they hold off, the more sales will be lost.
Mayer reiterated that the county said they would look at it again.
It was noted that the county had stated at their meeting that they wanted to have a 12-month period before making any changes though Spence said he was sure that this would be a topic of discussion at future Board of Supervisors meetings.
“I can tell you we will reconsider the rate for sure,” he said. “If we had the knowledge of what Roanoke County’s rate would be when we adopted our ordinance, I don’t think we would have made our rate 40 cents.”
Spence explained, “It is a way to increase our revenue without increasing real estate taxes, which all of our neighbors are currently taking, so it is a route the county chose to use as well. The rate is not set in stone, and I think it can be changed. We were down a member when the vote happened. When it was proposed to make an adjustment, it was 3-2 then and we lost one of the positive votes.”
McDonald asked Spence about Roanoke rates and Spence said that Dan Collins had more information, though when Roanoke County was asked about changing their rates, they were undecided.
“With that said, you do know the rates,” Carper added. “Right? You know Roanoke County is $2.50. There is a lot of moving parts to this, but you now have the knowledge that maybe some of the other counties that didn’t look into it. We need to be competitive and now we are not, not at all.”
Duncan asked if the county had talked of what they would do if the town adopted this tax.
“No, but I can only speak for myself as one member of the Board,” Spence said. “I would do what you feel is the best for the town of New Castle. We were using it as a way to raise revenue, but we have other methods, so it’s nothing personal. It is just a way to fill in some gaps, especially in areas we see a lot of increases and EMS is one of them.”
Mayer shared that they did get an official request from the county not to disallow their 40 cents per pack.
Zimmerman shared that that would not help the businesses.
“This would help our businesses out, as that is what they are asking us for,” Zimmerman said. “This council represents the town and its people and its businesses. That is all I have heard for the last several years from people to take care of our businesses. So, let’s take care of our businesses.”
Zimmerman made a motion to enact a town cigarette tax of 20 cents per pack as soon as possible and reiterated that he did not want to keep the funds from the cigarette tax.
“We have a good working relationship with the county, and it has improved over the years, and I don’t want to see something driving a wedge between us now,” he addressed Spence, “We are not doing this to take money away from you, we are doing this to help our businesses.”
McDonald shared, “Now is the time to vote on a date so we can publish it so their customers will come back.”
The ordinance was adopted to have a town cigarette tax of 20 cents per pack, with an implementation date of at least May 30, 2022. All members voted yes except for McDonald.
The ordinance passed.
The Carpers and Stephens thanked the Board for their consideration and caring for their small businesses.
Later, Carper shared, “I’m very gracious for the decision of the New Castle Town Council on adopting a 20 cents per pack cigarette tax at the February meeting. As I said, my cigarette sales were down almost 20 percent in just six weeks into the County’s 40 cents per pack cigarette tax that took effect on January 1. Businesses in Craig County were put at a huge disadvantage with the county tax. This not only affected our cigarette sales, but overall sales in our stores.”
He added, “New Castle businesses will now be in-line with surrounding counties issuing cig taxes. This was not only the right thing to do for Town businesses, but for all of Craig County citizens that depend on our small businesses on a daily basis. Hopefully. we can work with the County to have a more reasonable cig tax that will not shut small businesses doors. Cigarette sales are a huge part of the retail businesses in Craig County. In a convenience store they are #2 behind fuel. For us to send that business out of the county really made no sense. Again, I want to thank the NC Town Council on listening to all the information and making an informed and the right decision for Town businesses and all of Craig County citizens.”
“I believe 20 cents per pack is fair and competitive, but the 40 cents per pack was out of line in our market. The county chose to charge the maximum they could and put us out of the competitive market and took many customers out of Craig, out of our businesses,” Stephens said. “That is all we were asking for, was a fair shake, to be competitive with Roanoke (or surrounding counties). We already have enough going out of our county now. Even our bank is closing; we don’t need more.”
Stephens noted that the most competitive prices on commodities are cigarettes and gasoline.
“The town stepped up, listened to us, and helped us as a business,” Stephens said. “We weren’t asking the county for zero tax, but to lower it. The town did and we all appreciate that.”
