Almost 60 percent of Mason Haynesworth’s revenue at Chillin Smokes on Franklin Street comes from cigarettes. He’s worried about how an impending town Marlboro cigarette tax of 10 cents per pack — which had been set to begin on Friday — will affect his business.
“I’m going to have to pocket it,” he said of the added expense. “If I go up a dollar a carton, there’s a store less than a half-mile down the road that will have a dollar to play with” in their pricing.
But Haynesworth will be able to put off the tax a little longer.
The Rocky Mount Town Council approved the new tax two weeks ago as part of its $8.5 million 2011-12 budget, but preparations to collect it aren’t finished. The town estimates it will raise $125,000 from the new tax. The cigarette tax is now scheduled to go into effect Aug. 1, but that date could change as town officials complete details, said Town Manager James Ervin.
For now, some retailers are confused about how the tax will be collected. Johnny Singleton, owner of Riverside Minute Market, said he thought the distributor who supplies him would be responsible for the tax and provide the tax stamps on the packages.
Haynesworth thought each retailer would have to buy rolls of the stamps from the town at $1,500 a roll for 1,500 stamps to account for the tax.
Both situations are possible, Ervin said. The distributors could buy the stamps, or if retailers find themselves with unstamped merchandise, they can purchase a roll of stamps. As soon as details are solidified, the town will focus on educating the retailers, Ervin said.
Singleton acknowledged how difficult the decision must have been for council members but said he thought it was unfair to tax a select group.
“Everyone needs to pay their fair share,” he said.
The tax won’t change the shopping habits of Melissa Goodman, who lives near Singleton’s store. But retailers fear people will start shopping in the county, which like all Virginia counties except for two in Northern Virginia cannot levy a cigarette tax.
“People are still going to buy them, but they will aggressively shop” for the cheapest price, Haynesworth said.
Kimberly White, with TNC Oil and Grocery just outside the town limits, expects her family’s business to benefit from the tax. A smoker herself, White said she would ride just up the road for a cheaper pack of cigarettes.
Some 30 cities, 43 towns and two counties receive revenue from the tax, according to a 2009 report by the Weldon Cooper Center for Public Service.
Town officials originally proposed a 20 cents per pack tax, but town council decided on 10 cents, with a plan to revisit the tax in six months.
“Taxing is extremely difficult,” Ervin said. “No one likes taxes, but everyone has certain service level expectations. And we want to meet them.”
Vinton began taxing cigarettes in August 2009 at a rate of 20 cents per pack and has collected $292,548 for the nearly finished fiscal year, according to Barry Thompson, the town’s finance director.
In much more populous Roanoke, city officials project revenue from the tax will hit $2.34 million, or about 2 percent below budget, according to Ann Shawver, the city’s finance director. Revenue from the tax — the region’s highest rate — has declined about 7 percent from the prior year.
Salem has collected $365,000 in revenue so far this fiscal year from its cigarette tax, though like Roanoke, that figure has been in decline in recent years, according to city spokesman Mike Stevens.
Staff writers Mason Adams and Brian Kelley contributed to this report.