Regulation & Legislation

New NYC Bill Bans Discounts, Creates Price Floor for Cigarettes, Little Cigars

Proposal would also raise penalties for retailers who evade taxes, sell without license

NEW YORK -- New York City Mayor Michael Bloomberg has announced the "Sensible Tobacco Enforcement" bill, comprised of policies that will combat illegal cigarette smuggling, which--along with increased penalties for retailers who evade tobacco taxes or sell tobacco without a license--also prohibits the sale of discounted tobacco products, creates a price floor for cigarette packs and little cigars and imposes packaging requirements on cheap cigars.

As reported in a Raymond James/CSP Daily News Flash on Monday, Bloomberg announced the bill as the companion legislation to the "Tobacco Product Display Restriction" bill, which would make New York City the first city in the nation to keep tobacco products out of sight in retail stores (see related coverage).

Both bills will be introduced at the request of the mayor by Council Member Maria del Carmen Arroyo, chair of the Health Committee, on Wednesday.

The Sensible Tobacco Enforcement bill addresses the widespread availability of discounted and smuggled cigarettes. It strengthens enforcement and would help honest retailers compete, Bloomberg said. It prohibits retailers from redeeming coupons or honoring other price discounts for tobacco products; creates a minimum price for cigarettes and little cigars, at $10.50 per pack; requires that cheap cigars and cigarillos be sold in packages of at least four, and little cigars be sold in packages of at least 20.

Cigars that cost more than $3 each are exempt from the packaging rule.

It also gives the Department of Finance the authority to seal premises of tobacco sellers that have had repeated violations of the law--two violations for unlicensed activity within a two-year period or three other tobacco violations within a three-year period.

Giving the Department of Finance the authority to seal premises of tobacco sellers that have had repeated violations of the law. Illegal trafficking of cigarettes has a particularly strong impact on New York City, where cigarettes are the most expensive in the country due to federal, state and local taxes. Illegal tobacco sales are estimated to cost federal and state governments $5 billion annually and an estimated $250 to $600 million is lost annually in unpaid taxes from cigarette trafficking in New York City. This activity also hurts businesses that follow the law by allowing unfair, illegal competition, said the mayor.

"Forty-six percent of more than 1,900 inspected cigarette retailers were found to be selling unstamped or untaxed product over the past 18 months by the Office of the Sheriff--a staggering number that puts law-abiding businesses at an incredible disadvantage," said finance commissioner David Frankel. "The penalties on the books simply are not enough to ensure that cheap tobacco does not addict our city's youth, which is why we strongly encourage the Council to enact legislation that would increase the financial penalties and give the Department of Finance the authority to shutter premises of repeat violators."

"New York City now has fewer cigarette retailers than ever before and, after more than 133,000 undercover DCA Youth Tobacco inspections since 2002, we're happy to report compliance regarding illegal sales to minors has risen from 52% when the program began in 1998 to 91%," said consumer affairs commissioner Jonathan Mintz. "But even with this progress, our collective efforts must continue."

"We need to initiate policies that highlight good public health, particularly among youth. One way is to do away with industry-promoted discounts on cigarettes, and target illegal sales that evade taxes. This would create a fairer marketplace, and help honest retailers compete on a level playing field," said council member Gale Brewer.

"Ensuring high prices and regulating the marketing of tobacco products are proven ways to encourage adult users to quit tobacco use and to keep kids from ever starting the deadly habit," said Michele Bonan of the American Cancer Society Cancer Action Network.

"The proposals to set minimum price standards, prevent the use of coupons and other discounts, increase enforcement and penalties for tax evasion and restrict the display of tobacco products will all work together to reduce the burden of tobacco on our city in a major way," said Michael Seilback of the American Lung Association of the Northeast.

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