New Tax On Cigarettes?

Published 4:44 pm Thursday, May 2, 2013

FARMVILLE – Town Council is poised to light up a cigarette tax and officials aren't just blowing smoke.

A 27-cent per pack cigarette tax is expected to be formally added by Town Council to its proposed 2013-14 fiscal year budget, along with increased grave opening fees and higher water and sewer tap fees and higher prices for new graves (see page one story).

Town Council is expected to decide during its Wednesday night May monthly meeting to include the cigarette tax in its budget proposal. A public hearing on the proposed budget will be held in conjunction with Town Council's June 12 meeting.

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Farmville, which is looking for ways to generate additional revenue without raising the real estate tax, does not have a cigarette tax but many communities do.

Town Manager Gerald Spates provided council members with data, including a list of cigarette-taxing localities, during council's work session this week.

The budget committee “was surprised at how many” communities have a cigarette tax, Spates said during the work session.

Locally, the Town of Blackstone has a 20-cent per pack cigarette tax. Scottsville's cigarette tax is 10 cents per pack.

“The committee is recommending that we impose a cigarette tax of 27 cents per pack. Two cents of that would go to the wholesaler that puts the (tax) tags on,” Spates explained.

Individual retailers would not be the ones to actually place the tax tags or decals on the packs of cigarettes but any pack of cigarettes sold in Farmville would have to have those decals and the 27-cent tax would be applied to those packs.

The tax decal or tag would be sold to the wholesaler, the Town getting the tax money up front, the wholesalers applying the tax tags to the packs of cigarettes to be sold in the town.

Wholesalers are set up to place tax tags on cigarette packs, the town manager pointed out.

What kind of income might it produce?

“Ashland said they take in over $200,000 a year,” Spates pointed out, mooting the argument that people will start buying cigarettes beyond the town's corporate limits. Ashland, which has a 19-cent per pack tax, heard that argument but cigarette sales were not diminished by the tax.

“It's just like with the meals tax,” Spates pointed out. “When we put that in everybody said, 'Well, we're going to eat somewhere else' and whether they do or not I don't know but I don't think it's affected it.”

Continuing, Spates said, “the nice thing about it is you don't wait until they sell those packs of cigarettes. You get that (tax revenue) by furnishing that roll of stickers (to the wholesalers).”

Blackstone generates about $150,000 with its 10-cent tax.

Per pack tax rates are as much as 75 cents in the Town of Vienna and 65 cents in the Town of Purcellville.

Referring to the public hearing on the budget, which is expected to include the proposed cigarette tax, council member Jamie Davis pointed out the Town has to articulate a purpose.

“Every taxation should have a reason or responsibility behind it,” Davis said, adding he is certain the question will be asked during the public hearing.

The Town provides services to residents and needs pay for the provision of those services, Spates answered.

“Look at the police department,” Spates said, pointing to public safety. “When I came here we had 13 police officers. We now have 26. Your expenses have gone up.”

Spates also noted that Town employees clean up discarded cigarette butts.

Referring to the increased cost of local government, the police department, said council member David E. Whitus, probably has half a million dollars in vehicle and other equipment needs.

Council member Dr. Edward I. Gordon, on the other hand, said there are more than specific department needs and preferred to stay away from pointing to any one single need.

“I think you have to just say 'running a government, being proactive,'” he said, noting that some revenue streams may be taken away or tightened by state government in the future.

Meeting budgetary needs, Davis agreed, will answer the question of 'why' the Town is proposing a cigarette tax.

A cigarette tax would not only keep revenue-boosting pressure off those who own real estate but would also spread revenue generation beyond Town residents, just as the meals tax finds visitors to Farmville helping fill the Town treasury.

“When we did the meals tax, one of the big selling points was that this tax is primarily paid by people who come in and use our services, not from the local residents,” the town manager said. “We could have probably raised the same thing by increasing the real estate tax but you would have had to quadruple your real estate tax.”

The cigarette tax was also described as voluntary, with Spates agreeing, “Yeah, you don't have to buy them here if you don't want to.”

Discussing the budget, Spates said a cigarette tax probably wouldn't take effect until October or November to provide time to implement the new tax.

“You've got to give the wholesalers time to set up for it,” Spates noted. “And I'm sure you're going to get a lot of questions from the businesses that sell cigarettes. And we have to give them time to get whatever stock they have gone off the shelves without (the tax tags).”

Town Council's budget committee is chaired by Dr. Gordon, with members Donald L. Hunter and Whitus.