Danville’s proposed 30-cent per pack cigarette tax is drawing opposition, and not just from smokers — tobacco farmers, distributors and cigarette sellers all see this new tax as a threat to their businesses.
Like all 396 Sheetz locations in six states, the Danville Sheetz convenience store/gas station follows the company line when it comes to cigarette pricing — offering the “lowest priced cigarettes/tobacco allowed by law,” according to the company website.
Jerry Wegger, the director of sales for the Pennsylvania-headquartered company, said imposing a 30-cent cigarette tax in Danville will be devastating.
“Forty-three percent of a typical convenience store’s sales is cigarettes,” Wegger said. “This will put some of them out of business.”
Wegger said the company saw how a cigarette tax can affect business at their store in Stephens City last year when the town imposed a 25-cent cigarette tax.
“It hurt us bad. Instantly, the day they did it, sales dropped 30 percent,” Wegger said. “Now, it’s at 50 percent, even in other categories. Cigarette smokers don’t stop smoking — they just go outside the city limits to buy them.”
The company prefers to locate within cities and towns, Wegger said, but the current trend of cities imposing these extra taxes puts Sheetz stores at such “a large competitive disadvantage,” the company is thinking seriously about changing where it does business.
“It was a bad mistake for us to build in cities; we should have built outside of every city,” Wegger said.
Wegger said only about 20 percent of voters are smokers, and extra cigarette taxes not only unfairly targets a small portion of the population, but is a “bad deal for us.” He also sees it as a bad deal for the city, because if store sales drop the way they did in the town of Stephens City, sales taxes paid to Danville will drop dramatically.
Patrick Shehan, owner of PAMCO Inc., in Winston-Salem, N.C., has seven tobacco stores — five in North Carolina, one in Martinsville and Tar Heel Tobacco on Mount Cross Road in Danville.
Shehan said Danville has the edge over North Carolina since North Carolina has a state tax of $4.50 on each carton of cigarettes, while Virginia has a $3 state tax. Adding another $3, Shehan said, will put Danville at a disadvantage of $1.50 per carton to North Carolina — as well as a $3 disadvantage to Pittsylvania County.
“We have a nice shop in Danville, and it draws people from North Carolina,” Shehan said. “It doesn’t make sense for the city to push people out — they will all go down the road to get cheaper cigarettes. Why give money to North Carolina and the county? They (the city) loses, and so does the state.”
Shehan said the tobacco industry has been singled out enough with extra taxes.
“They’ve already bled us to death,” Shehan said. “It will have a huge affect on our sales, and we will have to let people go.”
Darrell Jackson is tobacco farmer in Axton who now uses some of his farm to grow vegetables, flowers and bedding plants.
He is infuriated over the proposed tax increase.
A pound of tobacco already generates too many taxes, Jackson said. On that pound of tobacco, there are already federal excise taxes, state excise taxes, local excise taxes, sales tax and tobacco settlement costs that add to the cost of a pack of cigarettes.
“The public needs to know that tobacco is being taxed to death and farmers are being put of out of business,” Jackson said.
Johnson said adding yet more taxes will put more burden on people in the area that rely on tobacco and tobacco-created jobs to make their livings.
“Tobacco has always been a mainstay for Southside Virginia,” Jackson said. “You talk about stabbing the local farmers in the back. I don’t see how anybody in Danville city, especially who come from a farming background, can stand for that.”
Jackson said he shops in Danville, but will stop if the tax goes through — and he hopes other farmers will boycott the city as well.
“I love the city of Danville, but there’s a right and a wrong,” Jackson said. “I know budgets are tight everywhere. Budgets are tight on the tobacco farm. We tighten our belts and cut spending. That’s what the city of Danville has got to do. They don’t need to raise taxes a dime.”
In a recent letter to the editor, Jeff D. Smith III, executive director of the Virginia Wholesalers and Distributors Association, said in a city like Danville that borders another state and a county that will not impose an extra tax, cross-border tobacco sales will increase and in-city sales will fall.
“And, where cross-border sales occur, customers make purchases in addition to tobacco products,” Smith noted.
Smith said such taxes “unfairly burden” a single segment of the population — smokers — rather than sharing the need for additional city income among all of its citizens, and called the proposal “a bad tax policy that should be rejected.”
There are some people who will be happy to see an increase in the cost of cigarettes in Danville — stores in North Carolina and Pittsylvania County competing for consumer dollars.
“I sure can’t see it hurting me,” Ronnie Carroll, owner/operator of 86 Convenience Market, the first North Carolina convenience store motorists will find on U.S. 86 heading south a few miles from Danville.
Virginia always had the advantage with gas, alcohol and cigarette prices and lower sales tax,” Carroll said. “It may prevent some of my customers from going to Virginia if my prices are more in line.”
Tara Bozick contributed to this story.
Public forums
Danville City Council is scheduling a public forum for citizens to air their opinions on any city budget issues May 11.
On June 7, a public hearing on proposed rate and fee increases — including a cigarette tax — will be held, giving citizens one more opportunity to voice their opinions on specific issues.
Two weeks after that, a final vote on the 2012 city budget will take place.
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