Tobacco Retail Licensing Fees

Long Island Gasoline Retailers Ass’n v. Paterson, 897 N.Y.S.2d 850 (N.Y. Sup. Ct. 2010) (Nassau County)

Plaintiffs, a group of retail trade associations collectively representing more than 10,000 New York state tobacco retailers, sought an injunction against the implementation of a new law establishing higher licensing fees for tobacco retailers.  Prior to the new law, retailers of tobacco products were subject to a flat rate annual licensing fee of $100.00.  New fees are calculated annually on a sliding scale based on the total sales volume of both tobacco and non-tobacco products.  The minimum fee is one thousand dollars for retailers with aggregate sales under one million dollars, and the maximum fee is five thousand dollars if sales are at least ten million dollars.

The trade groups claimed the higher fees would force up to 40% of tobacco retailers out of business with a corresponding loss of thousands of jobs, and that the sliding fee scale is a discriminatory and therefore unconstitutional tax under Equal Protection and Due Process Clauses of the Fourteenth Amendment.

Defendants argued in their motion to dismiss that the plaintiffs lacked standing to sue, that the legislature did not intend to discriminate among tobacco retailers, and there is no adequate showing for injunctive relief.

To maintain standing to pursue a claim, “[A]n organization plaintiff must demonstrate harmful effects on at least one of its members. . .”  Rudder v. Pataki, 711 N.E.2d 978, 980 (N.Y. 1999), citing Society of Plastics Industry, Inc. v. County of Suffolk, 573 N.E.2d 1034, 1042 (N.Y. 1991).   The court observed that the plaintiff group was unable to show that any one retailer in their constituency had closed or would be forced to close their business due to the higher fee.  Plaintiffs offered no disclosure of a single retailer’s financial statements showing how the higher fee would force them out of business.

In dismissing the claim for lack of standing, the court determined that potential injuries claimed by the plaintiffs were speculative since no harmful effect on at least one of its members was demonstrated.  “Without an allegation of injury-in-fact, plaintiffs’ assertions are little more than an attempt to legislate through the courts.” Id. at 981. Since the threshold issue resulted in dismissal of the action without prejudice, the court did not address the plaintiffs’ constitutional issues.

The plaintiffs appealed the dismissal of the case, and the Appellate Division of the Supreme Court granted Plaintiffs’ motion for a temporary injunction allowing retailers to renew their licenses for $100 pending outcome of an appeal.

On April 19, 2011, the Appellate Division dismissed the appeal as a result of new legislation enacted by the of the New York State Legislature amending the retail license fee to a flat rate of $300 per year.