Black Market Tobacco Sales Hurt New York Businesses

Drug store giant CVS has announced it will stop selling tobacco products later this year. Industry watchers say other drug store chains may follow CVS's lead. What does that change mean for New York City's bodegas, newsstands and other small shops?

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When CVS announced it would stop selling tobacco products later this year, industry experts predicted that other drugstore chains might follow suit - which makes you wonder if this means more business for other places that sell cigarettes.

Reporter Kaomi Goetz checked in with some of the grocery stores, newsstands and other small shops in New York City.

(SOUNDBITE OF CROWD CHATTER)

KAOMI GOETZ, BYLINE: At a busy intersection in Harlem, smokers can be found puffing on one last cigarette before getting on the subway. One favorite spot is in front of a Starbucks, across the street from a CVS drugstore. That's where I found 33-year-old Keisha Walker. Even though she smokes, she agrees with CVS's decision to stop selling cigarettes by October.

KEISHA WALKER: It's a pharmacy, they promote health, so, you know, I believe that yeah, they should stop selling the cigarettes because I don't think it's cool, I don't think it's cool at all.

(SOUNDBITE OF STREET NOISE)

GOETZ: Walker says the changes won't affect her. She prefers to buy cigarettes at her own neighborhood deli up in the Bronx, where she says she can get a better deal.

Further downtown in Manhattan, cigarettes typically sell for $14 or more a pack. Mony Rahul works at the Rayan Convenience Store on 14th Street. It's right across from a CVS. He's hoping to sell more cigarettes after the drug store competition goes away.

MONY RAHUL: They make a good decision. We small business owner, maybe it's helpful.

GOETZ: But Rahul knows that even after is CVS out of the business, his cigarette profits won't exactly surge. That's because New York taxes keep prices so high that he sells only about a dozen packs a day. And anyway, the profits are slim - about a buck a pack.

Maybe worst of all, selling cigarettes can be risky. Rahul says stores are subject to aggressive policing and regulatory visits. One mistaken sale to an underage customer could result in huge fines.

Still, owners of small shops, newsstands and gas stations, most will stick with tobacco because it helps bring in customers.

RAHUL: Some people will come here for like cigarette and soda like this. If we don't have cigarettes, they don't buy any item.

GOETZ: But some industry watchers say New York's small businesses may not see much, if any, gain from a CVS with drawl from the market.

Jim Calvin is president of the New York Association of Convenience Stores. He represents the state's 8,000 convenience stores. He says a lot of smokers have figured out ways around the high costs of buying legal cigarettes from regular stores.

JIM CALVIN: There is a thriving black market across New York State that consists of thousands of small-scale dealers who obtained cigarettes from other states, from Indian reservations, from other sources illegally and sell them in their local community.

GOETZ: RTI International, a non-profit health care think tank, recently found that just under half of all cigarettes consumed in New York were bought on the black market.

Calvin says shipments from lower-tax states like Pennsylvania and Virginia come in undetected. He says smokers can also buy untaxed cigarettes from about 300 stores on American Indian reservations.

Calvin says untaxed tobacco is supposed to be limited to within the tribe. But in practice, selling to non-Indians is so pervasive, the government can't enforce it.

CALVIN: All of this is illegal. All of this hurts licensed tax-collecting retailers like ours and it costs the city and the state a lot of tax revenue.

GOETZ: Two tribes in New York, the Shinnecock Indian Nation on Long Island and the Oneida Nation upstate, did not reply to a request for comment.

(SOUNDBITE OF CAR HONKING, STREET NOISES)

GOETZ: Back at the busy corner of 125th Street and Lenox in Harlem, I found people illegally selling cigarettes on the street. They refused to talk. But I saw several transactions that weren't exactly hidden from view.

Bronx smoker Keisha Walker and her friend knew about the seller as that guy who stands by McDonald's. But they say you won't catch them buying from him.

WALKER: No. They're fake. Don't buy them.

(LAUGHTER)

GOETZ: There were no cops to be seen. And other smokers standing nearby refused to say where they bought their cigarettes, one saying because the answer was obvious.

For NPR News, I'm Kaomi Goetz.

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