NY judge blocks higher fees for tobacco dealers

Newly raised prices on cigarettes are seen in a tobacco shop in New York April 1, 2009.

NEW YORK (Reuters) - New York's fee increases for cigarette-selling shops were temporarily blocked by a state judge, a retail association said on Friday, leaving the current $100-a-year charge in effect for now.

State Supreme Court Justice Thomas Feinman issued a temporary restraining order that prevents the state charging fees that could have climbed to as high as $5,000-a-year for stores with high volumes of sales, said James Calvin, president of the New York Association of Convenience Stores.

The fee increases were designed to stop about 40 percent of the state's 24,000 licensed tobacconists from selling cigarettes in an effort to improve public health, he said.

"But that theory is all wet because most of the displaced smokers would merely shift their tobacco purchases to Indian reservations, the Internet and the black market, making things worse for small business, tax revenue and public health," Calvin said in a statement.

A spokesman for New York Governor David Paterson had no immediate comment.

The state's governors have for years failed to force Native American reservation stores to charge New York state taxes on sales of cigarettes and gasoline. The state claims it loses hundreds of millions of dollars in tax revenues as a result.

Non-reservation stores say they cannot compete with the lower prices the Native American stores can offer.