Tobacco fee may hit merchants: blocking sales to minors would be program goal.

The Los Angeles City Council is considering imposing a fee of up to several hundred dollars on the 7.000-plus outlets selling cigarettes and other tobacco products--money that would be used to beef up enforcement of laws barring the sale of tobacco to minors.

The proposal is in its preliminary stages: so far, no dollar amount has been set. Its three sponsors, Council President Alex Padilla and Councilmembers Wendy Greuel and Jack Weiss, asked city staff workers to craft a sliding scale of fees, with small businesses paying the least.

A final ordinance could come back before the council before the August recess and could become law as early as next Jan. 1.

If it were to pass, Los Angeles would join a growing list of communities--including Pasadena, San Francisco, Berkeley and Sacramento--that have passed license lees in recent months. The annual fees generally range from $100 to $300 per establishment. They come on top of a statewide law that look effect earlier this month that requires every seller of tobacco products in the state to pay $100 to obtain a license.

Depending on how it's structured, a tobacco license fee in Los Angeles could be expected to generate between $1 million and $2 million a year.

While critics say these license fees are a money grab by a revenue-hungry local government. Padilla said the fee is primarily to boost enforcement efforts.

"Illegal sales of tobacco products to minors are an urgent health and public safety issue that demands aggressive enforcement," Padilla said.

Health organizations have long pushed for the fees as a way to boost enforcement efforts aimed at keeping cigarettes and other tobacco products out of the hands of minors. Several studies over the last 40 years have shown that once minors start smoking, they often smoke through most of their adult years and are more prone to smoking-related diseases.

"Retailers of all stripes sell tobacco to kids, from supermarkets to the corner convenience store," said Paul Knepprath, lobbyist for the American Lung Association of California. "License fees fund enforcement programs that hold retailers accountable."

The ALA is among the health organizations that have taken a model ordinance to local jurisdictions in order to get as many of them as possible to enact such fees.

Retailer opposition

But grocers and retailers are growing increasingly alarmed, viewing this trend as a tax grab by state and local governments. They also say it will create confusion among storeowners and ultimately push many tobacco sales underground.

"This is just to tax us to get more revenues," said David Mallel, an owner of several Los Angeles area newsstands that sell tobacco products. "If this license fee passes, I will have to pass on the higher cost to my customers."

One of the stated aims of the proposal is to reduce the number of outlets selling tobacco products. "Establishment of a tobacco permit fee may serve as a disincentive for non-traditional venues such as doughnut, ice cream and candy stores, discount gift stores and beauty salons to sell tobacco products," the proposed ordinance states.

Mallel said he would not drop the sale of tobacco products, but speculated that many of his regular customers would probably go to communities such as Inglewood of Culver City where there is no local retailer fee, or seek out black-market vendors.

Though restriction of the sale of tobacco products is one of the goals of the L.A. ordinance, it has not generated opposition from the tobacco industry. A spokeswoman for Philip Morris USA, the nation's largest cigarette manufacturer, said the company actually supports licensing and even license fees for sellers of its products.

"It's an effective tool on a number of issues, including preventing the sale of tobacco to minors and cracking down on the sale of counterfeit tobacco products," said spokeswoman Jamie Drogin, who noted that Philip Morris supported the statewide licensing law.

But retailers argue that tobacco-licensing ordinances push many small retailers into the black market and leave legitimate sellers stuck with the fees.

"These fees are generally levied against the good actors while the bad actors get away," said Paul Smith, lobbyist for the California Grocers Association. "What should happen is that penalties against violators should fund the enforcement efforts. But that of course wouldn't generate enough revenue to help balance local government budgets, which is the real reason why you're seeing the spread of these licensing fees."

Padilla said the money raised by the fee would go exclusively to beef up enforcement efforts, not to the city's general fund.

Currently, the L.A. City Attorney's office has 11 attorneys in two divisions that can be pulled in to prosecute tobacco sales cases.

City attorney spokesman Eric Moses said the office contracts with the state Department of Health Services for investigators. Last year, the DHS conducted 760 compliance checks within L.A. city limits; typically sending in two undercover agents and one teen-age decoy.

Citing a survey taken earlier this year showing that 40 percent of all tobacco sales in the city were to minors, City Attorney Rocky Delgadillo in May set up a toll-free hotline to register complaints about sales of tobacco products to minors.

But retailers are also concerned about confusion they say would result if Los Angeles were to enact a license fee.

Before California's license program took effect on July 1, the state Board of Equalization initially estimated that about 80,000 establishments in the state sell tobacco products. By the end of June, only 34,000 licenses had been issued, causing a scramble among the remaining retailers to get licenses before enforcement officers showed up at their doors.

Just before the July 1 deadline, the Legislature granted a three-month extension, allowing retailers to get temporary licenses while their applications are processed.

Retail groups also complain that the Los Angeles ordinance would pose problems for retailers with outlets in several jurisdictions.

"What we've got here is a classic case of double taxation as both the state and local governments slap fees on these licenses to sell tobacco products," said Bruce Young, spokesman for the California Retailers Association.

Pasadena's $135 license fee affects an estimated 200 establishments selling, tobacco products. While notices of the fee are only now being mailed out to the businesses, so far, there have been few complaints, according to Statice Wilmore, tobacco control program coordinator for Pasadena. She noted that only one business protested the fee at a recent public hearing.