Higher tax threatens Utah tobacco shops

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SALT LAKE CITY -- A local business owner is feeling the impact of the recent tobacco tax bill even before it goes into law.

"Last year when the tax tried to pass, I felt very angry and ended up having a cardiac arrest," said Gary Klc, owner of Jeanie's Smoke Shop in downtown Salt Lake City at 156 S. State St..

This year, the tax did pass. And a small business owner is trying to control his anger as he makes plans to shut down for good.

Jeanie's Smoke Shop is a victim of changing attitudes about its stock-in-trade: tobacco. The axe is falling in the form of a huge "tax-due" bill from the Legislature.

The lawmaker who sponsored the tax bill says he didn't even realize it would impact a retailer. Now that it has, he has no regrets.

But the mother and son who've run Jeanie's Smoke Shop for 60 years have plenty of regrets.

At 69.5 cents, Utah's current tobacco tax ranks 34th in the U.S. With an increase to $1.70, Utah will have the 18th highest tax in the nation.

Jeanie's is a shop that prides itself on offering customers a big selection of fine tobaccos and expensive cigars. But that big inventory is now a millstone that will likely sink the place. A new law jumps the tobacco inventory tax from 35 percent to 86 percent.

"Which would equate to about $120,000, $125,000," Klc said. It's a price he can't afford.

So Klc plans to say goodbye at the end of June to four employees and countless customers. He will shut down the store his father bought in 1949, and which his mother Genie ran when he was a little boy.

"It's like I'm losing my best friend," Klc said. "I kind of grew up here."

Sen. Allen Christensen, R-North Ogden, was the chief Senate sponsor of the tobacco tax bill. "I have sympathy for anybody who has a business anyplace who is impacted by government," he said. "But I'm sorry, I don't have as much sympathy for someone in the tobacco business."

Christensen says he didn't realize the inventory tax would affect retailers. "I was under the impression that it was going to be paid at the wholesale level," he said.

But Charlie Roberts of the Utah Tax Commission says retailers are clearly covered by the law. "It's inherent in the law, it's clear. The Legislature discussed in detail the inventory tax as part of this bill."

Christensen says lawmakers often hand off the idea for a bill to legislative researchers.

"It was a simply a matter of I hadn't read the bill just recently and understood it," Christensen said.

Klc said, "Senator Christian is kind of a puppet for the health department, and he doesn't know what he's doing."

"I can think of a lot worse things to be a puppet for than the health department of the state," Christensen said in response. "They are charged with watching out for the health and welfare of this state."

The new tax law isn't actually final yet. Gov. Gary Herbert hasn't signed it. His spokeswoman told KSL Thursday, "He does not believe he will veto it."

It's expected to take effect in July, with or without the governor's signature.

E-mail: hollenhorst@ksl.com

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