Amid rising taxes and calls for a crackdown on loose cigarette sales, vendors are finding craftier ways to keep their customers supplied and boost revenue in a time when business is tough.
Tax-free "loosies" have been a bodega staple for decades in New York City. Although their sale is illegal and store owners risk fines up to $4,000 and the loss of their tobacco license, they stand to make huge profits whenever tobacco taxes are increased. As the cost of cigarettes rises, enterprising bodega men have found ways around the law.
The price of a pack of cigarettes was around $8 in 2008, when the state added a $1.25 tax. On July 1 this year, another $1.65 hike went into effect. Combined with city tax, a pack now costs over $13 in Bushwick.
The hikes are a profit bonanza, bodega owners told BushwickBK. Two years ago, 50 cents could buy a loosie; the price is now 75 cents. Smokers have even reported that some stores are charging $1 per cigarette in parts of Bushwick and Ridgewood.
Julio, who opened his second bodega in Bushwick three months ago, said he prefers only to sell loosies to people who shop at his store on a regular basis.
"If I don’t know you then you could be a cop," he said. Julio claims he never sells to minors: "that’s what brings the cops to the store, which is no good for business". Julio said he sells at least two packs-worth of loosies on a good day, and makes more money per pack selling the cigarettes separately. Newport is usually the only brand being sold as loosies.
A majority of Julio’s cigarettes come from Pennsylvania, where he drives twice a month to stock up. There the cost per carton is about $50 compared to the $90 he would pay in New York. "Its much easier to sell them as loosies because the packs don’t have the apple [New York's cigarette tax stamp] on them," said the shopkeeper. When asked if the Pennsylvania vendors seem suspicious, Julio firmly replied that he pays in cash and they never ask questions.
Pennsylvania is not the only location where creative bodega owners are purchasing their deeply discounted cigarettes. After the most recent tax increase, stores in Connecticut, New Jersey, Vermont, and Massachusetts reported an uptick in sales.
Indian reservations, which do not have to pay taxes, have also become a hotspot. The Poospatuck reservation on Long Island garnered media attention when investigators from New York City were able to purchase large quantities of cigarettes after telling store clerks that the tobacco was for resale in Brooklyn. According to the New York Post, the investigators were able to purchase 60 cartons of Newports, which the city sees as a $3,500 revenue loss. Upstate, Indian reservations are fighting a bitter war in the courts against a tax-grab by Albany.
But local bodega men say the South remains the king of cheap tobacco. With the average retail price of a carton of Newports at $35 to $40 in Virginia, bodega owners in New York have an incentive to purchase in bulk for an even deeper wholesale discount.
Keith was one New Yorker who saw an opportunity to make fast money from cheap cigarettes. Keith attended a local college when he took a trip to Norfolk, Virginia, to visit family. Returning to New York, he stopped at a Norfolk mini-mall and purchased three cartons of cigarettes for personal use.
"I smoke when I drink or when I am stressed but I quickly realized that if I didn’t smoke all three cartons soon they would go stale." Keith took the extra unopened packs to a Brooklyn bodega to see if he could sell them to try and recoup some of his money. To his surprise, the owner quickly bought everything he had. "He asked me if I could get more — so I told him yes, without really knowing how I could actually get more," he said.
Virginia is a seven-hour drive, so Keith began having a family member ship two cartons via USPS to friends’ and relatives’ homes throughout Queens and Brooklyn. "I would ship only two cartons per box because I figured if the post office opened the box and saw only two cartons they would think it was only for personal use and not for resale," he said.
Keith had about a dozen locations where he could have the cigarettes delivered on a weekly basis. "If I game planned correctly I could have anywhere between 25 to 30 cartons per week shipped from Virginia. It was all profit — I would pick up the cartons, store them at my house and then sell them all in one shot at this one bodega where they know my pops."
The tobacco entrepreneur negotiated a deal with bodega owners for a percentage of the loosie sales. "If you bust down the carton into all loosies you can make about $150 per carton. I wasn’t greedy, so all I wanted was at least 40% of the profits, which comes out to roughly $60 a carton. Not bad for a few hours work."
Keith stopped his illegal cigarette trafficking ring when his parents got suspicious. "I still lived at home and you know Puerto Rican moms, they act like they are cleaning your room but they are really searching it… So I had to stop. I couldn’t afford to move out and I made enough that I could step away with a little bit of change in my pocket." He claimed he didn’t know he was violating state and federal laws at the time.
Keith sees no problem selling loosies. "I wasn’t selling drugs or killing anyone. I never hurt anyone by selling them something they can get already at any store."
Brian Calderon, who calls himself an "occasional smoker," agrees with Keith. "If you are selling packs, why not sell loosies? I just want to smoke one cigarette and not walk around with twenty," said the Bushwick native. Calderon has been smoking for about two years, and said he has seen bodega owners selling loosies to minors on a few occasions.
The sale of cigarettes to minors angers members of Bushwick’s Community Board 4. District Manager Nadine Whitted told BushwickBK that CB4 became proactive about loosies after Mayor Michael Bloomberg’s proposal to ban smoking in public spaces.
"Board members are concerned with the sale of cigarettes to minors. We have to think about the adolescents," said Whitted who believes loosies make it easier for minors to smoke.
CB4 has asked the city’s Dept. of Consumer Affairs, which licenses cigarette retailers and enforces city and state laws, to provide them with data showing which bodegas in Bushwick have repeatedly been fined for the sale of cigarettes to minors, and to begin targeting those stores. "Once we start looking at the numbers we will talk with our legislators about raising the fines and enforcing a ban on loosies," said Whitted, who admitted she quit smoking six years ago.
Bodega owner Julio, who admits he has been fined for selling cigars to minors, is not surprised at the move against loosies, but he is not worried they will completely wipe them out. "The economy is very bad and I heard Bloomberg might raise the [tax] on cigarettes again," he said.
"$14 is a lot of money for a pack, and people will probably buy more loosies if they raise it to that price."