By JAMES FINK
jfink@bizjournals.com | 716-541-1611

Bob Colasanti can see his business going up in smoke.

He's not alone.

The co-owner of Virgil Avenue Tobacconist in North Buffalo is about to take a double hit, courtesy of New York's projected $9 billion budget deficit.

As of July 1, the tax he must collect on imported cigarettes will increase by $1.20 per pack.

To compound matters, on Aug. 1, the tax he collects on the sale of cigars and imported tobacco - the bread and butter of his sales - will rise 29 percent from 46 percent to 75 percent. For a small business such as Virgil Avenue Tobacconist, the double whammy of increased taxes on both cigars and cigarettes couldn't come at a worse time. The increase, which New York is mandating to help generate cash flow, comes against the backdrop of a weak economy where sales of discretionary items such as cigars are already off.

"You know what this is going to do?" Colasanti said. "It's going to drive all my business away and send them to a state where there are little or no tobacco taxes."

The tobacco industry sales-tax increase is the fourth one that Colasanti has had to deal with in the 16 years he and his business partner, Barry Cohen, have operated Virgil Avenue Tobacconist.

And it just so happens that one of those low-tax states happens to be Pennsylvania. In Colasanti's case, there also is competition from Native American tribes such as the Seneca Nation of Indians, which has tax-free tobacco options. New York wants Indians to collect sales tax from non-Native Americans who buy tobacco on a reservation, however.

"What do I think is going to happen?" Colasanti says. "My sales are going to drop off dramatically. People will still come here but they will buy less or cheaper cigars."

He says he is preparing for it by cutting back on advertising and other expenses.

"Going forward, it is going to be a very, very interesting year," Colasanti said.

The New York State Tobacconists Association said a standard $6 cigar will have $2.25 in new state taxes. Higher-priced cigars - those that average $20 apiece - will see $7.50 in new state taxes. A box of 25 upscale cigars could see $200 in new taxes.