Don Russell, owner of Dr. Doolittle’s Pets and More on Newport Avenue in East Providence, checks on one of his Australian conures at his closed store. The state Division of Taxation shut down his shop because of nonpayment of sales taxes.

The Providence Journal Glenn Osmundson

EAST PROVIDENCE — At the entrance to Dr. Doolittle’s Pets & More, near the advertisements for “Baby parakeets. All colors. Lowest prices.” and “Free hamster with any cage over $30.00,” owner Don Russell has put up a new sign.

It is written by hand in black marker on a poster-size sheet of yellow paper taped to the front window.

“At this time we have no money and we are not allowed to open to raise the money. STUPID, STUPID, STUPID.”

Dr. Doolittle’s is one of the 1,092 businesses the state recently ordered to close on the spot for falling behind in their sales-tax payments. About half the businesses who got the cease-and-desist notices in late July paid off their debt to the state and are open. The other 500 are in various stages of resolving their problems, according to figures the state released Friday.

The state does not know how many of these 500 businesses, such as Dr. Doolittle’s, remain closed, said Amy Kempe, spokeswoman for Governor Carcieri.

Russell stopped paying sales taxes he collected on behalf of the state six months ago.

“I used that money to stay in business,” he said.

Now, he owes $23,000 in back taxes and $6,000 in penalties. On July 29, an East Providence police officer delivered a letter to the shop from the Rhode Island Division of Taxation. “You are conducting business without a permit and must cease immediately,” it told him.

So Russell locked the shop entrance and spends his days on the phone, calling East Providence City Hall, state politicians, bureaucrats, anyone who will listen. He hears the same answer again and again — “We’ll get back to you.”

He still goes to the store every day. So do some of his two full-time and five part-time employees. The 13 puppies — Shih Tzus, cockapoos and other small breeds — need to be fed and given water. The ferret needs to get out of its cage. The birds crave attention.

Russell faces a dilemma. He wants to pay his taxes, but the only way he can do that — reopening the shop — is forbidden, unless he pays the taxes.

In all, the state went after 1,200 businesses who owed money to the state. Of those, 1,092 involved sales-tax issues.

The state has agreed to extensions or payment plans for many of the 500 businesses that are still trying to resolve their problems, according to Kempe. For others, the state is looking into possible discrepancies in the records.

“As you can see from the numbers, the Division of Taxation is very willing and capable of working with individual taxpayers to come up with a remediation plan,” Kempe said Friday.

Russell doesn’t think the state is being flexible in his case.

He went to the Division of Taxation in Providence on July 30 to deliver a check for $4,500 — all the money he had on hand. He asked if he could keep the pet shop on Newport Avenue open long enough to liquidate by selling off the animals. The tax representative said no.

The next day, he returned to file tax forms that were overdue. A representative told him that if he paid another $10,000, he would be allowed to reopen. He said he didn’t have the money. He asked what would happen if he defied the order and was told he could be fined and imprisoned. He left the office in tears, escorted out by a supervisor.

“If you’ve got a state government that is not willing to work with small businesses, how will they get their money?” he said. “If I don’t reopen, they will not get a dime.”

RUSSELL OPENED Dr. Doolittle’s in 1997 after working 35 years for Woolworth’s, the now-defunct department store chain. He started out at Woolworth’s as a 17-year-old stock boy and worked his way up to store manager, in Providence and elsewhere in the Northeast. When new management took over and fired Russell and other veteran employees to cut costs, he spent a year interviewing for other jobs before deciding to start his own business.

A pet store made sense. Russell loves animals. When his two daughters were young, they called him Dr. Doolittle because he took in so many strays. And he thought the pet business would be lucrative.

For a time, it was. In 2004, sales peaked at $900,000 and Russell made a $69,000 profit. But all that money was used to expand the store’s inventory and to pay off loans from the East Providence Economic Development Commission and the U.S. Small Business Administration. By 2006, the store profit dropped to $24,000, and he used it to pay off some back federal taxes.

In 2007, as the economy started to buckle, Russell was in the red for the first time. The next year, his losses hit $80,000. He expects to lose even more this year.

Russell cut costs. He started doing the store’s books himself instead of using an accountant. He renegotiated insurance payments and stopped advertising, which was costing $28,000 a year. The landlord agreed to slash the rent on the store’s 7,600-square-foot space by nearly 50 percent.

But the bills kept coming: $2,000 a month for electricity, $5,000 a month in rent, $700 in insurance. Then there were unexpected expenses: $2,000 to replace a computer that crashed, $2,500 in veterinary bills after several puppies got sick. And disasters: he lost 600 fish after his electricity was shut off for failing to pay a bill.

“That’s small business,” Russell said. “You work day to day, week to week.”

He stopped paying the state the money he collected in sales taxes, figuring that he would make restitution when business picked up. But it didn’t.

ON THURSDAY afternoon, a week after he closed the business, Russell estimated he had already lost at least $12,000 in sales.

A supplier came by to offer his support. At least a dozen customers visited over a two-hour span, only to see the handwritten sign at the door. Some would look in through the window at the darkened store. Others simply walked away.

Russell checked on the puppies pawing at their glass display cases.

“The problem is they need to get out,” he said. “They need to be with people.”

Before closing, he cut prices for them by 40 percent and was selling up to two a day. He bought them from breeders in Kansas and will pay to return them if he can’t reopen.

Russell stroked the ferret’s chest and let it nibble on his finger. He let two conures, colorful birds from Australia, perch on his arm and whispered to them. “Hi, baby,” he said. “Yes, you’re a good bird.” He will give the birds away if the store goes out of business.

Periodically, the phone rang inside the shop.

“Dr. Doo’s, how may I help you?” Russell would say after picking up.

Then, in answer to an inquiry about a pet or piece of equipment, he would have to tell the caller that no, he actually couldn’t help. The store was closed. He didn’t know when it would open again.

Mary Hiler, a part-time worker, stopped in to clean cages and feed the animals. She started working for Russell a year ago, after moving to Rhode Island from New Jersey. She came north after the arcade where she worked near Atlantic City closed down.

“Everybody keeps closing these mom-and-pop stores,” she said. “There are no more jobs out there.”

Hiler is worried that she will be forced to apply for unemployment benefits. That’s one of the Catch-22’s in the state’s crackdown on delinquent business owners. In this case alone, it could put eight more people out of work in a state that has the second-highest unemployment rate in the country.

LAST MONTH, Russell applied for a new loan from the Small Business Administration, this one through a program called America’s Recovery Capital, designed to provide short-term relief to businesses in trouble during the recession. He was denied because his business was deemed too much of a credit risk.

Russell has few assets. He is 65, divorced, and rents an apartment in a Victorian carriage house in Central Falls. He has two antique autos — a 1973 Pontiac Grand Am and a 1948 Willys delivery van — and the 1998 Chrysler Intrepid he uses everyday.

He knows of companies that will let him borrow money against his store’s future earnings. Some are fly-by-night operations that charge as much as 30-percent interest. He borrowed $20,000 from one of them last December and ended up paying $7,600 in interest and another $1,100 in broker’s fees.

But he can’t see any other choice. He says he will borrow $10,000 to pay the Division of Taxation and $10,000 more to cover his bills. Russell is adamant that he will reopen and stay in business for as long as he can.

“Until the next disaster,” he said.

With reports from staff writer Cynthia Needham.

akuffner@projo.com