The call for stricter punishment by Lacors chairman Paul Bettison follows the publication of a year-long study by the trading standards body, which found that of the 72 fines handed down to retailers in the past 12 months, 33% were for sums of less than £100, and 79% were for less than £350.
"Councils are doing everything in their power to protect young people from the dangers of smoking, but retailers caught selling to minors are effectively being slapped on the wrist with minuscule fines," Bettison said.
"A fine of less than £100 is hardly enough to make a shopkeeper think twice about selling to children. It is time for magistrates to hit those retailers that have a blatant disregard of the law and children's health with higher fines that act as a deterrent," he added.
His calls have infuriated retailers who already operate under a new "three strikes" policy which could see them fined up to £5,000 and banned from selling tobacco for a year.
Independent retailer John Abbott from Darlington said the call for tougher penalties was a slap in the face to all responsible retailers. "We are doing all we can to prevent underage sales, but the odds are against us," he said.
Ken Patel, retailer and national spokesman for the Tobacco Retailers Alliance, added that retailers should be applauded for the successes that they were having in reducing tobacco sales to minors, not penalised further.
The Lacors survey also claimed that one-fifth of retailers in England "willingly" sold cigarettes to under-18 a figure which has been rubbished by the Association of Convenience Stores (ACS).
ACS chief executive James Lowman said: "The figures show that of the premises suspected of selling tobacco to those underage, about one in five were proved to be breaking the law, rather than one in five of all retailers. We believe that this is an important distinction to make."