Sanderson said he's "very, very unhappy," about the move.
"I'm extremely disappointed," he said.
"We've got a bit of money set aside, but it'll eventually mean we will have to close Paihia station because we won't have the money to keep going. And if our paramedics need extra equipment, we can't buy it."
St John volunteers hold about 20 sausage sizzles a year outside the ASB Bank on Williams Rd on days when large cruise ships dock at Waitangi wharf.
Seller of quality cooked sausages Robert Cross said he loses money every time there is a sausage sizzle.
Cross said he emailed council questioning why St John was allowed to hold them when the district plan says mobile food operators can only operate twice a year on public land.
"When the sausage sizzle is in town I close up," he said.
"I've got rent to pay and I rely on tourist days. My staff lose income and I lose income.
"The reality is the cruise ships spend no money here in town. They spend very little. Some businesses do okay out of them, but they [passengers] come ashore and just want to get through the day and get back to the buffet. If they can get away with a $2 sausage it gets them back to the buffet on the boat."
Cross said he had tried to speak with St John volunteers about moving to alternative spots like Waitangi and offered to pay them 10 per cent of his take on cruise ship days.
He said "everyone who serves food" in the town is affected by them.
"We want them to talk to the food business community so we can come up with a solution," he said.
"I've asked them to look at alternatives to what they're doing which is fundamentally illegal."
Another Paihia food business said while St John was "extremely important", the sausage sizzle competed with local food businesses and he would rather give a donation.
Business Paihia chairwoman Robyn Stent said she understands the issue of people struggling to make a living.
But the St John fundraisers added to the community atmosphere, she said.
"There are always issues with businesses who have invested a lot of money to be able to make money. When there are a lot of people in town and something comes in as a one-off that can upset that potential income ... it's competing for the tourist dollar.
"But it's quite sad because they're fundraising. They're only $2 and they get a lot of support from locals. It's good for our community."
Vinnies Fish & Chips Takeaways, which sells deep fried sausages for $3, also supports the fundraising method.
"They're fundraising for different people around Paihia and for themselves," manager Nellie Waiomio said.
"I don't see any issue with it. I've spoken to quite a few people and they're pretty gutted with what's going on."
St John volunteers have been holding sausage sizzles in Paihia every year since 2000, Sanderson said.
They have raised more than $40,000 for 34 AEDs which are located at spots around the Bay of Islands and give $8000 each year to Paihia School.
"We only get funded 70 percent by the Government, the area committee has to raise the other 30 per cent," Sanderson said.
"Ninety per cent of the money comes from sausage sizzles."
St John is currently looking for alternative premises for its next sausage sizzle on December 28.
Council was approached for comment yesterday morning but had failed to respond by deadline.
