Recent statistics show more cigarettes are smuggled into New York than any other state. Local tobacco merchants say it’s no coincidence, because the state’s markup on cigarettes has gone up about 200 percent since 2006.
Smuggled cigarettes account for 57 percent of cigarettes sold in New York, the highest in the nation. For New York smokers, it may not be that surprising because the state currently has the highest tax at $4.35 per pack of 20 cigarettes. New York City currently charges $1.50 on top of the $4.35.
New York Governor Andrew Cuomo announced last March that he has established a “Cigarette Strike Force” composed of state, local and federal agencies that are determined to stop the incoming traffic of illegal contraband and untaxed tobacco.
Cary Ziter of the New York State Department of Taxation and Finance says that tax evasion for tobacco products isn’t a new issue at all, although the reason for the strike force is to “turn up the heat” against the people and organizations bringing in contraband.
The smuggling rates are concerning to many federal bureaus and agencies on the task force, though the state and local agencies are especially eager to resolve the issue.
“The Tax Department wants to do a better job – is doing a better job of coordinating with different counties throughout the state like Richmond County and New York County,” said Ziter. “Those district attorney offices are very interested in cigarette enforcement and they’re a vital part of this effort.”
The repercussions for smuggling tobacco from out of state and selling without the implemented tax regulation vary depending on the court ruling, but recently several cases have resulted in jail time, Ziter says.
“The penalties can be very severe because you’re looking at criminal action and you’re looking at sales tax fraud, tax fraud or use tax fraud,” said Ziter. “It really depends on the number of cartons that the people bring in.”
While Governor Cuomo attempts to clamp down on untaxed tobacco, local convenience store owners and tobacconists believe that the issue could have been avoided if the taxes hadn’t risen to the highest in the nation.
According to Jim Calvin, President of The New York Association of Convenience Stores, in three or four steps the state legislature and various governors increased the state excise tax from 56 cents a pack to its current $4.35 mark. Each time these dramatic increases were proposed, NYACS and other members in the industry warned that tax evasion on tobacco would rise as well. Calvin says the proof of this is in the thriving black market for tobacco that has become a lucrative business.
“Having the highest excise tax in the country would be a very effective step to deter smoking if the smoking population was a captive audience, but they’re not,” said Calvin. “There are many other places that smokers can and do turn to find cigarettes without having to pay the exorbitant tax-included price.”
Tobacconists are also feeling the pinch. Pamela Kuczenski is part-owner of Eldeez Tobacco in Stuyvesant Plaza in Albany, which deals primarily with pipe tobacco and cigars. She says although the cigar tax and loose tobacco tax are different from the cigarette tax, similar patterns of tax evasion have been occurring in her trade.
“You pay more tax-wise than you do for the actual product and if you go to Pennsylvania, you don’t pay any tax on them,” said Kuczenski. “I can’t blame people for doing it.”
According to Taxfoundation.org, New York’s neighboring states all have significantly lower taxes on cigarette packs. Connecticut is relatively close at $3.40 per pack. New Hampshire has a tax mark of just $1.78, leading to the highest net outflow of smuggled cigarettes in the nation. New Jersey is $2.70 per pack, Vermont is $2.62 per pack and Massachusetts is $2.51 per pack.
Douglas Boettner, a Cigar Rights of America Ambassador, says he has been smoking cigars for 15 years and works with his lobbying organization to bring the cigar tax down from the current 75 percent of the wholesale price of a single cigar. To keep cigar purchasers visiting their local stores, instead of resorting to outside consumption, Boettner believes that current tax percentage needs to disappear completely.
“As a U.S. citizen, I have a right for life, liberty and the pursuit of happiness and I’m happy when I smoke cigars, I want to be able to smoke cigars,” said boettner. “I don’t want to have to pay a 75 percent tax and that’s a usurious tax.”
Boettner is a registered lobbyist in New York and blogs at dboettner.wordpress.com.
Kuczenski believes tax evasion for personal use is understandable. Even her loyal customers travel outside of state limits to purchase a carton of cigarettes or a box of cigars. However, the issue lies with the state not cracking down hard enough on the truckloads of contraband making its way across the border.
“Cross into New York State and the signs say ‘Enjoy New York, Explore New York, Experience New York,’” said Kuczenski. “Enjoy paying more for services. It’s terrible, all New York State is doing is encouraging people to go out of state and purchase.”
Eldeez tobacco has been in business for 33 years, and the tobacco store has expanded three times since then. The store has experienced many changes in the market due to state and federal regulations being passed, according to Kuczenski.
But as health experts warn, tobacco is addictive – meaning customers will find a place to but their smokes. Kuczenski is just hoping that will be in her store and not elsewhere.
WAMC news intern Ryan Anglim is finishing his last semester at the College of Saint Rose, where he will graduate with a Bachelor of Arts in Communications.
