NYACS Study Finds Rampant Cigarette Tax Evasion in NY State

ALBANY, N.Y. -- A new report commissioned by the New York Association of Convenience Stores (NYACS) shows that cigarette tax evasion continues to be a problem in New York, costing the state at least $1.7 billion a year in tax revenue and 6,700 jobs.

The economic study, conducted by John Dunham & Associates on behalf of NYACS, found that state taxes were not collected on one out of every two packs of cigarettes consumed in New York State in 2011.

"This is further proof that New York, which has the highest cigarette excise tax in the nation, continues to suffer the corrosive economic and fiscal effects of the worst cigarette tax evasion in the nation," said NYACS President James Calvin. "This epidemic costs our state and local governments hundreds of millions of dollars in tax revenue annually, deprives tax-collecting retailers of legitimate business and siphons away private-sector jobs.

"Moreover, it undermines the public health policy goal of deterring smoking," he added.

Additional findings in the report include:

  • In 2011, New Yorkers purchased 384 million packs of cigarettes from other states, Indian reservations, duty-free shops and military bases. If New York State tax had been collected on all of those purchases, it would have generated $1.67 billion in tax revenue. The actual tax-loss figure is probably even higher because this estimate excludes black-market and counterfeit cigarettes, which are becoming more prevalent.
  • If all cigarettes consumed in New York State were purchased in-state from tax-collecting sources, it would generate an additional 6,776 jobs and an additional $257 million in wages.

New York State's cigarette excise tax is $4.35 per pack, the highest in the United States. The tax rate in surrounding states is significantly lower -- for example, New Jersey is $2.70, Pennsylvania is $1.60 and Vermont is $2.62. The differences make cross-border purchases "lucrative," according to NYACS.

The state also grapples with the issue of Native American reservations selling cigarettes to non-Native American customers, which is a violation of state law.

"We urge New York State to make it a top priority in 2013 to stem the tide of cigarette tax evasion in the interest of maximizing tax revenue, employment, economic growth and community health," Calvin concluded.


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