NYC Investigation Finds Illegal Cigarettes For Sale

NEW YORK -- Proponents of increasing cigarette taxes claim two things: the hike will bring in much-needed revenue and motivate people to quit. It can also has another unintended, not-so-legal consequence.

According to the New York Post, The sheriff's unit of the New York City Finance Department that conducted a sweep of 1,700 stores licensed to sell tobacco products found 42 percent either selling untaxed cigarettes or using counterfeit stamps to avoid the combined $5.85 city-state tax.

"That is an alarming number," said Jim Calvin, president of the New York Association of Convenience Stores, which represents 1,600 outlets around the state. He added that while there's no excuse for tax evasion, "it's a reflection of the desperation of some store owners" trying to make ends meet in a jurisdiction with the highest cigarette tax in the nation.

Since New York cigarettes taxes became the highest in the land a few years ago, revenue has been decreasing. The city took in $158.5 million from its share of the cigarette tax in 2003. However, last year, collections were down to $69.8 million, a 56-percent drop, according to the news report. During that same period, the smoking rate fell 28 percent.

Finance Commissioner David Frankel told the newspaper that his agency's pursuit of cigarette tax cheats is as much about fairness as revenues. "At a recent outreach event in The Bronx, I had a guy who came up to me desperate for help because his family's delicatessen is going out of business because their competitors are selling illegal cigarettes and they refuse to do it," he said. "It's our job to protect them, and we're going to do that."

The city is not just fighting untaxed cigarettes and fake tax stamps. Counterfeit cigarettes have also become a problem, Frankel said.

Frankel said the city is drawing up legislation to increase the penalties on those who flout the tax law because their impact "is devastating to small businesses" that are honest.

In an appearance before the city council on June 6, he said the current penalties for those caught with a few cartons of untaxed cigarettes are minimal. City Councilman Lew Fidler (D-Brooklyn) urged him to be more aggressive.