Retailer claims Big Tobacco is aiding smugglers, ''robbing'' New York

Source from:  Nypost.com 02/25/2015

Big Tobacco is complicit in the massive cigarette bootlegging business that robs New York state and the Big Apple of $2.5 billion a year in tax revenue, a state retail group claims.

Tobacco giants Philip Morris and Reynolds American allocate "massive amounts of boxed cigarettes to stores in their home states (soft-pack markets), knowing that most of this product will become contraband as it is bootlegged into New York," the group, the New York State Association of Wholesale Marketers and Distributors, wrote in a letter this month to state Attorney General Eric Schneiderman.

The letter, mailed Feb. 3, a copy of which was obtained by The Post, claims the cheap smokes flooding New York streets have helped increase the percentage of smokers in the state to 16 percent of adults from 14 percent over the last three years.

But with "most stores" openly selling untaxed cigs, the number of cartons of legit, taxed smokes shipped to New York has fallen to 6 million in 2014 from 40 million in 2000, the group said in the letter, signed by its Executive Director Arthur H. Katz.

New York has the highest cigarette tax in the US - $4.35 a pack, plus an added $1.50 for smokes sold in New York City.

Bootleggers ship in smokes from low-tax states like Virginia, where the tax is 30 cents a pack. Stores then sell them at below-market rates and no tax is collected.

Big Tobacco "could stop all the bootlegging in two weeks," Tom Stanton, the former head of New York tax enforcement, told The Post. He said the cigarette makers could do this by taking steps to deny illicit transporters or by directing authorities to confiscate untaxed product.

The tobacco giants have the ability to monitor their product at every stop - from wholesale to retail, Stanton said.

Schneiderman last week sued UPS for shipping 700,000 untaxed cartons to New Yorkers' homes in violation of a 2005 settlement where it promised not to do so.

The AG sued FedEx on the same grounds last year.

Stanton called the AG's suits "ridiculous" and a shoot-the-messenger type of thinking.

The AG "is committed to enforcing all New York state laws, whether by prosecuting cigarette-smuggling rings or suing major companies like FedEx and UPS for willfully violating laws against shipping untaxed cigarettes," a spokeswoman for the lawman said.

Whether the city and state will later go after Big Tobacco itself remains to be seen.

A Philip Morris spokesman declined to comment on the suits against UPS and FedEx, but said the company had "an entire department dedicated to address illicit trade."

He also referenced a company Web site that calls cigarette bootlegging "a concern for our business, law enforcement and regulatory authorities."

Reynolds American did not return calls for comment.