By AGNES PALAZZETTI and TOM PRECIOUS
News Staff Reporters
4/3/2002
 

An Indian nation from Central New York is placing tobacco kiosks in some Buffalo-area convenience stores that will allow the electronic mail ordering of tax-free cigarettes at a savings of up to $20 a carton. The move, a first according to industry officials, came Tuesday, the day before today's 39-cents-per-pack state tax increase. That increase brings the total state tax on a pack of smokes to $1.50, the highest in the nation.

The Oneida Indian Nation, the nation that operates the Turning Stone gambling casino at Verona, installed its first Internet-based tobacco kiosk in the Yellow Goose convenience store on Colvin Avenue, the first of six planned installations. Critics called it an obvious bid by the Oneidas and Yellow Goose to help smokers skirt today's tax increase.

And officials with State Attorney General Eliot L. Spitzer's office immediately pointed to potential legal problems because the kiosks could permit minors to buy cigarettes illegally. Furthermore, they claim, the plan may violate state tax laws by using a non-Indian-owned retail outlet as a conduit for selling tax-free cigarettes.

The marketing technique uses a touch-screen computer to allow smokers with a credit card to order most major cigarette brands tax-free from the Oneidas' Internet-based tobacco company near Utica. "This raises serious questions about the legality of the operation, and any retailer should think twice before installing one of these in their store," said Marc Violette, a Spitzer spokesman.

Oneida officials said they informed the Pataki administration in advance about their plans. State Tax Department officials declined to say if they were concerned about similar operations popping up across the state. "We're aware of the situation, and we're looking into it," said Marc Carey, the agency's spokesman. He would not say if his office thinks the kiosks might violate state law.

Using touch-screen technology like clerks use in fast-food restaurants, the smokers tap the screen to choose a product. A simulated keyboard then pops up to permit the customer to enter credit card and address information. Orders are usually received within a few days.  Customers using the kiosk's computer are linked to a Web site run by the Oneidas that sells 52 brands of cigarettes - all free of state taxes. At the Oneida Web site, cigarette prices listed Tuesday were significantly below what smokers would spend at a non-Indian-owned retail outlet. The site sells brands from Kools, at $27.50 per carton, and Marlboros, at $33.50 per carton, to its cheapest brand, Grand Palace, at $10.50 per carton. There are 10 packs in a carton.

Mark S. Sidebottom operates the 33-store chain of Yellow Goose stores in Western New York. He refused to say Tuesday what financial incentive his company is receiving from the Oneidas for the kiosks' placement. Sidebottom did say the kiosks will be installed in five more stores, "and if they are successful, we will put them in all our stores."

The Oneidas and Sidebottom defended the system from critics who believe it may not be legal to permit non-Indians to purchase cigarettes from an Indian tobacco distributor but at a non-Indian retailer. "They really aren't any different than ordering cigarettes from the Oneida Indians from your home," Sidebottom said. "We simply are providing a service for those customers who don't have computers in their home." The cigarettes are sent from the Oneida Nation's distribution center on its reservation near Utica. Jerry Reed, an Oneida spokesman, said an Oneida-owned company also makes the kiosks. The Oneidas say that, as a sovereign tribe, they did not need state approval for the new tobacco venture.

The timing of the move by the Oneidas is curious. The tribe is actively working with the Pataki administration to try to settle a long-standing land claim in Central New York and to expand its existing casino operation - Turning Stone at Verona - into the Catskills.

Yet, observers at the Capitol say, the bid to help more smokers evade state sales taxes can only embarrass the Pataki administration, which has already been taking a hit over the years from non-Indian retailers for failing to collect taxes on reservation sales of tobacco and gasoline to non-Indians. The governor has fought attempts by non-Indian retailers to force the state to collect taxes on cigarette sales at reservation stores. The state did try to slow Internet sales of tax-free cigarettes by making it a crime for companies such as United Parcel Service to deliver cigarettes without a state tax stamp. But that law, which advocates say was needed to cut down on cigarette sales to minors, was struck down by a federal judge last year.

The Oneidas' bid to place the kiosks in an initial six Yellow Goose stores occurs in a region the Seneca Nation of Indians already considers its prime marketing area for tax-free cigarette sales. Seneca President Cyrus M. Schindler was unavailable to comment Tuesday.

After years of complaints by non-Indian tobacco retailers about the unfair advantage of Indian-owned stores, industry officials and anti-smoking groups say Yellow Goose has taken a simple approach: If you can't beat them, join them.

Retailers say a state policy that has sharply increased cigarette sales taxes over the past few years has cut sharpely into revenues of non-Indian stores. They say they can't compete in an environment that is pushing many smokers to buy cigarettes across state borders. Pennsylvania's tax, for instance, is 31 cents per pack. The head of the trade group for convenience stores in New York said the new cigarette sales tactic by Yellow Goose is a first in the state. "It's a reflection of the dire situation that convenience store operators are faced with under the state's tax policy," said James Calvin, executive director of the New York Association of Convenience Stores.

His group found, using state data, that tax-collecting retailers sold 51 million fewer cartons of cigarettes over a two-year period since the last tax increase in 2000, with much of that being picked up by cross-border and Indian sales.  Calvin said it's not surprising Yellow Goose would turn to such an unusual means to sell cigarettes, which can account for one-third of convenience store sales in a year. He said most smokers aren't quitting as the state raises its taxes. They are merely finding ways to avoid the tax.

Anti-smoking groups called the move a scheme that keeps those smokers who may have been convinced to quit with the new higher taxes to remain as tobacco users. "We're concerned about anything that encourages tax avoidance," said Russell Sciandra, director of the Center for a Tobacco Free New York. "We support the tax increase because of the public health impact it will have in reducing tobacco use." Sciandra said he is also concerned that the new kiosk system will make it easier for teenagers to buy cigarettes.

Reed, the Oneida spokesman, said the six-carton minimum order and the required use of a credit card "will discourage teenagers from using the kiosks."

Larry Ballagh, who has a booming Internet business along with a small cigarette manufacturing operation on the Seneca Indian Cattaraugus Reservation, said he preferred to hold his comments until "I can take a look at what the Oneidas are doing." "Of course," Ballagh added, "that doesn't mean that six months from now I may not be knee-deep in this kind of operation."
 

A SELF-MADE PROBLEM
Buffalo News
4/11/2002
 

A move by the Oneida Indian Nation to put tobacco kiosks in some Buffalo-area convenience stores, to allow electronic mail ordering of tax-free
cigarettes, is a blatant end-run around this state's tax laws that threatens to reduce revenues at a time when the state can least afford it. And while we hate to say we told you so, we told you so.

Albany thinks it has found the economic version of the Fountain of Youth: Pass whatever health program sounds good, raise cigarette taxes to pay for...

...Click here for the complete text of article
 

CIG TAX MAY LURE BUTT-LEGGERS
NY Post
5/19/2002

A new crop of cigarette smugglers is expected to blow into town if the proposed $1.50-a-pack tax hike is approved by the state and city this week.

A vanload of bootlegged smokes could earn a smuggler more than $100,000 in profit, those opposing the new tax predict.

Some bootleggers have already tested the market, said William McMahon, assistant special agent in charge of the U.S. Bureau of Alcohol, Tobacco and Firearms in New York.

"It's getting busier, that's for sure," he said. "It's going to be a big money-maker."

In February, two Chinese nationals were busted in Queens while selling cartons from the back of a rental van for $22. They ferried nearly 2,000 cartons from Virginia, where the tax is only $2.50 per carton.

Mayor Bloomberg called for the cigarette tax hike in his recent budget.

"You can fit 5,700 cartons in a standard van and potentially make $170,000 on a load from an Indian reservation," said Richard Lipsky, a lobbyist for local delis that stand to lose business if the city tax goes through. "That's a tremendous incentive."
 

PSSST... WANNA BUY CIGARETTES?
A Testimonial - June 18, 2002

Well, it has already come to this. The other day some drug pusher in the street offered me cigarettes for $2. I don't know whether this was a cocaine pusher who had expanded his product line or a completely new entrepreneur. How long before there are turf-war shoot-'em-ups over cigarettes, and when will the first policeman be killed in a cigarette deal gone bad or a cigarette bust?

"Gary"
 

THIEVES BUTT IN ON CIG DEALERS
NY Post
June 30, 2002

On the eve of the city's massive cigarette-tax hike, thieves decided to bum themselves a last-minute drag - by stealing tens of thousands of dollars worth of smokes in two heists.

The first theft was discovered at 5 a.m. when the owner of Parsons Mini Mart on Northern Boulevard in Queens arrived to begin his workday - only to find his shop had been burglarized overnight.

The owner of the Flushing shop, who asked that his name not be published, said he suspected something was wrong when he found the lock to the store glued shut.

After an hour, and a call to a locksmith, the owner got inside. There he found the shop ransacked and numerous missing items, including 600 cartons of cigarettes worth $28,000.

"Everything, they took," he said. "Nothing was left over. All the cigarettes, phone cards - everything they could sell was gone."

The shopkeeper said the crooks got into his store by breaking an "access point" into the basement while the shop was closed between 1 and 5 a.m. yesterday.

Besides the cigarettes, the thieves took also cash and merchandise.

"What are you going to do?" he said in resignation over his loss.

The other heist, which police believe was unrelated to the Flushing theft, was the brazen, broad-daylight robbery of A&T Tobacco Sales on Graham Street in Greenpoint, Brooklyn.

The manager told cops he was outside at 2:15 p.m. when two men approached him from behind, stuck a hard object in his back and imprisoned him in his store's bathroom. While he was locked in the toilet, the thieves took $30,000 in cigarettes and fled.

Police are still investigating the two thefts of cigarettes, and have announced no suspects. Thieves often steal cigarettes so they can be resold tax-free on the black market.

The most recent butt heist was earlier this year, when thieves stole $300,000 worth of untaxed, out-of-state cigarettes from the back of a truck that had been left unattended on Webster Avenue in The Bronx.

The cops arrested the thieves after getting a tip the suspects set up a makeshift cigarette market outside a Bronx warehouse and were selling the illicit butts for $15 a carton - a deep discount.
 

Read Their Lips: No Taxes. (Period.)
NY Times
July 8, 2002

MASTIC, N.Y. — Call it tax avoidance — and call it completely legal.

In this case, call it what Don Kemler does once a week, like clockwork. Every Tuesday, Mr. Kemler, 48, navigates the winding roads of this Suffolk County community, sliding his electric blue pickup truck into a parking space facing two wooden carvings of American Indian men. He climbs the stairs to the Peace Pipe Smoke Shop, plunks down his $21.25 and leaves with his prize: one carton — 10 packs — of USA Gold
cigarettes.

"It's a filthy habit," Mr. Kemler, a lumber salesman from Shirley, said one evening in June, referring to his 30 years of smoking. "But that doesn't mean I'm willing to pay those crazy taxes."

Mr. Kemler is one of many New Yorkers (there is no official count) who visit the tiny Unkechaug Indian Nation to buy tax-free cigarettes. Unwilling to pay those taxes — $1.50 a pack to the state, and now an additional $1.50 a pack in city taxes for New York City smokers — these New Yorkers buy off-brand cigarettes for just over $2 a pack, as opposed to nearly $7 a pack for city smokers. (Savings are similar for premium brands, which sell for less than $3.50 a pack on reservations.)

Mr. Kemler frequents the Peace Pipe, one of four smoke shops on the five-square-block Poospatuck Reservation, population 220, about 70 miles east of Times Square. The Unkechaugs are one of many Indian nations, including the Seneca Nation in upstate New York and the Shinnecock Nation in Southampton, that take advantage of their right as sovereign nations to buy and sell cigarettes without paying or charging the hefty
taxes from the state and the city.

They fought hard for this right, which they say has moved their nations from poverty to relative wealth, and have been in and out of court for years over the issue. One main opponent is the New York Association of Convenience Stores, whose members make a lot of money on cigarette sales. Last December, the United States Supreme Court refused to hear a challenge to a lower court decision granting Indian sovereignty in this
matter, seemingly exhausting the association's attempts to force the state to collect the tax from Indian nations. The association is now trying to get federal or state legislation passed to ban what it terms the state's "selective enforcement policy," said James Calvin, the president of the association.

So for now the nations sell legally from their shops, over the phone and via the Internet. Their advertisements, heavily peppered with exclamation points, read, "Stop paying those high retail prices and start saving with Indiansmokesonline!" and "Make Senecasmokes your choice for discount cigarettes, you'll be glad you did!"

Shoppers who visit the store tend to buy two to five cartons at a time, shop owners say, while those who buy over the phone or Internet buy from 2 cartons to 50. (There is no legal limit to the number of cartons one customer can buy.)

It's hard to imagine what one person does with 50 cartons — 10,000 cigarettes — but these stores' owners reject any suggestion of bootlegging.

"We get a lot of Manhattanites stopping by on their way out to the Hamptons with a list of orders from friends and co-workers," said Harry Wallace, chief of the Unkechaug Nation and owner of the Poospatuck Smoke Shop and Trading Company, the first shop to open on the reservation, in 1991. "They say, `This carton is for Jane, this carton is for Sharon,' etc. But it's perfectly legal to buy cigarettes for your friends."

There is no law that the cigarettes must be for the buyer's own use; what is illegal is reselling cigarettes bought here for more money and pocketing the difference. Chief Wallace said he assumed those buying for Jane and Sharon made no profit.

But while Chief Wallace said he knew of no bootleggers or smugglers, the phenomenon is not unknown. A spokesman for the New York division of the Bureau of Alcohol, Tobacco and Firearms, Joseph Green, said that he could not comment on open investigations but that such matters are closely monitored. Mr. Green pointed out that the number of tobacco-related investigations conducted by the bureau increased to 71 in the country in 2001 from 6 in 1998.

One of the largest smuggling cases involved the St. Regis Mohawk Nation in Hogansburg, N.Y. In the late 1990's, 16 of the tribe's members pleaded guilty to conspiring to smuggle hundreds of millions of dollars' worth of cigarettes and alcohol into Canada through a reservation. A unit of the RJR Nabisco Holdings Corporation pleaded guilty to federal criminal charges in the case and agreed to pay $15 million in penalties.

Governments say they are raising cigarette taxes not just to increase revenue, but also to discourage smoking. Tobacco companies argue that higher taxes encourage smuggling.

On a June day, customers streamed into Chief Wallace's shop, a small pine-paneled store with walls of cigarettes and cases displaying Indian-made jewelry and moccasins. Cars filled the small parking area and newcomers had to park by the bushes or down the road. Yet exactly how thriving these businesses are is unclear, because the shop owners — who seem to feel vilified by just about everyone except their loyal
customers — are unwilling to say.

When asked how many cartons of cigarettes he sells per month, Chief Wallace, a stocky man wearing two braids, denim shorts and flip-flops, responded, "It's none of your business."

A visit to the other smoke shops on the Unkechaug reservation yielded similar results.

So one could explore the economics this way: A reporter watched seven cartons of cigarettes being sold inside Chief Wallace's shop in five minutes one day in June. Erring on the side of caution, then, one could assume 50 cartons are sold an hour. The shop is open 13.5 hours a day every day, which translates to 675 cartons a day, 4,725 cartons per week, or 18,900 per month. (And that does not include phone and Internet orders.) At an average price of $27.50 per carton, Chief Wallace would take in about $520,000.

His profit would be that sum, minus his overhead and what he paid for the cigarettes. Those two costs are another mystery, as Chief Wallace, as well as the cigarette manufacturers and distributors, would not say what he pays for them.

Looked at another way, at $15 in tax per carton, assuming those hypothetical calculations are not too far off, the state is losing about $283,500 a month in revenue from Chief Wallace's shop alone (again, not counting Internet and phone orders). Chief Wallace said there were 85 Indian-owned tobacco outlets in the state at his last count, in 1998. So the hypothetical statewide total: a $24-million-a-month loss to the government. And New York City is also losing $1.50 in tax per pack.

Still, the state seems to have no intention of changing course. And Chief Wallace and his fellow shop owners feel that their right to sell tax-free cigarettes (and gasoline) is nothing short of the lawful exercise of their sovereignty.

"Before we had tobacco shops, we had a welfare economy — and the state was paying for that," Chief Wallace said as he lighted a Marlboro Red. "We couldn't focus on our political, social and educational rights because we were focused on day-to-day survival. Now we're not. Now we are empowered."

Anyway, said the shop owners, they are doing the community a favor.

"We sell to a lot of fixed-income people; you know, senior citizens and veterans on Social Security," said Mike General, manager of JR's Smokeshop II in the Seneca Nation. "They're looking to save money wherever they can, and you can't beat our prices."

As to the morality of making carcinogens available at low cost to the masses, whether they are people on fixed incomes or travelers en route to the Hamptons, Chief Wallace shrugged and lighted another cigarette. "If they're so bad, make them illegal," he said. "In the meantime, leave me alone."
 

Tax Hike Puts Store Profits Up In Smoke
NY Daily News
September 17, 2002

It's not even three months since the city jacked its cigarette tax up to $1.50 a pack, but many retail stores along the Nassau border are feeling a big pinch.

Instead of buying their butts in eastern Queens, smokers are slipping into nearby Nassau County, where cigarettes cost $4.50 to $5.50 a pack -- substantially less than in the city.

"When people ask for a pack and I say $7.35, they say 'never mind' and walk out," said Charles Chen, owner of Douglaston Minute Market and Gifts.  "It's been terrible.  We've lost about 75% of our customers, and I'm barely making the $2,500 monthly rent payments."

The city expects the tax increase -- from 8 cents a pack -- to raise $111 million this fiscal year, and Mayor Bloomberg said he hoped the hike also would deter New Yorkers from smoking.

"No one is stupid enough to pay the high price," Chen said.  "I am a couple of minutes from Long Island, so people are getting their cigarettes there."

Elvis Rodriguez, a salesman at the 21 Convenience Store in Laurelton, said his customers are either going to adjoining Valley Stream in Nassau County or purchasing black market smokes peddled illegally on the streets not far from his store.

"They are selling cigarettes for $5 a pack right on Merrick Blvd.," Rodriguez said.  "It's that bad."

Law enforcement officials in Virginia provided some details yesterday on where the illegal smokes may come from.  They reported that since the beginning of August, thousands of dollars of cigarettes have been stolen in a rash of smash-and-grab thefts at stores there.  Authorities believe the stolen smokes are being sold on the black market here and in other states with high cigarette taxes.

Within the past two weeks, burglars in Virginia have snatched nearly $30,000 worth of cigarettes.

"We don't know i f all these burglaries are related, but we do know there's some black market activity going on here," said Prince William County police spokesman Dennis Mangan.

One of Rodriguez's customers, John Simpson of Laurelton, said he quit smoking because the price was too high.

"Why not make it $10?" Simpson asked.  "It's ridiculous."

At Bambi Cards and Gifts in Rosedale, some customers are forgoing the cigarettes completely.  "Long Island is just a one-minute drive, so when they hear the price they just ask for the free book of matches and leave," said owner Gun Se Lee.

Meanwhile, at Delight Traders on 259th St. and Hillside Ave., owner Gary Virdi called the situation a losing battle.  His weekly revenue has declined by $1,000.

"I am hurting, especially since I am on the border of Nassau," said Virdi, who has gone from selling nine cartons a day to just one.  "If the price was the same over there it would have been a little bit better, but now people have a choice and go the few extra blocks to save money.  I am nervous because I won't be able to survive like this."

At the Amoco gas station on Northern Blvd. in Great Neck, just across the city line in Nassau, it's a different story.  Business is booming.

"We have gotten 5% more customers," said the station owner, who asked that her name not be used.  "I don't feel bad about the stores across the street [Northern Blvd. -- in Queens] from me.  It's a business."

Ellen Oh owns the Northern Deli in Little NEck across from the Amoco station -- one of the businesses that lost a number of customers.

"It's unfair," said Oh, whose cigarette sales had accounted for 20% of her business.  "The day the tax went up... I saw the business drop."

Glancing at a shelf full of cigarettes, she noted:  "Why shouldn't [sic] it only be a city tax?  The mayor is picking on the small-business owner.  We are the the little people.  They should go for the bigger corporate types."
 

$200M lost to smokes smugglers
Yearly city, state tax shortfall from gang & Internet sales
NY Daily News
September 23, 2002

Freelance smugglers, organized crime and Internet sources are flooding New York's neighborhoods with cheap cigarettes that would bring the city and state upward of $200 million a year in taxes on the legitimate market.

With premium brands such as Marlboro going for $7.75 a pack in many stores throughout the five boroughs and cartons going for $70 and more, thousands of smokers have chosen to buy either smuggled smokes - or untaxed cigarettes from more than 144 Internet sites, which are legal but unregulated.

The boom in underground cigarettes was touched off by the July 2 increase in city taxes to $1.50 per pack from 8 cents apack and a bump in
state taxes to the same $1.50 per pack from $1.11, according to government officials and tobacco wholesalers.

In July and August, 24.5 million fewer packs of legitimate cigarettes were sold in retail outlets throughout the city than in July and August last year, according to the city Finance Department. That's a drop of 41%.

Smuggling to the city from lower-tax states such as Virginia (2.5 cents a pack total) generates tremendous profits for ringleaders - up to $25,000 for a day's work involving a van loaded with 2,500 cartons, said Edgar Domenech, special agent in charge for the federal Bureau of Alcohol, Tobacco and Firearms' regional field division.

Untaxed cigarettes or cigarette packs with phony tax stamps are available in many neighborhood stores or on the street, where hawkers
routinely peddle $50 cartons.

"When it comes to smuggling and counterfeit stamps, traditional organized crime is involved, terrorist groups are involved and street gangs are involved," said John Dugan, the ATF's area supervisor for industry operations.

"Now, the profit margin is tremendous," he said.

3 stores in 4 blocks

One morning last week, three stores in a four-block area in Bedford-Stuyvesant, Brooklyn, were busted by agents of the Finance Department's tax enforcement division for selling untaxed cigarettes.

The agents bought the cigarettes at Tony's Millennium grocery store, 269 Schenectady Ave.; the Peking restaurant, 249 Schenectady Ave., and Freddie's deli and grocery, four blocks away on St. Johns Place.

"I don't know where they're from, I don't [know] anything about it," said Antonio Blas, a clerk at Tony's Millennium. Hewas answering the
investigators' questions as they searched his store.

Blas said that sales of cigarettes of any kind were "way down" because of street hawkers.

"They're right outside the store, up the block, selling out of their trunks, saying, 'Hey, man, $5, $5 a pack,' so people are not coming in here to
buy," he said.

 'I work here, not owner'

At Freddie's deli, Faiz Saleh Al-Qah, the clerk behind the counter, shook his head and in broken English told investigators he had no idea what
they were talking about when they confronted him with the untaxed packs. "I work here, not owner," Al-Qah said.

And at the Peking restaurant, investigators arrested the owner after finding 10 cartons of untaxed cigarettes hidden in barrels and under counters.

City Finance Commissioner Martha Stark said her investigators are spot-checking stores on a continuing basis. "We are enforcing the
regulations," she said.

City officials argued the tax increase was necessary to help close the $5 billion budget gap and to deter smoking.

"This tax increase is more about saving lives - mostly about saving young lives - than it is about revenues, for if we collect $100 million a year in cigarette tax revenues, that really is not significant considering that our estimate for total tax collections is $14 billion for the year," Stark said.

Even though fewer packs of cigarettes are being sold, she said, revenues have increased because of the tax hike. This July, cigarette revenues for the city were $12.3 million, Stark said, while in July 2001, the revenues were $2.3 million.

Wholesalers said that figure doesn't take into account the lost revenues to the city and state from other taxes, including $15 a carton in state
taxes, and an additional $5.60 in taxes shared by the state and city.

"This new tax is negative revenue producing. The city and state will have a net loss of $250million a year," said Leonard Schwartz, president of Globe Wholesale Tobacco Co. and chairman of the Tobacco Association of the State of New York.

"Thirty-five million cartons were sold in the city last [fiscal] year; they're going to lose 18 million cartons," he said, predicting that legitimate cigarette sales would drop further in the coming months.

Whatever their differences over tax revenue collections, Schwartz, Stark and law enforcement agencies all agree on one point: The city is awash in black market cigarettes.

But the Finance Department has only 16 investigators to patrol 13,000 retail stores licensed to sell cigarettes in the city, and those investigators also enforce other tax regulations.

Additionally, enforcement of city, state and federal laws on cigarettes is spotty, at best, in part because the ATF and the FBI, which is also
responsible for tobacco regulations, give the issue a low priority.

Locally, few black market cigarette and phony tax stamp cases have been prosecuted. So the smugglers have nearly free rein, inspired as well by maximum federal sentences of six months in jail and/or a $1,000 fine. They have to be caught with a minimum of 300 cartons in order to be prosecuted.

Web unregulated

As for the Internet sales, the Web is entirely unregulated.

A recent U.S. General Accounting Office report said untaxed Internet sales of cigarettes will reach $5 billion nationwide by 2005, and states "will lose about $1.4 billion from those sales."

Nearly all the 47 New York State Internet sales sites are run by Native Americans whose operations are not taxed under federal law, and who pass those savings on to consumers. Premium brands are available at $28 to $33 a carton.

In theory, the buyer is supposed to pay city and state sales taxes on purchases of more than two cartons.

"But nobody is enforcing that; it's impossible to enforce, although we'd like to," Stark said.

A law banning untaxed Internet cigarette sales in New York was declared unconstitutional after a challenge by Brown & Williamson Tobacco and Santa Fe Natural Tobacco Co., a Native American brand. A Manhattan federal judge ruled that only the federal government has the right to regulate interstate commerce.

Cops Flick Butt-Leggers
NY Post
September 28, 2002

Cops seized more than 1,200 cartons of counterfeit cigarettes from a Queens home where authorities said a mom, pop and son ran a $5 million-a-year bootleg operation, DA Richard Brown said yesterday.

The family imported cheaply made smokes packaged as Marlboros and other name-brand smokes, stored them in their three-story apartment house, and peddled them to retail stores on Canal Street in Chinatown, authorities said.

Zhi-Cheng Chen, 52, his wife, Hui-Ling Chen, 48, and their son, Lei Lei Chen, 22, allegedly earned $100,000 a week from their sales, authorities said.

All three were arrested Wednesday and pleaded not guilty to charges of cnspiracy, trademark counterfeiting and cigarette tax offenses.  They were released on $5,000 bail.

Brown said a torrent of untaxed cigarettes, including fakes, has been pouring into the city since the state raised the cigarette tax, making the price of legal smokes $7.50 a pack.

The fakes -- which smoke hotter and taste drier than legal butts, and are often laced with sawdust -- sell for about $50 a
carton, while name brands sell for $70-$75 a carton, Brown said.
 

Stolen Cig Ring Nailed
NY Post
October 24, 2002

Cops say a Bronx cigarette warehouse was like the Golden Goose to four thieves who burglarized it four times since last
summer before laying an egg when they were arrested with $65,000 in stolen smokes.

The quartet allegedly stole an estimated $150,000 in cigarettes from the S&A Cigarette Co., cops said.

Sources said they believe the contraband - about half of which had the coveted NYS tax stamps on them - was being offered for sale at wholesale prices.

On Tuesday, Detective Jose Ramirez of the 40th Precinct got information that a cache of the stolen cigarettes was being stored in two vans at East 198th Street and Webster Avenue.

Police Officers Carlos Lopez, Chris Gonzalez and George Vanwellenger descended upon the location and arrested four men.
 

Tobacco group files lawsuit to snuff levies
NY Daily News
November 12, 2002

Branding the recent cigarette tax hikes an unconstitutional sham that is failing to produce promised additional revenues, tobacco wholesalers will file a lawsuit today to eliminate the increase.

The suit, to be filed in Manhattan Supreme Court by the state Association of Tobacco and Candy Wholesalers, said the state and city will lose more than $200 million in taxes this fiscal year. The reason, court papers say, is that smokers are buying on the black market or on the Internet to evade the increases.

"The increases are unconstitutional because it's an attempt by Mayor Bloomberg to selectively rule an industry for a social agenda, to eliminate smoking," said attorney Ronald Warfield, representing the tobacco group.

The suit also charges that the increase "purposefully and unfairly disadvantages all legitimate agents licensed to sell cigarettes" in the city in favor of those outside the city, including Internet dealers.

The wholesalers have been taking a beating with decreased sales of packs with legitimate tax stamps, according to Leonard Schwartz, chairman of the tobacco group.

Spokesmen for Bloomberg and city Controller William Thompson, both named as defendants in the suit, could not be reached for comment yesterday, a national holiday.

The increases, which went into effect July 2, are from 8 cents to $3 a pack in city taxes and from $1.11 to $1.50 a pack in state taxes.

Legitimate New York tax-stamped cigarette sales in the city have dropped by half since the tax hikes went into effect, according to both Schwartz and the city Department of Finance.

In previous arguments over the numbers, city officials stated that even with fewer sales, the tax increase will produce $115 million for the city this fiscal year, compared with $28 million last year.
 

DALE McFEATTERS: New York's cigarette tax is a taxing failure
NewsObserver.com
December 27, 2002

(SH) - Despite overwhelming experience to the contrary, politicians remain bloodied but unbowed in their belief that they can
somehow outwit the laws of economics.

New York City is a case in point.

Last summer, the revenue-short city boosted its tax on a pack of cigarettes from 8 cents to $1.50. The state also boosted its tax to $1.50. The combined tax makes the price of a pack of cigarettes in New York City $7.50, the most expensive in the nation.

The tax was the product of the usual mix of motives: pecuniary and patronizing. Pecuniary because it would bring in lots of money, and patronizing because it implied "Let's get people to quit this filthy habit by making it prohibitively expensive."

The tax is also brutally regressive, penalizing lower income smokers much more harshly than the well-to-do. You can argue that the poor shouldn't be wasting their money on useless, unhealthy vice, but as long as cigarettes are a legal product, that's really none of the government's business.

The result of the tax hike, according to The Wall Street Journal, is that legitimate sales have fallen steeply, the number of tax
stamps sold by the city is off 50 percent and the city has a thriving black market in contraband cigarettes, easily obtainable down I-95 in the low tobacco-tax states of Virginia and North Carolina.

The untaxed cigarettes are sold on street corners, out of car trunks and under the counter at convenience stores. The price is $4 to $5 a pack, no bargain, but it beats $7.50. And, in accord with the law of unintended consequences, some penny ante drug dealers may have switched to peddling contraband smokes because the penalties are lighter, a maximum of five years for cigarettes to a maximum of life for drugs.

The politicians have thus unerringly honed in on that economic benchmark where it pays people to cheat. Thus, the way of all sin taxes.
 

Black Market Sales Growing
CSNews Online
December 27, 2002

NEW YORK -- Streetwise entrepreneurs, taking advantage of the nation's highest tobacco taxes, are lurking the streets hawking packs of premium brands for $5.

Cigarette trafficking has exploded in recent months in New York City, The Wall Street Journal reported, attracting veteran and amateur hawkers seeking extra income.

Why the boom? Last summer, the city raised its excise tax on cigarettes to an eye-popping $1.50 a pack, from eight cents. New York State also raised its levy, from $1.11 to $1.50. The combined $3-a-pack wallop makes cigarettes here the costliest in the U.S., about $7.50 a pack. On the street, $4 to $5 a pack is practically irresistible, the newspaper reported.

"I go for shopping areas, wherever there's a large crowd," said a 28-year-old cigarette hawker who identified himself as Ave. "I make a good profit, enough to pay my bills."

With legitimate sales of cigarettes down significantly, business for street peddlers like Ave are good ? and they deprive the financially-ailing of much-needed tax revenue. The number of cigarette-tax stamps sold by the city from August through November was down 50 percent from the same period a year ago, The Journal reported.

The black market has spread across the city. In Brooklyn, a landlord fearing drug pushers were in the neighborhood called police. The "pushers" turned out to be cigarette vendors. Bootleggers sell untaxed cigarettes from car trunks; cab drivers offer them to passengers; and corner groceries sell them to favored customers. Some street hawkers even approach commuters outside Grand Central Terminal.
 


What cities do you get the best sales from? alot of cities :-) some are listed below
Bristol, Groton, Hartford, Manchester, New Britain, New London, Norwich, Torrington, Vernon, Willimantic, Windsor Bridgeport, Danbury, Greenwich, Meriden, New Haven, Norwalk, Stamford, Waterbury Ct Altoona, Bedford, Bellefonte, Clarion, Clearfield, Erie, Huntingdon, Johnstown, Meadville, Oil City, Punxsutawney, State College, Warren Aliquippa, Butler, Connellsville, Greenville, Indiana, Kittanning, Latrobe, New Castle, Rochester, Sharon, Uniontown, Washington; surrounds but does not include Pittsburgh Camp Hill, Carlisle, Chambersburg, Gettysburg, Harrisburg, Lancaster, Lebanon, Lewistown, Mechanicsburg, Shippensburg, York Allentown, Ardmore, Bala Cynwyd, Bethlehem, Bryn Mawr, Chester, Collegeville, Conshohocken, Easton, King of Prussia, Norristown, Paoli, Reading, Wayne, West Ambler, Bristol, Churchville, Doylestown, Hatboro, Kulpsville, Langhorne, New Hope, Philadelphia, Quakertown, Warrington, Willow Grove PA Arlington, Braintree, Burlington, Canton, Chelsea, Cohasset, Dedham, Duxbury, Kingston, Lexington, Lynn, Malden, Medford, Needham, Randolph, Reading, Revere, Rockland, Saugus, Stoughton, Wakefield, Waltham, Wellesley, Weymouth, suburbs on all sides of Boston Attleboro, Brockton, Cape Cod, Fall River, Falmouth, Framingham, Hyannis, Marlborough, Martha's Vineyard, Nantucket, Natick, New Bedford, North Easton, Plymouth, Southbridge, Taunton, Walpole, Wayland, Worcester Andover, Athol, Barre, Beverly, Billerica, Chelmsford, Concord, Danvers, Fitchburg, Gloucester, Haverhill, Lawrence, Leominster, Lowell, Maynard, Methuen, New Salem, Peabody, Salem, Sudbury, Wilmington MA
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