States, Losing $5 Billion Annually to Cigarette Smuggling, Fight Back

States from Florida to Rhode Island and Michigan are increasing their law-enforcement attention on cigarette smuggling, which is costing states billions in annual tax revenues, the Wall Street Journal reported July 20.

Some smugglers simply buy cigarettes in low-tax states and resell them illegally in states with higher taxes. Others steal tax stamps, or manufacture and sell counterfeit cigarettes. “People have smuggled cigarettes from North Carolina and Virginia up north in the past, but we haven’t seen the volume we are seeing today where it’s tracked by the trailer load,” said Capt. Dennis Wilson of the Fairfax County, Va., police department.

Experts say cigarette smuggling has increased as the state and federal governments impose higher taxes on tobacco products. “We do not want to have our tax laws ignored and lose tax revenue from legitimate sales of cigarettes,” said Maryland State Comptroller Peter Franchot.

Officials say that organized crime is taking over the smuggling business from smalltime operators. “It’s a big business and it’s getting horribly bigger,” said Paul Carey III, enforcement coordinator for the Northern Virginia Cigarette Tax Board.

Cigarette companies have also worked to prevent smuggling. “It’s in our interest as a company to ensure our products stay in the legal supply chain,” said Reynolds American Inc. spokesperson John Singleton.