From: Associated Press
RICHMOND — Lawmakers are aiming to impose harsher penalties on cigarette traffickers in Virginia, where officials say low excise taxes have made it an attractive base for smugglers who can sell smokes on the black market in nearby states and funnel the profits to organized crime.
Virginia is home to the country’s second-lowest excise tax at $3 a carton.
That means smugglers can easily buy hundreds or even thousands of cartons and resell them in the Northeast, undercutting retailers and skirting the higher taxes imposed there to boost public revenues and curb smoking rates. New York City, for example, taxes cartons at $58.50 apiece — nearly $6 a pack. Just a short drive away in Washington, the tax is $25 a carton.
Cigarettes also can be trafficked from neighboring North Carolina, which is home to cigarette maker R.J. Reynolds Tobacco Co., and also imposes low excise taxes.
Arkansas — a neighbor to low-tax Missouri — is among the states that have passed legislation aimed at cigarette smuggling in recent years, and others have stepped up enforcement efforts. But most rely on the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, which has prosecuted several high-profile smuggling cases in recent years.
Smuggling enough cigarettes can lead to an enormous payday. ATF estimates that a car can carry 10 cases of cigarettes — there are 60 cartons in a case — with an estimated profit of $34,000.
Upgrade to a van, and 50 cases can turn a $170,000 profit, said Virginia State Crime Commission legal affairs director G. Stewart Petoe. A large truckload can haul 800 cases and net a profit of $4 million. The Justice Department says the lost tax revenues can add up to several billion dollars.