N.H. Cigarette Tax Cut Failing To Boost Sales

New Hampshire's reduced cigarette tax, implemented in June, has failed to boost revenue through increased sales during the first four months of the fiscal year, according to a Nashua Telegraph report.

During this time period, the state collected $77.5 million, which is $3.5 million or 4.3 percent less than legislative budget writers had predicted. Last fiscal year, New Hampshire collected $84 million during the first four months.

The New Hampshire Legislature cut the state's cigarette tax by 10 cents down to $1.58 per pack in June, following years of the New Hampshire Grocers Association's claims that a cut would boost sales. Economists hired by the grocers predicted an increase of $13 million in revenue, while economists working for anti-tobacco groups predicted a decline of $9 million, according to the report.

Last month, the state saw an especially deep plunge as it collected only $16.4 million in cigarette taxes, down 14 percent from the monthly pace.

When the tax cut first took effect, it was difficult to determine whether it had a negative effect on revenue, or if retailers were simply buying bonds for wholesale cheap cigarettes instead of paying in cash. But now the conclusion is clear, according to Administrative Services Commissioner Linda Hodgdon. "There's no arguing with the numbers, and they are pretty firm right now," she said.

From June through October, the state issued 55.7 million tax stamps for cigarette packs, compared to 57 million tax stamps during the same time period last year. Tobacco sales in New Hampshire have gone down steadily as more people quit smoking cigarettes; five years ago, 71.5 million tax stamps were issued during the June-October window.

Rep. Susan Almy (D-Lebanon) criticized the tax cut, saying the state should assist people in quitting smoking cigarettes, not encourage them to purchase more. "Back in June when the state budget passed, Democrats warned cutting the cigarette tax by 10 cents a pack would have a negative effect on state revenue. The reduction was just a political ploy by the Republicans," said Almy in a statement. "I think if you asked citizens around the state, they would agree that it wasn't a good idea to make college more expensive and online cigarettes cheaper."

Overall, New Hampshire has taken in $10.9 million in revenue over projections, according to the report.

› Read More

County Inspectors Accused Of Taking Cigarette Tax Bribes

Two Cook County revenue investigators have been fired for allegedly accepting “thousands” of dollars in bribes — hush money from convenience stores and other outlets selling cigarettes without paying the local online cigarettes tax.

That’s according to a new report released Thursday by Cook County Inspector General Patrick Blanchard, who launched an investigation earlier this year after the Revenue Department passed along a tip they received about the bribery scheme.

Blanchard would say little about the probe, which is ongoing, but did he say the men “admitted their role when faced” with the allegations. One investigator even turned some of his ill-gotten gains in to Blanchard’s office.

Blanchard said the scheme cost untold thousands of dollars in lost revenues for the county.

The shakedowns unfolded when revenue investigators checked on retail outlets selling cigarettes, according to Blanchard’s report. Vendors not paying the cigarette tax faced hefty fines but avoided that altogether by paying off investigators.

The investigation comes as County Board President Toni Preckwinkle and Sheriff Tom Dart crack down on retail outlets selling discount cigarette online without paying the tax.

› Read More

Federal Appeals Court Says Tribe Must Pay State Cigarette Tax

A federal appeals panel has upheld the state in its long-running battle to force Yakama tribal smoke cigarettes shops to collect the $3.03 state cigarette tax from non-Indian buyers.

The U.S. 9th Circuit Court of Appeals on Friday upheld U.S. District Judge Robert H. Whaley, who ruled last year that tribal smoke cigarettes shops on the 1.2 million-acre Yakama reservation must collect the tax.

The ruling not only levels the playing field between tribal and non-tribal retailers, but clears up decades of dispute, said state Department of Revenue spokesman Mike Gowrylow.

"We're pleased that the appeals court reaffirmed the district court's decision that the state has the right to expect the tribe to assess the state tax to non-Indians on the reservation," he said. "This is all about the state saying if you're going to sell discount cigarette online in this state to the general public, then you need to collect the state cigarette tax."

But the ruling doesn't affect King Mountain cigarette sales on the reservation, he said. Both tribal members and nonmembers alike can still purchase that brand on the reservation free of state taxes because its buy cigarettes are manufactured on tribal land by a tribal member, Delbert Wheeler.

Yakama Tribal Council Chairman Harry Smiskin, who spearheaded the lawsuit, didn't return phone calls Tuesday seeking comment on whether the tribe would appeal to the U.S. Supreme Court.

Yakama tribal leaders argued in their U.S. District Court case that the state tax unfairly burdens tribal smoke cigarettes shop owners.

But the three-judge appeals panel didn't see it that way, saying that the tax burden ultimately falls on the buyer.

"The precollection obligation is a minimal burden on the tribes and their retailers and does not change the legal incidence calculation," the judges wrote.

Non-Indian retailers complained that the tax exemption gave tribal smoke cigarettes shops an unfair price advantage, and Department of Revenue officials said the loophole has cost the state millions annually in lost tax revenue.

Disputes often led to state and federal confiscation of untaxed smokes headed for the reservation and raids of tribal smoke cigarettes shops.

Over the past decade, the state has been reached cigarette tax agreements with many other tribes in the state.

In 2004, the Yakamas and the state agreed on a tax compact that had tribal smoke cigarettes shop owners ramp up a tax over a few years. The tribe was allowed to keep the revenue.

But a few years later, tribal smoke cigarettes shops said the tax was causing them to lose business because it was driving prices too high. The state, in turn, said smoke cigarettes shop owners failed to submit required audits of cigarette sales and the tax agreement subsequently unraveled.

It's not clear if the recent ruling would send the tribe and state back to the table to possibly work up a new tax agreement, Gowrylow said.

"We haven't had any indication from the tribe that they are interested in another compact," he said.

The state isn't sure yet how it's going to enforce the tax requirement on non-Indians.

"At this point, it's too soon to speculate on what the next step is going to be," Gowrylow said. "But certainly what this does is remove a legal threat that challenges whether the state can expect tribal smoke cigarettes shops to assess the state's cigarette tax on (non-Indians)."

› Read More

Health Groups Urge N.J. To Spend More On Smoking-cessation Programs

A coalition of health groups is urging New Jersey to dedicate more cigarette tax revenue to programs that help people quit smoking cigarettes.

The groups say less than 1 percent of the billion dollars a year New Jersey gets in cheap cigarettes revenue from taxes and as part of a national settlement with cigarettes store companies goes toward smoking cigarettes-cessation programs. They're pushing for funding for those programs to be increased by $30 million a year.

"We believe there's a moral obligation to the smokers," said Blair Horner, vice president of advocacy for the American Cancer Society in New Jersey. "It's simply not fair to keep asking them--15 percent of the public we're talking about roughly--to pay more and more and then offer them no way to quit."

Dr. Fred Jacobs, former state Health Commissioner who now chairs the anti-tobacco coalition NJ Breathes, said it's an easy choice.

"If the government won't act to protect the health and safety of the people it serves, than what exactly is the role of the government at all?" he said Wednesday.

If more of the current revenue is not directed to stop smoking cigarettes efforts, the health groups recommend increasing the state's cigarette tax by a dollar a pack to help fund those programs.

› Read More

Cigarettes Smuggled Into State Illegally

About 40 percent of all online cigarettes smoked in New Jersey are smuggled into the state illegally — the highest percentage of any state in the nation — resulting in a loss of more than $500 million in uncollected tax revenue each year, according to a report obtained by The Star-Ledger.
The reason is hardly surprising: New Jersey levels a $2.70 tax on each pack of buy cigarettes sold, one of the highest rates in the nation.

Mobsters, people with ties to terrorist groups, and small-time crooks turn a quick profit by smuggling large quantities of cigarettes store from other states or overseas and selling them in New Jersey, according to the 2009 state Treasury Department report.

And every day, smokers in New Jersey avoid the steep tax by ordering cheap cigarettes on the internet or driving to neighboring states, most often Delaware, where they cost far less.
"New Jersey faces a consequential problem from cigarette tax evasion and smuggling," wrote Eric Friedman, a tax specialist with the Treasury Department who authored the report. "An increase in the tax rate will produce fewer legal, and more illegal, sales of cigarettes."
The report, which was completed but not officially released in 2008, is the first official estimate of the financial toll cigarette smuggling takes on the state, and raises questions about whether New Jersey is doing enough to combat the problem in today’s austere budget climate.
The estimated $519 million in uncollected tax revenue, about 1.5 percent of the 2012 budget, is about the same amount raised by the controversial millionaire’s tax in 2009. It also comes close to the $735 million that records show the cigarette tax itself raised last year.

"It’s an untapped resource of legitimate revenue," said state Sen. Joseph Vitale (D-Middlesex), who sponsored a measure signed by Gov. Jon Corzine in 2008 that called for the state to conduct the study and develop ways to combat smuggling, including the use of high-tech tax stamps that provide a history of every pack.

The overwhelming majority of cigarettes smuggled into the state — about 75 percent — are brought in by those looking to turn a quick and hefty profit, the report said. Often, these black market retailers use cheap, counterfeit tax stamps to elude detection. Far fewer packs are brought in by smokers trying to save money, and they are aided by the police, who rarely arrest those who cross state lines to buy cigarettes.
The report, taken together with new leadership at the state Office of Criminal Investigation, which focuses on tax evasion for the Department of Treasury, has led to an increase in the number of smugglers being caught.
It urged the state to bolster its depleted investigative team and adopt law enforcement strategies often associated with narcotics investigations, like controlled buys, video surveillance and the use of paid informants.
In addition, the 28-page report said the state should team up with the federal government and increase its investigation of retailers in Delaware, Pennsylvania and Virginia to help catch those crossing the border to buy discount cigarette online and stiffen the penalties for violators.
Charles Giblin, a veteran police officer who heads the Office of Criminal Investigation, said before he took over two years ago and shifted its attention to cigarettes online smuggling, the office focused heavily on white-collar crime.

Since then, he said, smuggling arrests have risen from 45 in 2009 to 192 last year.
Miroslaw Sapinski, a 63-year-old butcher from Saddle Brook, was arrested for smuggling and in April was sentenced to three years in prison. He was caught buying cartons of discount cigarettes in Virginia for about $35 a carton and reselling them at his shop for $58. Ordinarily, a carton of discount cigarettes sells for $80 in New Jersey

The Bergen County Prosecutor’s Office said Sapinski was selling about 500 cartons a week, which cost the state about $13,500 in lost tax revenue. When police seized the cars belonging to him and his wife, they said they recovered more than $80,000 in cash.

"We are using a multi-pronged approach," Giblin said. "We are going to seize assets and use whatever powers we have to curtail smuggling."

The state is also considering the use of high-tech tax stamps suggested in Vitale’s measure, which are encrypted with codes that include the history of each pack of cigarettes. Retailers and enforcement officials use hand-held scanners that reveal if a stamp is authentic, as well as where the pack came from and where it has been.

The encrypted stamps, combined with increased enforcement, have helped lift cigarette tax revenue in California, and they are also being used in Massachusetts. But New Jersey officials question whether investing in the technology will pay off.

"We are sending out requests for information later this year, and we will evaluate them," said Andy Pratt, a spokesman for the state Treasury Department. "But right now we are not convinced the technology itself increases revenue."

› Read More