Tax lures bootleg tobacco to state

Authorities arrest 4, confiscate 15,000 packs of unstamped cigarettes

September 24, 1999|By Greg Garland | Greg Garland,SUN STAFF

The 30-cents-a-pack increase in state cigarette taxes that took effect July 1 is making Maryland an attractive target for bootleggers who do a thriving business in Northeast states with high tobacco taxes, state regulators say.

Since the tax increase took effect, agents from State Comptroller William Donald Schaefer's office said they have made four separate arrests, confiscating 15,000 packs of unstamped cigarettes worth more than $40,000.

State officials said three of those arrested were from the New York City area, and that it was not clear whether the cigarettes, purchased in Virginia, were intended for resale in Maryland or destined for sale elsewhere in the Northeast.

The latest arrest -- Monday in Prince George's County -- was the biggest yet, with a 35-year-old Brooklyn, N.Y., man charged with smuggling 9,410 packs of unstamped cigarettes, worth nearly $27,000, into the state.

"We believe that this is a multistate enterprise, and that they are dealing in other Northeastern states," said Thomas E. Gue, a supervisor with the comptroller's field enforcement division.

Gue said the 66-cents-per-pack tax in Maryland -- the third-highest in the Northeast, behind the 80 cents levied in New Jersey and the 78 cents assessed in New York City -- is making Maryland a target for bootleg sales. "Before the tax increase, we weren't as attractive to the bootlegging problem, but now we are," Gue said.

Another official with the comptroller's office said the four arrests since the fiscal year started July 1 are one fewer than all the arrests made in Maryland for cigarette smuggling the previous year.

All the states bordering Maryland levy lower taxes on cigarettes -- 2.5 cents in Virginia, 17 cents in West Virginia, 24 cents in Delaware and 31 cents in Pennsylvania -- prompting many Marylanders to cross state lines to stock up on smokes. The tax in Washington is 65 cents a pack.

Maryland law allows residents to possess two packs of cigarettes that do not bear the state's tax stamps, while nonresidents traveling through can possess a carton.

Gue said he has limited staff resources -- 12 enforcement agents with police powers, who also have other duties -- and his office concentrates on larger scale smuggling. Information developed through informants, police agencies and other sources led to the four busts since July 1, he said.

"We don't really know how big a problem it's going to be, but with the tax increase in July we knew we were going to have to be more alert to the possibility of untaxed cigarettes coming into the state of Maryland," Gue said.

Gue and Michael D. Golden, a Schaefer spokesman, said the comptroller has made enforcement a priority because bootleg cigarette sales put legitimate businesses that obey the laws at a disadvantage. "Comptroller Schaefer is very serious about stemming the tide of smuggled cigarettes," Golden said.

Opponents of the tax increase had warned it would hurt Maryland merchants who would lose sales of tobacco products to neighboring states that have lower taxes and that it would lead to smuggling problems, as has been the case elsewhere.

"It was entirely predictable and it's very unfortunate," said J. William Pitcher, who lobbied against the tax increase for tobacco companies in Maryland. "It would be even worse if they had passed a higher tax."

Pub Date: 9/24/99

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