Getting around the high cost of cigarettes is much easier

April 21, 2002|By Jay Hancock

MIKE Tome has some choice words for the politicians who keep raising taxes on the product he sells: Yeah, baby. You go, taxman. Thank you, sir, may I have another?

As proprietor of Cheap-, Tome has no better marketing and promotion agents than the suits in Annapolis, Albany, Providence, Trenton and other state capitals that just jacked up cigarette taxes. Again.

Tome is a Seneca Indian who ships cigs tax-free from a 7-Eleven-size warehouse in upstate New York. His location on the Allegheny Indian Reservation, Tome says, places him beyond the writ of Parris N. Glendening, New York Gov. George E. Pataki or anybody else trying to balance public budgets by extorting smokers.

Each time taxes rise, Tome gets new business. He's one of thousands of people, operating in a dozen ways, who have dedicated their waking hours to outsmarting the executives, legislatures and lawyers driving up the cost of tobacco.

CheapSmokesbyMail's neon Web page sells almost any cigarette you've heard of, and many you haven't, free of excise and sales taxes.

A carton of Marlboros is $27.99. Free shipping. In downtown Baltimore, a carton of Marlboros is $37.99. And it will rise another $3.40 after state taxes go from 66 cents a pack to $1 on June 1.

CheapSmokesbyMail, whose faithful customers include a few Marylanders, has been doubly blessed this year in New York.

On April 1, the state cigarette tax went up to $1.50 a pack, the highest in the country, and New York Mayor Michael Bloomberg wants to add another $1.50 a pack in his city. A pack in Gotham could cost more than $6 before long.

Quick to recognize a heaven-sent opportunity, the folks at CheapSmokesbyMail jumped in a Ford Explorer a couple of weeks ago and drove down the New York State Thruway to Lower Manhattan, where they passed out leaflets advertising their wares.

Potential customers were easy to identify and approach: They were the ones huddled on sidewalks and in alleys ingesting nicotine, banished from the corporate warrens above. Tome, 30, says his orders have lit up since the expedition.

"I'd say we had a 50 percent increase," he says. "We went down there after last year's tax increase, which also happened to be in April, and it went OK. This time it was GREAT. This time a LOT of people were interested."

Another way to escape high tobacco taxes is to buy by mail from Virginia, North Carolina or other low-tax states through such companies as eSmokes- .com, based in Lowell, N.C.

Or you can drive to Virginia, where the tax is only 2.5 cents a pack, and throw a few cartons in the trunk.

"Let me tell you something. There is huge traffic going from Virginia into Maryland," says Gary Kirschner, chief executive of eSmokes and a former manager for tobacco giant Brown & Williamson. "There are stores on the border doing 40,000 and 50,000 cartons a week."

All of this is illegal in Maryland, of course, where you're not allowed to bring more than two packs of cigarettes from another state by any means, according to the state comptroller's office.

You can also cheat the taxman the old-fashioned, secondhand way: with smugglers.

Last month, four enterprising gentlemen from Brooklyn, N.Y., loaded almost 700 cartons of bootleg cigs into a Toyota Camry and a Chevy Suburban and headed north from Virginia's Eastern Shore, according to the Maryland comptroller's office.

Unfortunately for the entrepreneurs, they were arrested on Route 13 just over the Maryland border by state agents. But many more smugglers probably get through than are arrested.

Taxes aren't the only thing hitting smokers' pocketbooks.

The tobacco-litigation settlement has built billions of dollars into cigarette prices to pay lawyers, government plaintiffs and the estates of people who died of lung cancer. And the cigarette companies themselves keep raising prices to maintain profits.

Happily for tobacco users, the market also works here in wondrous ways. New cigarette brands are undercutting the established giants' prices and, in some cases, bypassing the litigation-finance machine.

Recently Maryland sued four upstart cigarette manufacturers who had kept prices low by failing to pay into a required escrow account to cover future lawsuits, said Assistant Attorney General Maureen M. Dove.

Expect this sort of thing to continue. The more money the establishment tries to pry out of smokers, the more the system will break down. Don't be surprised if tobacco-tax increases fail to raise as much revenue as lawmakers think.

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