The higher tax appears to have cut into sales more than expected. Pack sales have dropped 23 percent to 35 percent each month since the tax was enacted - much greater than the 18 percent drop in sales predicted by fiscal analysts when the higher tobacco tax was proposed.
Comptroller Peter Franchot said in a recent letter to legislative leaders that tobacco tax collections this year have been substantially lower than expected. He noted that the strained economy has prompted some consumers to cut back.
At the Citgo gas station in the Western Maryland city of Brunswick, manager Cindy Furr said that her cigarette sales have dropped "dramatically" because customers can cross the Potomac River and buy smokes more cheaply at a convenience store a mile away in Virginia.
Furr said she used to order cigarettes from a wholesaler twice a week, and now she needs to order them only every two weeks, though customers continue to patronize the store for other things.
"We do have some pretty loyal customers, but if someone is going across the bridge to get cigarettes, they may say, 'While I'm here, I'll get gas,' " Furr said. "I just think Maryland is a little too overpriced."
Groups that push for higher taxes, including the Campaign for Tobacco-Free Kids, say that even with the decline of cigarette sales - which they see as a positive outcome - states still see significant increases in tax revenue when they raise the levy.
In Maryland, preliminary figures show tax receipts from cigarettes rose 27 percent to $340 million in fiscal 2008, which ended in June, up from $268 million the year before.
Danny McGoldrick, a researcher with the tobacco-free campaign, said his group encourages states to conservatively estimate the boon to revenue after a tax increase. He also said fewer smokers translates into lower health care costs, another burden on state budgets.
Kelly, whose force includes more than 20 inspectors and agents who oversee the enforcement of alcohol, fuel and tobacco taxes, said they log hours of surveillance and have developed a network of informants, including people who have been arrested and legitimate businesses who hear information about illegal sales.
The comptroller's office is also looking at using high-tech tax stamps to better track cigarette sales and thwart counterfeiters.
Agents tracked Pavel Peleshenko, 50, of Brooklyn, after he bought more than 25 cases of cigarettes, about 30 cartons each, at a large retailer in Virginia, according to authorities.
