Cigarettes cost Virginia millions in lost taxes

Illegal Cigaretts

ABINGDON, Va. - Cheap cigarettes are costing the Virginia Commonwealth millions of dollars and now officials are cracking down on bootleggers.

"It's not a good feeling for sure," said Logan Patrick, Manager at the Wholesale House Tobacco Outlet.

Patrick says that cigarette trafficking really can affect their business. "People are able to go to another store and pretty much get it quite a bit cheaper or better deals on it because they're doing something illegal," he said.

We learned that cigarette trafficking has been going on for years, but is becoming more widely known. We spoke with Virginia delegate Joe Johnson, who said that people do it more often to avoid paying taxes and to gain a little profit. "The counterfeit, black market would rob Virginia of a lot of income," said Johnson.

We learned that the manufacturers pay the federal tax of $11 up front and it is included in the sale price when wholesalers buy it. It is actually the wholesaler's responsibility to affix the stamps on each individual pack of cigarettes, which actually gives the state of Virginia $3 per pack.

However, if the packs are not sold in the state of Virginia with the proper stamps, then the state is not getting the tax money.

That isn't the only problem -- we also discovered that individuals go into stores looking to buy cases of cigarettes to sell in other states. Patrick says that they know exactly what to do if that happens in his store. "We would first contact the ATF. We would then give them the closest of a physical description or appearance description," said Patrick.

News 5 did a little digging and discovered that Virginia has the second-cheapest tax rate for cigarettes in the country, making it the perfect place to get cigarettes to sell in other states.

New York City, on the other hand, has the highest, costing cigarette buyers nearly $60 per carton in taxes alone.

The Bureau of Alcohol, Tobacco, Firearms and Explosives told us that the profit made on the cigarettes is around $85 per carton sold. We learned that some New York residents would do anything to get them cheaper, even if it is illegal.

Meanwhile, the store manager says that no matter the profit, they will not budge on their rules. "We follow all federal guidelines and do not sell cigarettes to anyone except who is coming through that door," said Patrick.

We discovered that a new state law was put into effect on July 1 saying that anyone who possesses with intent to distribute more than 25 cartons of tax-paid cigarettes will be guilty of a misdemeanor and would face a penalty of $5,000 to $50,000.

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