NCPA - National Center for Policy Analysis

Smokers Finding Ways Not To Pay The Price

January 3, 2000

New sky-high taxes being imposed on cigarettes by many states are prompting smokers to find ways to avoid paying them.

  • One means is to patronize cigarette shops located on Indian reservations, where customers don't have to pay state taxes -- and many are flocking to them, according to reports.
  • At a reservation smoke shop near Buffalo, N.Y., customers can avoid the state's $1.11 tax -- the highest in the nation.
  • Sales are also offered over the Web by Indian firms -- offering savings of at least $10 a carton.
  • While non-Indians are supposed to pay the taxes, they reportedly are not doing so -- either in the shops or through Internet sales.

According to the federal Bureau of Alcohol, Tobacco and Firearms, states with the highest cigarette taxes in 1998 were losing $100 million a year in potential revenues because of smuggling.

After Maryland raised its tax last year to 66 cents a pack from 36 cents, state authorities admitted that they made only nine arrests for smuggling during three months -- although that was up from five for the entire previous year.

Source: Joyce Purnick, "Cigarette Tax Leaves Smokers Many Ways to Avoid It," New York Times, January 3, 2000.


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