Extra on Excise: New York’s Cigarette Strike Force to the Rescue

 What does a state do when it is losing tax revenue from tobacco trafficking and other forms of cigarette tax evasion?  In New York’s case, it created the Cigarette Strike Force—and it is paying off, recovering over $4 million in cash and tobacco contraband in its seven months of existence. The program is young, but according to Risa Sugarman, deputy commissioner for criminal investigations in the New York  Department of Taxation and Finance,  “they are here to stay.”

 It sounds like something out of a movie or a comic book. A strike force, formed by the governor to combat crime and cut sources of funding to terrorists. But this isn’t fiction. This inter-agency crew of tax warriors is here to stomp out crime rings, cut funding to terrorism and refill the state tax coffers that have been robbed by cigarette bandits. In March, Gov. Andrew Cuomo’s (D) press release announcing the strike force said it will “crack down on illegal tobacco trafficking and sales.”

The Cigarette Strike Force is housed in the Criminal Investigations Division (CID) of the New York  Department of Taxation and Finance. Michael Spinosa is the chief investigator of the strike force and acting director of the CID. “We’re looking to stop the flow of illicit and illegal cigarettes into New York state, and to investigate where the money is coming from, and where it is going to,” Spinosa said during a telephone interview with Bloomberg BNA on Aug. 13.

 Illegal cigarette trafficking is a problem shared by states across the country. According to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), states are losing out on billions of combined tax revenue dollars from the trafficking of cigarettes and other tobacco products.

 The illicit trade is a simple one: traffickers buy large quantities of cigarettes from states that impose low cigarette excise taxes like Virginia, at $0.30 per pack of 20, and sell them in states that impose high cigarette excise taxes like New York, at $4.35 per pack of 20. A cigarette trafficker can make up to $90,000 by trafficking just a van load of cigarettes, according to the U.S. Department of Justice’s 2009 report on the ATF’s efforts to combat cigarette trafficking.

 The differing tax rates between the states is the primary reason that cigarette trafficking is profitable, according to the DOJ. However, the strike force also battles other forms of cigarette tax evasion, like bootlegging from overseas and fraudulent tax stamps.

 The force has not been shy or quiet about its successes--numerous raids and arrests have been published by the department of taxation and finance:

  • On April 7, a strike force press release announced a seizure of 460 cartons of illegal cigarettes, more than 10,000 cigars, 14,000 counterfeit cigarette stamps, and more than $4,000. The strike yielded two arrests, and multiple trafficking charges.
  • On June 3, a strike force press release boasted a collection 3,236 cartons of illegal cigarettes, thousands of counterfeit stamps, and more than $130,000 cash. This strike yielded two arrests and multiple felonies.
  • On May 14, a press release detailed the arrest of a Bronx resident and seizure of 997 cartons of cigarettes bearing Virginia tax stamps. The individual in possession was charged with three felonies.

 The strike force is taking the fight to the next step. “We will stop the cigarettes, seize them, then do intelligence gathering and trace where the money came from, and where it is going,” Sugarman said during an Aug. 13 telephone interview with Bloomberg BNA.

 “Then we put the conspiracy together, make additional arrests, and seize their assets,” Spinosa said.

 Cigarette trafficking was an attractive alternative to trafficking drugs because cigarette trafficking had lesser penalties and lighter enforcement. If it’s up to Spinosa and his strike force crew, cigarette trafficking will not be such a viable alternative anymore.

Continue the discussion on LinkedIn: Should other states pursue aggressive enforcement against illegal cigarette trafficking?

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