Extras on Excise: Virginia Is Part of the Cigarette Smuggling Problem, But Also Part of the Solution?

Due to having one of the lowest state excise taxes for cigarettes—$0.30 for a pack of 20 cigarettes—Virginia is a very popular source for smugglers who purchase large quantities of cigarettes and then sell them illegally in states with higher taxes. The Commonwealth, however, is aware this problem exists and is looking for solutions.

The Bureau of Alcohol, Tobacco, Firearms and Explosives has found that cigarette smuggling leads to federal and state revenue losses of between $7 and $10 billion annually, as previously reported by Bloomberg News.

States with higher cigarette excise taxes have been host to greater amounts of tobacco trafficking. In particular, New York, which has the highest state excise tax rate ($4.35 a pack), sees a large amount of illegal cigarette commerce. In March, the state responded to this ongoing criminal activity by creating a “Cigarette Strike Force” to stop the smuggling.

Similarly, the Virginia State Crime Commission seeks to enhance the Commonwealth’s ability to stop the problem at the source.

On Dec. 2, the commission, which is primarily composed of state lawmakers, decided to propose laws geared towards preventing future cigarette smuggling. The commission’s Policy Options and Recommendations report makes six recommendations for the Virginia General Assembly, such as creating a mandatory tobacco retail license for both retailers and wholesalers.

For the proposed retail license, the commission wants the Department of Alcoholic Beverage Control to oversee the program. The report explains that the ABC’s jurisdiction over alcohol licensing procedures and enforcement makes them well equipped to supervise tobacco licenses. The commission also cited the overlap between tobacco and alcohol sales, as well as the more integrated response available with a central agency.

This is not the first time that the commission has voiced an opinion about cigarette smuggling. In 2012, the state senate tasked the commission with writing a report about cigarette trafficking that included prevention recommendations. The commission has since released updated reports each year.

One of the commission’s findings in a November 2014 report is that certain gangs smuggle cigarettes to support their human trafficking activities. Even more alarming is the discovery of ties between terrorism and smuggling; one group of smugglers arrested in 2013 had connections with Hamas and Hezbollah.

The General Assembly has enacted previous commission recommendations pertaining to preventing cigarette smuggling, so these new proposals may find favor with the legislature in 2015. In the meanwhile, the buttlegging cat-and-mouse game continues.