Delivering for NYC

Cracking Down On The Sale Of Illegal Tobacco

Why should we care? Because the black market sale of cigarettes are funding terrorist groups such as Hamas and Hezbollah and cheating New York City out of millions in tax receipts. According to a recent Government Office of Accountability (GAO) report, Hezbollah profited $1.5 million from the sale of illegal tobacco from 1996-2000. We need to close the loopholes in current tobacco trafficking laws and provide law enforcement with new tools to combat the innovative methods being used by cigarette traffickers to distribute their products.

Here’s why illegal tobacco sales are happening. There is a high variability between the excise taxes on cigarettes in different localities. This creates a highly lucrative market for individuals to purchase cigarettes in one locality and transport them to another locality for resale, below market value but at a profit, while evading the local sales tax. The Independent Budget Office (IBO) estimates New York City loses $40 million per year in tax revenue due to the illegal tobacco market.

Also, cigarette wholesalers legally sell tax free cigarettes to Native Americans living on reservations, which are being illegally resold tax-free on the internet to non-Native Americans. Since 2002, when New York increased the tax on cigarettes 39 cents to $1.50 a pack, the number of tax free cigarette packs sold to Native Americans living on New York reservations has risen from 280,065,310 packs in 2002 to 360,145,380 in 2006, an increase of 22%. Of the 105 domestic tobacco retail websites, 60 are by Native Americans. A survey conducted in 2006 by the state's Department of Health found that nearly half of the smokers interviewed in New York City said that they had bought illegal cigarettes within the year.

It’s been well documented that the profit in these illegal tobacco schemes has been used to fund organized crime and terrorist groups. The federal Bureau of Alcohol, Firearms, Tobacco and Explosives says that eight years ago there were only 100 such investigations, now there are several hundred in New York State, several with links to extremist groups such as Hamas and Hezbollah.

Bottom line, it’s time we crack down on the illegal sale of tobacco. Every day we delay is another day terrorists and criminals have the ability to raise more money and kids have easy access to tobacco products sold over the internet.

In November, I announced the introduction of the Prevent All Cigarette Trafficking Act of 2007 or the PACT Act (H.R. 4081). To read the press release from the announcement event, click here