Fake cigarettes rife in New York City, says study

Tobacco stores in New York City are selling a 'substantial' number of cigarette packs carrying either counterfeit or out-of-state tax stamps.

That is the conclusion of an investigation by New York University public health researchers, who have published their findings in the BMJ journal Tobacco Control.

The illegal cigarette sales are more common in independent stores than in chain stores, according to the researchers, who suggest that one reason for the finding is that cigarettes are more expensive in New York than anywhere else in the country "thanks to state and city taxes and minimum price laws."

In NYC, stamping agents pay cigarette taxes to the government in advance; they purchase and affix tax stamps to packs for wholesalers, who in turn sell the stamped packs to the more than 9,700 licensed retailers.

A team led by Diana Silver, associate professor of public health at NYU's Steinhardt School of Culture, Education, and Human Development and College of Global Public Health, bought 830 packs of cigarettes from chain and independent cigarette retailers across NYC over a few months in 2014.

To determine the legality of the tax stamps, the NYC Sheriff's office used a laser detection device to inspect the packs and find counterfeit and out-of-state stamps, and concluded that 125 or 15 per cent of the packs were bogus.

More than 10 per cent of all stamps were counterfeit, while 4.5 per cent carried stamps from Virginia. Virginia does not have a minimum legal price for cigarettes and imposes a cigarette excise tax of 30 cents per pack - the second-lowest in the country.

The number of illegal packs - which were found in all five city boroughs - grew over the period studied, increasing from the spring to the fall of 2014.

"Our research found that illegal cigarettes are regularly available over the counter in New York City," said Silver. "Taxes on packs sold with counterfeit or out-of-state tax stamps are not being recouped by the city and the state."

The vast majority of cigarette packs were sold at prices in compliance with the minimum price law, suggesting that the lower prices paid by the retailers were not passed on to customers.

"Consumers may be unaware they are purchasing illegal cigarettes, since, at least in our study, clerks sold our investigators these cigarettes at full price," she added.

Prior studies have collected littered cigarette packs and examined their stamps to try and understand the extent to which cigarette taxes are dodged, but evidence about tax evasion, especially in over-the-counter cigarette sales, is still scarce.

"While cigarettes that have been smuggled into New York City from other places may also be sold directly to consumers, our study demonstrates that retailers are selling these cigarettes throughout the city," said Silver.

"Our findings underscore the need for intensive monitoring, oversight, and support to help retailers comply with existing and new cigarette laws. The use of digital tax stamps, coordination of taxes across areas, and systematic monitoring of enforcement efforts could help to address the issues we uncovered," she concluded.