Tennessee cigarette surveillance program begins today
by Tom Humphrey
Knox News


NASHVILLE - Starting today, state Department of Revenue agents will begin stopping Tennessee motorists spotted buying large quantities of cigarettes in border states, then charging them with a crime and, in some cases, seizing their cars.

Agents have already been watching out-of-state stores that sell cigarettes near the Tennessee border to "get a feel where problem areas are," Farr said.

While declining to be specific, the commissioner said "problem areas" are generally along interstate highways with exits near the Tennessee border.
The idea is for the monitoring agent to spot a person buying cigarettes in volume at an out-of-state market, then departing in a vehicle with Tennessee license tags. Starting today, monitoring agents spotting such a suspect will call an arresting agent who will stop the car when it enters Tennessee, he said.

The agents will work "in roving teams at random times," he said.

"This shows once again that Reagan Farr and the Department of Revenue are more interested in turning Tennessee into a police state than doing their job of collecting taxes," said Drew Johnson, president of the Tennessee Center for Policy Research.

Farr said the program is partly an "education initiative" to make people aware of tobacco tax provisions in state law and a response to complaints from Tennessee tobacco retailers about "streams of Tennessee license plates crossing the border" from out-of-state retailers.

"I don't think (Johnson) or anyone else wants to see the commissioner of revenue deciding which laws passed by the Tennessee Legislature to enforce and which not to enforce," Farr said. "If that were the case, they (legislators) could just tell the commissioner 'get me $11 billion' wherever you think best."

Tennessee's cigarette tax went from 20 cents per pack to 62 cents per pack effective July 1. All eight states that border Tennessee have lower tax rates, meaning smokers can save up to 45 cents per pack - $4.50 for a 10-pack carton - by purchasing out of state.

The border states with the lowest cigarette taxes are Missouri with 17 cents and Mississippi at 18 cents. The highest is Arkansas with 59 cents.

Kentucky and Virginia both tax cigarettes at 30 cents a pack, North Carolina at 35 cents, Georgia at 37 cents and Alabama at 42.5 cents.

Under state law, bringing more than two cartons of cigarettes into the state without paying Tennessee taxes is a "Class B" misdemeanor, carrying punishment of up to six months in jail and/or a $500 fine. Bringing 25 or more cartons is a "Class E" felony, with minimum penalty of one year in prison and a maximum of six years plus a fine of up to $3,000.

In addition, the specific state statute dealing with untaxed cigarettes provides that vehicles used to transport more than two cartons "are considered contraband and are subject to seizure," says a Department of Revenue statement.

Farr said that agents have been instructed to seize any vehicle carrying more than 25 cartons of cigarettes without Tennessee tax stamps. In cases where three to 24 cartons are involved, he said vehicle seizure is "at the officer's discretion."

Rep. Stacey Campfield, R-Knoxville, said he sees inconsistency in the enforcement program.

"This administration has been very willing to turn a blind eye to illegal aliens pouring into our state, yet, when a natural Tennessean brings a couple of cartons of smokes across the state line, they want to arrest them," Campfield said.

He and Johnson both said the program appears to involve the state in interstate commerce, an area where the federal government is granted sole authority by the U.S. Constitution. Johnson said he hopes an arrested motorist will file a lawsuit against the program, and further predicted the state would lose.

Farr said the program does not run afoul of federal restrictions on state interference with interstate commerce.

"We're not regulating the purchase of anything in another state," he said. "We're regulating the possession of contraband in Tennessee."



Another Related Article:

Contraband Cigarettes?


 
Eric Beauchesne, CanWest News Service
Published: Thursday, June 01, 2006

OTTAWA - The golfer, sipping a beer on the 19th hole of an eastern Ontario golf course, unsealed a plastic sandwich bag and pulled out a cigarette.
Asked it they were contraband, he nodded yes, explaining later that at $20 for a carton of 200 cigarettes, the cost was less than a third of what he would have paid in a store, and that as a bonus he gets free home delivery.

He also said, jokingly, that he didn't know anyone who still bought cigarettes from stores.

His comments help explain a 10 per cent drop in sales of cigarettes this year - according to Statistics Canada - and an even greater decline in production here. They also explain what RCMP officers say has been a massive increase in seizures of contraband cigarettes.

''Since 2002, our seizures have increased about tenfold,'' said RCMP superintendent Joe Oliver.

''We're looking at potential losses, if you're looking at all taxes, in the hundreds of millions of dollars. It's not cheap.''

The drop in licensed production and sales of cigarettes combined with the reported increase in seizures of contraband smokes, bolster tobacco industry claims high taxes don't deter sales but merely drive them underground.

''The reality is high taxation policies have resulted in a considerable increase in contraband activity, whether it's product coming from native reservations or whether it's product coming from offshore,'' said Rothmans Inc. spokesman John McDonald.

Police and industry spokespersons admit they don't know how large a share of the annual multibillion-dollar cigarette market is contraband. However, they suspect it is back to, or near, levels reached in 1994 when governments in Canada slashed taxes to rein in what police said was an out-of-control black market for cigarettes.

Estimates of the share of today's market that's contraband run from 25 to 30 per cent for some parts of the country, McDonald said, adding that it doesn't just hurt government, but also legitimate suppliers, from producers to wholesalers to retailers.

Further, there's no control over people selling contraband cigarettes, and they don't care who they sell to, he added.
''These guys selling cigarettes out of the trunk of a car don't ask for proof of age,'' McDonald commented.

''This is the unintended consequences of high tobacco taxes,'' he said, noting that up to three-quarters of the retail price of cigarettes is tax. ''Yet, the anti-tobacco people ask for even higher taxes.''

Rob Cunningham, senior policy analyst with the Canadian Cancer Society, agrees no one knows the extent of contraband sales but suspects it's still a ''small portion'' of what he said is a shrinking market for cigarettes.

Federal government surveys show ''very substantial'' declines in the prevalence of smoking, he said. According to those surveys, 20 per cent of Canadians age 15 and over smoke on a daily or occasional bases, which is down from 25 per cent at the start of the decade.

The retail price of a carton of cigarettes varies widely from province to province, but has surged to $70 to $90 today from $23 to $59 in the late 1990s. That has widened the price gap with contraband cigarettes, a carton of which sells for anywhere from $20 in parts of Central Canada to as much as $40 in other regions of the country.






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