Arizona officials are targeting illegal mail-order and Internet cigarette sales that don’t charge state taxes, saying lost revenue could be costing the state as much as $84 million a year.
"There have been studies done . . . that indicate the loss back in fiscal year 2003 was $12 million" for Arizona, said Dan Zemke, the state Department of Revenue’s public information officer. "That was under the presumption that 2 percent of sales were not being subjected to tax. There have been a couple of studies that this 2 percent will increase, or has increased, to as much as 6 (percent) to 14 percent."
The governor’s office has tripled the number of tobacco tax enforcement staff members to 10 to help "stem the tide of illegal sales," Zemke said.
In the fiscal year ending June 30, the state’s $1.18-perpack tobacco tax generated more than $274 million. The revenue goes to health care, education and the General Fund.
"The Legislature chose to make this a serious issue," Zemke said.
Cigarette sales in Arizona have fallen in recent years, he said, and it is difficult to know what part can be attributed to illegal sales.
Arizona’s initiative to stop illegal cigarette sales officially begins Wednesday, though Sandra Schwartz, the department’s criminal and civil investigations administrator, said more than 57,000 illegal cigarettes were seized in the first half of August.
State law requires Internet and mail-order sellers to Arizona consumers to file monthly reports with the Department of Revenue that list buyer names, addresses and purchase amounts. Sellers also have to report how they verified their customers’ ages. Fines can reach $5,000 or five times the price of the cigarettes purchased. Adults who buy illegal cigarettes face the same felony penalties, Zemke said. Minors would be charged with a petty offense.
Zemke conceded that the laws may be tough to enforce on out-of-state or out-ofcountry sellers.
"That’s something the (Arizona Attorney General’s Office) is going to figure out with us about what’s going to be effective," he said.
For more information about laws regarding illegal cigarette sales, visit www.revenue.state.az.us.