A year-long investigation in New York has resulted in the arrest of 21 individuals for cigarette tax stamp fraud. The individuals, mostly from the Bronx, Staten Island and Brooklyn, face charges of criminal tax fraud under new enhanced New York State laws expressly targeting these tax crimes.

Sales and purchases of more than nine million unstamped cigarettes resulted in a $21m New York State cigarette excise tax stamp fraud. On multiple occasions the defendants spent over $16m purchasing the unstamped cigarettes from undercover New York State tax investigators. They would then resell the unstamped cigarettes at a sizable profit to small businesses for individual sale, never paying the $42.50 excise tax or the sales tax on the cigarette cartons and never reporting the purchases or sales to the State. They would routinely purchase hundreds of cartons of unstamped cigarettes at a time.

New York State imposes an excise tax on cigarettes of $2.75 per pack of twenty.  Additionally, New York City is permitted to impose an additional $1.50 per pack, bringing the total combined tax rate to $4.25.

The operation seized over 150,000 counterfeit stamps and household irons, used to attach the stamps, along with boxes upon boxes of untaxed Marlboro and Newport cigarettes. It seems that a large proportion of the cigarettes came from North Carolina, where the state tax is low.