Criminal Sale of Untaxed Cigarettes (NY State Tax Law § 1814)

Posted By Galluzzo & Arnone LLP || 10-Jan-2013

A recent article in CNN declared that 60% of the cigarettes sold in New York had been smuggled in from out of state so as to avoid the onerous New York state cigarette taxes. This is somewhat unsurprising, given that New York state imposes a $4.35 tax per pack, and New York City an additional $1.50 (making some packs as expensive as $12 each). Indeed, New York state’s cigarette taxes are the highest in the country; in contrast, Missouri imposes a tax of just 17 cents per pack.

Prosecutors have taken notice and are pursuing traffickers of untaxed cigarettes. For example, the Queens District Attorney’s Office recently announced an arrest of a major trafficker of untaxed cigarettes. The applicable criminal statute for smugglers and traffickers of untaxed cigarettes is New York State Tax Law § 1814, which can apply either Class A misdemeanor or Class E felony charges to the conduct.

New York State Tax Law § 1814 states:

	--(a) Any person who willfully attempts in any manner to evade or defeat
	 the taxes imposed by article twenty of this chapter or payment thereof
	 on (i) ten thousand cigarettes or more (ii) twenty-two thousand cigars
	 or more, or (iii) four hundred forty pounds of tobacco or more or has
	 previously been convicted two or more times of a violation of paragraph
	 one of this subdivision shall be guilty of a class E felony. (b) Any person,
	 other than an agent licensed by the commissioner, who possesses or transports
	 for the purpose of sale any unstamped or unlawfully stamped packages of
	 cigarettes subject to tax imposed by section four hundred seventy-one
	 of this chapter, or who sells or offers for sale unstamped or unlawfully
	 stamped packages of cigarettes in violation of the provisions of article
	 twenty of this chapter shall be guilty of a misdemeanor. Any person who
	 violates the provisions of this subdivision after having previously been
	 convicted of a violation of this subdivision within the preceding five
	 years shall be guilty of a class E felony. (c) (1) Any person, other than
	 an agent licensed by the commissioner, who willfully possesses or transports
	 for the purpose of sale ten thousand or more cigarettes subject to the
	 tax imposed by section four hundred seventy-one of this chapter in any
	 unstamped or unlawfully stamped packages or who willfully sells or offers
	 for sale ten thousand or more cigarettes in any unstamped or unlawfully
	 stamped packages in violation of article twenty of this chapter shall
	 be guilty of a class E felony. (2) Any person, other than an agent licensed
	 by the commissioner, who willfully possesses or transports for the purpose
	 of sale thirty thousand or more cigarettes subject to the tax imposed
	 by section four hundred seventy-one of this chapter in any unstamped or
	 unlawfully stamped packages or who willfully sells or offers for sale
	 thirty thousand or more cigarettes in any unstamped or unlawfully stamped
	 packages in violation of article twenty of this chapter shall be guilty
	 of a class D felony. (d) For the purposes of this section, the possession
	 or transportation within this state by any person, other than an agent,
	 at any one time of five thousand or more cigarettes in unstamped or unlawfully
	 stamped packages shall be presumptive evidence that such cigarettes are
	 possessed or transported for the purpose of sale and are subject to the
	 tax imposed by section four hundred seventy-one of this chapter. With
	 respect to such possession or transportation any provisions of article
	 twenty of this chapter providing for a time period during which a use
	 tax imposed by such article may be paid on unstamped cigarettes or unlawfully
	 or improperly stamped cigarettes or during which such cigarettes may be
	 returned to an agent shall not apply. The possession within this state
	 of more than four hundred cigarettes in unstamped or unlawfully stamped
	 packages by any person other than an agent at any one time shall be presumptive
	 evidence that such cigarettes are subject to tax as provided by article
	 twenty of this chapter. (e) Nothing in this section shall apply to common
	 or contract carriers or warehousemen while engaged in lawfully transporting
	 or storing unstamped packages of cigarettes as merchandise, or lawfully
	 transporting or storing tobacco products, nor to any employee of such
	 carrier or warehouseman acting within the scope of his employment, nor
	 to public officers or employees in the performance of their official duties
	 requiring possession or control of unstamped or unlawfully stamped packages
	 of cigarettes or possession or control of tobacco products, nor to temporary
	 incidental possession by employees or agents of persons lawfully entitled
	 to possession, nor to persons whose possession is for the purpose of aiding
	 police officers in performing their duties. (f) Any willful act or omission,
	 other than those described in section eighteen hundred one of this article
	 or subdivision (a), (b), (c), (d), (e), (g), (h) or (i) of this section,
	 by any person which constitutes a violation of any provision of article
	 twenty of this chapter shall constitute a misdemeanor. (g) Any person
	 who falsely or fraudulently makes, alters or counterfeits any stamp prescribed
	 by the tax commission under the provisions of article twenty of this chapter,
	 or causes or procures to be falsely or fraudulently made, altered or counterfeited
	 any such stamp, or knowingly and willfully utters, purchases, passes or
	 tenders as true any such false, altered or counterfeited stamp, or knowingly
	 and willfully possesses any cigarettes in packages bearing any such false,
	 altered or counterfeited stamp, and any person who knowingly and willfully
	 makes, causes to be made, purchases or receives any device for forging
	 or counterfeiting any stamp, prescribed by the tax commission under the
	 provisions of article twenty of this chapter, or who knowingly and willfully
	 possesses any such device, shall be guilty of a class E felony. For the
	 purposes of this subdivision, the words "stamp prescribed by the
	 tax commission" shall include a stamp, impression or imprint made
	 by a metering machine, the design of which has been approved by such commission.
	 (h) (1) Any dealer, other than a distributor appointed by the commissioner
	 of taxation and finance under article twenty of this chapter, who shall
	 knowingly transport or have in his custody, possession or under his control
	 more than ten pounds of tobacco or more than five hundred cigars upon
	 which the taxes imposed by article twenty of this chapter have not been
	 assumed or paid by a distributor appointed by the commissioner of taxation
	 and finance under article twenty of this chapter, or other person treated
	 as a distributor pursuant to section four hundred seventy-one-d of this
	 chapter, shall be guilty of a misdemeanor punishable by a fine of not
	 more than five thousand dollars or by a term of imprisonment not to exceed
	 thirty days. (2) Any person, other than a dealer or a distributor appointed
	 by the commissioner under article twenty of this chapter, who shall knowingly
	 transport or have in his custody, possession or under his control more
	 than fifteen pounds of tobacco or more than seven hundred fifty cigars
	 upon which the taxes imposed by article twenty of this chapter have not
	 been assumed or paid by a distributor appointed by the commissioner under
	 article twenty of this chapter, or other person treated as a distributor
	 pursuant to section four hundred seventy-one-d of this chapter shall be
	 guilty of a misdemeanor punishable by a fine of not more than five thousand
	 dollars or by a term of imprisonment not to exceed thirty days. (3) Any
	 person, other than a distributor appointed by the commissioner under article
	 twenty of this chapter, who shall knowingly transport or have in his custody,
	 possession or under his control twenty-five hundred or more cigars or
	 fifty or more pounds of tobacco upon which the taxes imposed by article
	 twenty of this chapter have not been assumed or paid by a distributor
	 appointed by the commissioner under article twenty of this chapter, or
	 other person treated as a distributor pursuant to section four hundred
	 seventy-one-d of this chapter shall be guilty of a misdemeanor. Provided
	 further, that any person who has twice been convicted under this subdivision
	 shall be guilty of a class E felony for any subsequent violation of this
	 section, regardless of the amount of tobacco products involved in such
	 violation. (4) For purposes of this subdivision, such person shall knowingly
	 transport or have in his custody, possession or under his control tobacco
	 or cigars on which such taxes have not been assumed or paid by a distributor
	 appointed by the commissioner where such person has knowledge of the requirement
	 of the tax on tobacco products and, where to his knowledge, such taxes
	 have not been assumed or paid on such tobacco products by a distributor
	 appointed by the commissioner of taxation and finance. (i) Any person
	 who falsely or fraudulently makes, alters or counterfeits a registration
	 certificate or sticker required under the provisions of section four hundred
	 eighty-a of this chapter, or causes or procures to be falsely or fraudulently
	 made, altered or counterfeited any such registration certificate or sticker,
	 or knowingly and willfully utters, purchases, passes or tenders as true
	 any such false, altered or counterfeited registration certificate or sticker,
	 and any person who knowingly and willfully makes, causes to be made, purchases
	 or receives any device for forging or counterfeiting any registration
	 certificate or sticker required under the provisions of such section,
	 or who knowingly and willfully possesses any such device, shall be guilty
	 of a class B misdemeanor.
	So, in a nutshell, as you can see from the above, whether or not a criminal
		 cigarette smuggler is charged with a Class D or E felony or an A misdemeanor
		 depends largely on the quantity of cigarettes at issue (one can also be
		 charged with a lesser B misdemeanor for possessing a counterfeit tax stamp
		 forgery device). One can be prosecuted for selling the cigarettes or merely
		 possessing them with the intent to sell and/or evade taxes. 

If you or a loved one have been arrested and charged with a violation of New York State Tax Law §1814 for allegedly selling illegal cigarettes, you should strongly consider retaining an experienced criminal defense lawyer immediately.

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