Rhode Island: Cigarette Tax Spurs Cigarette Smuggling
- Sales Tax News
- Oct 10, 2012 | Gail Cole
After New York, Rhode Island has the highest cigarette excise tax in the country. On July 1, 2012, the cigarette tax was raised from $3.46 to $3.50 per pack. By comparison, the cigarette tax per pack is $0.30 in Virginia, $0.87 in California, and $1.98 in Illinois. New York's cigarette tax is $4.35 per pack. According to the non-partisan research group, Tax Foundation, "[t]he national average is $1.46" per pack.
In response to increasing taxes around the country, states like Rhode Island have seen "a growing number of out-of-state cigarette dealers taking orders for cigarettes over the telephone, by mail order, or over the internet." (Rhode Island Division of Taxation). Cigarettes sold by out-of-state cigarette dealers generally do not include a state's cigarette tax or sales tax; they are usually "unstamped." Stamps provide proof of payment of the cigarette tax.
Such purchases raise a lot of questions. To answer them, the State of Rhode Island Division of Taxation has released a notice regarding Internet / Mail Order Purchases of Cigarettes.
Is it legal to purchase unstamped cigarettes over the phone, the internet, or by mail?
Unstamped cigarettes are considered contraband in Rhode Island. They "may be seized by the Tax Administrator, his agents, or law enforcement personnel."
Is a purchaser required to pay tax on cigarettes purchased over the phone, the internet, or by mail?
Anyone in Rhode Island must "file a return and pay the tax due to the Administrator within twenty-four (24) hours after coming into possession of the cigarettes. Both the cigarette tax and the sales tax are due… ."
How much tax is due?
The Rhode Island cigarette tax of $3.50 and the seven percent (7%) Rhode Island sales tax are due.
What is the penalty for failure to pay the tax due?
Anyone who purchases unstamped cigarettes for personal use "and fails to pay the required taxes within twenty-four (24) hours … is guilty of a misdemeanor" and faces fines of at least hundred fifty dollars and up to one year in prison, or both.
"Any person who orders unstamped cigarettes for others, or pools orders for unstamped cigarettes with others is guilty of a felony… ." Such an individual faces fines of ten thousand dollars or five times the retail value of the cigarettes involved (whichever is greater), and up to five years in prison.