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Posted January 18, 2013 | comments Leave a comment

Winchester bearing down on cigarette tax violations

By Joe Beck

Winchester authorities intensified their crackdown on illicit cigarette sales Thursday as they confiscated packs by the dozen at all four convenience stores they visited.

Some of the packs were missing a city tax stamp, and others were suspected of being counterfeit products smuggled in from China and other countries. Ann Burkholder, Commissioner of Revenue, and Paul J. Carey, chief of enforcement for the Northern Virginia Cigarette Tax Board, displayed two boxes filled with the seized cigarettes before a training class of police officers Thursday night. Burkholder estimated the boxes held the equivalent of about 20 cartons.

The class was latest of several conducted in the last month that signaled Burkholder's intention to step up efforts to enforce the requirement that all cigarette packs sold within the city limits bear a 25-cent local tax stamp in addition to the one required by the state.

Carey said it's been hard to get state and city officials to take cigarette trafficking seriously, but that may be changing. City police need to take a closer look if they stop a vehicle and see more than six cartons of cigarettes inside, he told the class.

"There's a lot of stuff out there that's running through your community that you haven't seen," Carey said.

The class was held days after Winchester police arrested a New York City man at America's Best Value Inn. Heng Ping Li was charged with possession of untaxed cigarettes after police executed a search warrant and discovered 480 untaxed cartons in his room.

"Clearly, what happened last week was pretty new to us," Burkholder said, adding that she was studying procedures for converting the confiscated cigarettes into revenue for the city.

Traffickers stand to make huge sums of easy money, some of which often finds its way to terrorism and organized crime networks, Carey said. Cartons of cigarettes bought in Virginia and resold in New York can quickly bring in hundreds of thousands of dollars to sellers, Carey said.

The math is simple: New York City taxes a carton of cigarettes containing 10 packs at $58.50 a carton while Virginia's tax rate for the same carton stands at $3. Someone from Virginia selling a case of cigarettes filled with 60 cartons can make an illicit profit of up to $3,330 by reselling it in New York City, according to the Virginia Crime Commission.

Federal authorities have been prosecuting cigarette trafficking cases from Frederick and Shenandoah counties, some of which have involved transactions running into the millions of dollars.

Burkholder estimated that Winchester's crackdown on illicit cigarette sales has already allowed the city to recover about $30,000 in lost revenue from unreported sales taxes and unpaid local tax stamps.

Burkholder said fair and equitable enforcement of cigarette taxes also helps merchants who otherwise find themselves at a disadvantage when competing against a business that rakes in profits from illicit activity.

"For those operating an honest, law-abiding business in Winchester, it helps level the playing the field," she said.

Contact staff writer Joe Beck at 540-465-5137 ext. 142, or jbeck@nvdaily.com

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