Cigarette tax cash going up in smoke

The Target 12 Investigators uncover tax dollars going up in smoke. We confront cigarette sellers after discovering some may not be honest in paying cigarette taxes.

Target 12 has learned that Rhode Island is losing thousands, potentially millions of dollars to retailers who try and cheat the system and pocket the cash themselves.

Rhode Island raked in more than a hundred million dollars last year. The money was used to pay for things like education and public safety. But now, with the highest cigarette taxes in the country, there's temptation to cheat.

There is no denying that cigarettes are a huge cash cow for Rhode Island. On every pack sold the state collects $3.46 in taxes. It's so important. It's what led to the now-infamous smoke shop raid in 2003. Target 12 has discovered some retailers will go to great lengths to pocket the tax money instead of paying it. Acting on a tip, we sent a producer into Richmond News in downtown Providence to buy a pack of Marlboro 100's.

Our producer came out with the pack of cigarettes with part of the tax stamp apparently scratched away.

Alex Diprato confronted the store clerk," I am Alex with Eyewitness news. How are you doing?"
Clerk: Good.
Alex: Good. We bought this cigarette pack here earlier, and it doesn't have the RI stamp. The tax stamp. Why is that?
Clerk: I don’t know I am just helping this guy.

The tax stamp should be clearly visible on every pack. Its how the state makes sure the cigarette tax is paid. At Downtown Variety we bought another pack of Marlboro 100's. Again, the stamp apparently scratched off.

Alex Diprato asks, "Are you aware all cigarettes sold in RI must have the tax stamp? This one is scratched out."
Clerk # 2 responds, "I don’t know about it. I don’t know about it. I am just helping my friend."

The clerk said he didn't know why. But when we asked to see another pack of cigarettes. The clerk was quick to give us some Marlboro 100's with a Rhode Island stamp.

Alex Diprato: Is there another pack we can see? This one has the stamp. Why doesn't this one?
Clerk #2: I don’t know.

We showed the cigarettes to David Sullivan at the Division of Taxation.
Sullivan says, "It is pretty prevalent in the state."

Sullivan says dishonest retailers often buy cigarettes from Virginia where the tax is just 30 cents, then scratch the Virginia name away and sell the cigarettes at Rhode Island prices, pocketing more than 2 bucks a pack. Virginia's stamp is almost identical to Rhode Island's.

What it looks like happened to us, is that it was a stamp from another state, it could be Virginia since the color is the same, then scratched off the name of the state so you couldn't quickly identify that it was a Virginia tax stamp and they were selling it in Rhode Island probably illegally.

With our findings the Target 12 Investigators went to back Richmond News to confront the owner. But, he was not interested in talking to us.

Alex Diprato asks, "Why doesn't this have the tax stamp?"
The store owner responded, "I don't know what you are talking about. I don't know what you are talking about. I wasn't here."
Alex Diprato: Are you selling cigarettes without stamps?
Owner: Don't play around with me.

The owner ordered us out of the store refusing to answer any questions. We've learned Rhode Island is in the midst of changing its tax stamp to make it more unique.

Alex Diprato asks, "This is ripping off the state?"
Dan Sullivan: Correct it is illegal and its contraband cigarettes, they are not paying the taxes they should on the cigarettes.

Eyewitness News also tried, but was unable to reach the owner of Downtown Variety. A state investigator visited 750 retailers last year, seizing cigarettes and making more than a dozen arrests. No criminal charges have ever been lodged against the two stores we visited.

Cigarette Tax Laws for Retailers: http://www.rilin.state.ri.us/PublicLaws/law02/law02067.htm

Cigarette Tax Laws for Consumers: http://www.tax.ri.gov/help/cigarette_faq.php  

For questions, or to report cigarettes being sold illegally, call the RI Division of Taxation Hotline at 401-574-8955