WRAL Investigates

Senate debates tax stamps to snuff out cigarette smuggling

A Senate committee on Wednesday debated whether North Carolina should begin requiring tax stamps on packs of cigarettes to prevent smuggling.

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Cigarette smuggling big business in N.C.
RALEIGH, N.C. — A Senate committee on Wednesday debated whether North Carolina should begin requiring tax stamps on packs of cigarettes to prevent smuggling.

North Carolina, South Carolina and North Dakota are the only three states that don't mandate a stamp to show that state taxes have been paid on each pack of cigarettes. Agents with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives say the lack of tax stamps allows smugglers to stick other states' stamps on cigarettes bought in North Carolina and resell them elsewhere for hefty profits.

In 2002, two brothers were convicted in Charlotte of smuggling cigarettes to Michigan, selling them and using the proceeds to fund suspected Hezbollah terrorists.

The operation was based about 300 yards from Sen. Fletcher Hartsell's home in Concord, which prompted him to sponsor a bill calling for North Carolina to begin using tax stamps on cigarette packs.

Hartsell, R-Cabarrus, even played video of a recent WRAL Investigates story on cigarette smuggling for his colleagues on the Senate Finance Committee.

Area ATF agents told WRAL that they have investigated four smuggling cases in the past eight years that resulted in federal convictions. That does not include cases that were referred back to the state for prosecution or any ongoing illegal cigarette investigations.

Still, wholesalers are lobbying against the proposal, saying a simple stamp could cost them plenty of money and wouldn't affect the smuggling efforts of organized crime or terrorists.

"These are folks who blow up buildings and planes and kill people, and the fact we tell them or that we put a stamp on a pack of cigarettes is not going to make them follow the law," said Andy Ellen, general counsel for the North Carolina Retail Merchants Association.

The committee didn't act on the bill Wednesday, but Sen. David Hoyle, D-Gaston, said he plans to vote against it because he doesn't want to add costs to merchants statewide.

"It's something I don't think is necessary," Hoyle said of the tax stamp. "At a time when we need to do everything we can to help small businesses, we seem to be piling on and putting more and more regulations and more and more costs on business, and it's time for it to stop."

Michael Thorne-Begland, director of brand integrity and assistant general counsel for client services for Altria Group Inc., the parent company of cigarette giant Philip Morris, disputed the idea that tax stamps would be a tremendous cost burden for retailers.

"We provide machines for free that a wholesaler can apply a stamp. They can also be bought for as little as $5,500," said Thorne-Begland, who came to Raleigh from Altria's headquarters in Richmond, Va., to support the tax stamp effort.

"We care largely because we don't want our brands associated with illicit activity," he said.


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Bruce Mildwurf, Reporter
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