NACS shares concerns about unleveled playing field with Senate Finance Committee The U.S. Senate Finance Committee is held a hearing to address tobacco tax evasion, an issue about which NACS has long been active in educating both members of Congress and the general public. NACS has submitted a statement, “Tobacco: Taxes Owed, Avoided and Evaded,” to the Committee, in order to provide background on this issue affecting retailers.
The letter, available here, details the channels through which illicit sales of tobacco products occur, often placing convenience store tobacco retailers at a severe disadvantage. The primary channels through which this occurs are:
Many Native American tribes and tribal retailers are abusing their sovereignty to evade state taxes on sales of tobacco. Given the large tax component of the price of cigarettes, avoiding taxation can drive many consumers to tribal businesses, resulting in losses for off-reservation businesses and for the states that rely on that revenue.
Non-face-to-face (e.g., Internet) tobacco sales are far less likely to abide by pertinent tax provisions than sales in brick-and-mortar establishments. Congress took important steps to address this problem when it passed the Prevent All Cigarette Trafficking (“PACT”) Act, but continued vigilance by enforcement authorities is needed to build on the progress made to date.
Certain tobacco manufacturers are evading a recent tax increase applicable to cigarettes, “roll your own” tobacco and little cigars, by mislabeling their “roll-your-own” tobacco as “pipe tobacco.”
Due to the large disparities in tobacco product taxation in various states, some individuals purchase cigarettes in “low tax” states and transport them to “high tax states” to tell them on the black market. Such sales are at a substantial discount compared to the retail price in the “high tax” states that incorporates state tobacco taxes. Increased federal enforcement efforts are necessary to curtail this practice.
“Tobacco tax evasion continues to harm both legitimate retailers and the entities to which the taxes are due,” said Lyle Beckwith, NACS senior VP of government relations. “NACS appreciates the Senate Finance Committee’s attention to this issue.”
The full text of the NACS statement is available on NACS Online.