State revenuers find no wisp of smuggling

Arkansas Tobacco Control agents have periodically checked retail stores across the Missouri state line from Bella Vista since March 1, when Arkansas raised its cigarette tax by $5.60 per carton, but so far they’ve seen no smuggling of cigarettes.

“I’ve not seen anything that looked anywhere close to a misdemeanor or felony,” Bill Holohan told Glenn Redding on Tuesday as the two Arkansas enforcement agents talked in the parking lot of the Wal-Mart Supercenter. “I haven’t seen much tobacco come out at all.”

“I don’t think we’ve got much bootlegging going on,” Redding replied, referring to the transportation of untaxed cigarettes.

The agents were looking for Arkansans who were buying several cartons of cigarettes in Missouri to bring back to their home state. In particular, they were looking for Arkansas retailers who buy cigarettes in Missouri and take them across the state line to sell in Arkansas stores.

Possession of more than 11 packs of cigarettes in Arkansas, without Arkansas tax stamps, would qualify as a Class A misdemeanor, punishable by up to one year in jail. Possession of nine cartons would be a felony, punishable by up to 10 years in prison.

Missouri has the second-lowest cigarette tax in the country – $1.70 per carton. In Arkansas, the total state tax is $11.50 per carton, theoretically making a 10-pack carton of cigarettes about $10 cheaper in Missouri. Eight cities in Arkansas, including Bella Vista, have cigarette tax rates only 3 percent higher than Missouri – or $2 per carton – because they border that state.

Premium brands now sell for about $50 a carton at many Arkansas stores. Marlboro, the nation’s most popular brand, was selling for $53.53 per carton, with sales tax included, in Rogers on Wednesday.

In March, when Arkansas Act 180 went into effect raising the tax on cigarettes, the Tobacco Control Board heard reports about people buying 20 cartons at a time in the southwest corner of Missouri to take back to Arkansas.

But Redding said that may have been a rush to stock up before new price increases kicked in. The federal government raised its excise tax on cigarettes by $6.17 on April 1, but some manufacturers passed that price hike on to retailers a month earlier.

Redding notes that, with only eight agents, the state Tobacco Control Board is spread thin. Redding has 533 permitted retailers in his 13-county section of north Arkansas.

Looking for smugglers is only part of what he does. Redding also checks to make sure stores are operating legally and not selling tobacco below the minimum prices allowed by the state.

The Tobacco Control Board does compliance checks at each store at least once a year. That requires sending a minor, under age 18, into each store to try to buy cigarettes.

Redding goes in earlier to ensure the minor’s safety. He pretends to shop while the minor tries to purchase cigarettes. Redding, 52, has experience as an actor. As a child, he appeared in two episodes of Gunsmoke and one episode of Petticoat Junction. He also spent 20 years with the Harrison Police Department, about four years of which was as an undercover officer.

Tobacco Control does 5,000 compliance checks a year, in accordance with an agreement with the state Department of Health.

The first-offense fines for selling to a minor are up to $250 to the store owner and $100 to the sales clerk, plus court costs. The amount of fines double for the proprietor on the second, third and fourth offenses, and the store’s tobacco permit can be suspended for two, seven or 14 days, respectively. On the fifth offense, the owner can be fined $2,000 and lose his tobacco permit.

Stores in Arkansas had a 6.4 percent violation rate in 2008, when checked for selling to minors. That compares to a 21.4 percent violation rate in 2003. The improvement was because of “increased compliance checks and merchant education,” according to the board’s annual summary.

Redding regularly checks retailers along every road from Arkansas to Missouri. He also has visited 20 law enforcement agencies in his region to make sure they’re on the lookout for tobacco smugglers.

“This is a tougher game than narcotics because it’s a legal game until you buy too much of it,” he said.

The additional Arkansas tax is supposed to help pay for a trauma system for selected hospitals in the state.

The new federal cigarette tax will provide funding for the State Children’s Health Insurance Program and is part of a strategy to discourage young people from smoking.

Nationally, the state tax rate on cigarettes ranges from 70 cents per carton in South Carolina to $34.60 in Rhode Island. A carton normally contains 10 packs. Each pack usually contains 20 cigarettes.

On March 1, Arkansas also raised the tax on other tobacco products by 36 percent on the selling price, up from 32 percent, for a total rate of 68 percent. In Arkansas, an individual or retailer can legally possess 50 cigars or three pounds of smoking tobacco purchased in another state.

Since it began targeting tobacco product smugglers in September, the Tobacco Control Board has charged six retailers in Arkansas with selling tobacco products brought in from other states.

The arrests were made in Little Rock, West Memphis, Jonesboro, El Dorado and Dermott. Three of those arrests involved tobacco from Tennessee, where the state tax is $6.20 per carton of cigarettes and 6.6 percent on the sales price for other tobacco products.

Last year, the board issued 21 administrative fines totaling $40,513.


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