Tobacco Tax Evasion Continues in Rhode Island

Rhode Island’s plague of cigarette tax evasion by those looking to capitalize on the Ocean State’s demand for cheap smokes appears to continue.

That is the takeaway from recent announcements by the Rhode Island Division of Taxation, which in the last month has reported two separate instances of busts allegedly involving sellers of cigarette packs that do not bear the state’s tax stamps.

This week, the Division of Taxation announced the conclusion of a two-month investigation by the Rhode Island State Police into illegal gambling, during which two convenience stores were discovered to have been “involved in the illegal sale of fraudulent and forged stamped cigarette packs.”

Last month, the Division announced that the State Police had “arrested three men on charges involving [non-payment of] the cigarette tax.” The Division confirms that “charges against one of the men included importing cigarettes with intent to evade taxes.”

As of the beginning of this year, Rhode Island’s cigarette tax was the second-highest in the country at $3.46 per pack, whereas neighboring Massachusetts clocked in at 9th place at $2.51 per pack.

That, some say, may explain the appeal of smuggled cigarettes or cigarettes bearing forged or fraudulent tax stamps to smokers within the state, and why tax evasion remains a potentially attractive, albeit illegal, activity.

Rhode Island Democratic Rep. Robert Phillips has introduced legislation that would cut the state’s high tobacco tax by $1 per pack, arguably reducing the incentive to purchase such cigarettes and providing a rationale for smokers from states like Connecticut (where the tax rate is lower, but still among the five highest rates in the nation) to visit Rhode Island and stock up on smokes.

Thus far, that legislation seems to have attracted little support, despite reports of alleged tax evasion like those over the last month.