Businesses accused of selling untaxed cigarettes

April 25, 2013
Updated 8:32 p.m.
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— The state Department of Taxation and Finance announced Thursday the arrest of 10 people in the Capital Region and Hudson Valley for allegedly illegally possessing untaxed cigarettes and tobacco.

Those arrested are all employees or owners of roll-your-own cigarette outlets. State officials say they possessed quantities of pre-rolled, untaxed cigarettes that were to be sold, in violation of state Tax Law.

“They were rolling cigarettes and selling them without tax stamps,” said Geoff Gloak, a spokesman for the Department of Taxation and Finance.

Gloak said in many cases, the shops were selling 200 cigarettes — the equivalent of a carton — they rolled in a machine without the proper taxes added.

There were no immediate arrests at two of the 12 locations raided, though evidence was seized.

Earlier this year, undercover investigators with the Department of Taxation and Finance said they made purchases of untaxed, pre-rolled cigarettes at each of the 12 locations.

The Capital Region locations raided include:

• Tobacco House of Juan in Westgate Plaza, 911 Central Ave., Albany. Two roll-your-own cigarette machines, a point of sale computer, 117 cartons of untaxed cigarettes and $11,000 in cash were seized, and Zhuying Chen was charged with two felonies.

• Tobacco House of Xin, 2100 Doubleday Ave., Ballston Spa, a recently opened business. Ten cartons of untaxed cigarettes were seized, but no arrests were made.

• Tobacco House of EA, 1892 Central Ave., Colonie. Two roll-your-own machines, a point of sale computer, a vehicle and 140 cartons of untaxed cigarettes were seized, and Cai Lin was charged with two felonies.

Because cigarette taxes were not prepaid, as required, officials said the shops were able to sell cigarettes for as little as $35 a carton. When sold legally, cigarettes can cost as much as $100 a carton for premium brands.

“Avoiding taxes gives unscrupulous merchants an unfair advantage over business owners who comply with their tax responsibilities,” state Commissioner of Taxation and Finance Thomas H. Mattox said in a statement.

The Department of Taxation and Finance executed warrants at each of the shops and seized records, equipment, unstamped tobacco products and cash. The department was assisted by state police, the federal Department of Homeland Security and several local police agencies.

The 10 individuals arrested were charged with illegal possession of untaxed cigarettes for the purpose of sale or possessing untaxed tobacco.

“As alleged, these defendants undercut other merchants, cheated the state out of tax revenue and put at risk the stream of payments the state receives under the Master Settlement Agreement — payments that are vital toward funding healthcare and smoking-prevention programs,” Mattox said in the statement.

The Master Settlement Agreement is a 1998 agreement by New York and 45 other states with participating tobacco companies that require those companies to pay billions of dollars annually — including about $800 million a year to New York alone — to offset costs associated with treating tobacco-related illnesses.

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