Tenn. cigarette tax hike prompts surveillance on state borders

Published 2:08 am Sunday, September 23, 2007

This year’s tripling of Tennessee’s cigarette tax has prompted state revenue officials to conduct surveillance of tobacco retailers just over state lines, suspecting Tennesseans are buying smokes in bulk in neighboring states with cheaper taxes.

Commissioner Reagan Farr said Friday he wants Tennesseans to know tobacco purchased out-of-state may be considered contraband. Buying and transporting large amounts of tobacco into the state is not only illegal, Farr said, it’s costing retailers money.

“As a result of this legislation, Tennesseans may travel to neighboring states to purchase cigarettes in order to avoid paying Tennessee cigarette tax,” Farr said. “Tennesseans should know that the law requires cigarettes purchased outside of the state to bear a Tennessee tobacco stamp.”

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Possessing more than 20 packs — or two cartons — of cigarettes not bearing state revenue stamps is a misdemeanor. Possession of more than 25 cartons of untaxed cigarettes is a felony.

David Remke, the lead investigator for the department, said retailers on the border have seen tobacco profits plummet since the tax increased from 20 cents per pack to 62 cents per pack in July.

“Tennessee retailers on the border are losing money,” Remke said. “People are driving less than a mile over the border in some instances, buying cigarettes and bringing them back into Tennessee. We have to put a stop to it.”

Taxes are lower in all eight states that border Tennessee, Remke said, so there isn’t a particular area that will be monitored. Missouri and Mississippi have the two lowest taxes in the nation, at 18 and 17 cents, respectively.

The state had similar problems when Tennessee didn’t have a lottery, and when alcohol prices were lower in other states.

“We’ve learned from the past it’s hard to monitor,” Remke said. “But it can be stopped.”

Police and department investigators will patrol the borders, even going across state lines to track purchases. Officers are not permitted to make arrest in other states, but they can follow drivers back into Tennessee and then apprehend them.

“If revenue agents believe that an individual is transporting more than two cartons of cigarettes into Tennessee, the vehicle carrying the cigarettes will be stopped and searched,” Farr said. “If more than two cartons are found, the cigarettes will be seized and agents have the discretion to make arrests and seize the vehicle.”

While businesses on the border may be losing money, the cigarette tax increase is estimated to bring in an additional $228 million in annual revenue. The extra money will go toward education, agricultural enhancements and trauma centers.

Remke said if businesses on the border lose money, the impact of the tax will be diminished.

“Retailers are working with us,” Remke said. “They want this to stop just as much as us. More even.”