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What is Cigarette and Tobacco Products Tax Evasion?
California's cigarette tax per pack of 20 cigarettes currently stands at 87 cents. The tax on tobacco products is based on the wholesale cost of tobacco products, and as of July 1, 2007, the rate is 45.13%.
Any person who evades the reporting, assessment or payment of cigarette or tobacco products taxes that would otherwise be due may be guilty of cigarette or tobacco products tax evasion. And effective January 1, 2004, any retailer, wholesaler, or distributor of cigarettes and tobacco products and any manufacturer or importer of cigarettes that does not comply with the new licensing requirements of the Cigarette and Tobacco Products Licensing Act of 2003 (AB 71) may receive fines up to $5,000, imprisonment up to one year in county jail, or both fines and imprisonment.
Examples of Cigarette or Tobacco Products Tax Evasion:
- Sale of unstamped cigarettes.
- Intentionally importing tobacco products from outside the state without remitting the appropriate California State tobacco products taxes.
- Sale of untaxed tobacco products.
- Sale of cigarettes with counterfeit tax stamps.
- Possessing, owning, storing or selling untaxed cigarettes or tobacco products (unless licensed as a distributor, manufacturer or importer)
Examples of violations of the Cigarette and Tobacco Products Licensing Act of 2003:
- Sale or distribution of cigarettes or tobacco products without a license.
- Not obtaining and maintaining a license for each location selling cigarettes or tobacco products.
- Not displaying your license in public view.
- Not maintaining the required purchase records.
- Refusing access of purchase records to authorized inspectors or enforcement staff.
- Selling cigarettes or tobacco products to individuals under 18 years of age (STAKE Act).
Why is Cigarette or Tobacco Products Tax Evasion harmful?
- Tax evasion hurts all of us by reducing the amount of revenue available for essential state and local services. Cigarette and tobacco products taxes fund a number of important programs. Nearly 90% of the taxes collected on cigarettes and tobacco products are earmarked for program funding of breast cancer research, health education, hospital and physician services, research, public resources, and county-run projects for child health and development.
- Cigarette and tobacco products tax evasion hurts the honest business owner. Unscrupulous sellers can undercut the prices charged by the legitimate businessperson.
- Cigarette and tobacco products tax evasion is accompanied by an increase in thefts, hijackings, and cross-border smuggling.
Report Cigarette and Tobacco Tax Evasion
Public awareness and involvement are essential in eliminating tobacco tax evasion. To report suspected tobacco tax evasion, contact the Board of Equalization Investigations Division at 916-324-0105 or the Tax Evasion Hotline at 888-334-3300. To submit a complaint by e-mail, please click here.
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