Posted on: Wednesday, April 17, 2002

Cigarette tax evaders getting more creative

By Brandon Masuoka
Advertiser Staff Writer

Merchants trying to evade the $1-per-pack cigarette stamp tax have been caught hiding unstamped cigarettes inside freezers and under ice cream, a state inspector said yesterday.

Attorney General Earl Anzai said despite vigorous cigarette tax stamp enforcement, some merchants are still cheating the system.

The tax stamping of cigarettes began Jan. 1, 2001, and inspections of retail stores for compliance began April 1, 2001. In the past year, inspectors have made 92 felony arrests and have seized more than 2 million cigarettes, Anzai said.

Enforcement efforts and inspections of more than 700 stores have increased cigarette tax revenues by $20 million over prior years, Anzai said.

The crackdown has led to an increase of black market cigarettes, counterfeit stamps and hidden illegal cigarettes, said Earl Hoke, supervising deputy attorney general of the tobacco enforcement unit.

"We've found cigarettes in freezers, in refrigerators, in empty liquor boxes, stashed under ice cream, on top of store equipment, between canisters of soda, inside attics and basements, behind false panels in walls," Hoke said. "All over the creation."

In March, special investigators from the attorney general's office conducted 97 retail inspections throughout the state. Of the 97 businesses inspected, 26 businesses had contraband cigarettes. There were 18 felony arrests for cigarette tax violations. In some cases, cigarettes were seized without charges being leveled.

In those cases, special investigators seized one or two packs or cartons of unstamped cigarettes and issued warning to stores. Having been warned, the stores face prosecution for any subsequent violations.

Hoke said a few stores have been busted twice, including one in Chinatown last year that was selling unstamped cigarettes and was also cutting stamps in half and affixing the illegal "half stamp" to two packs of cigarettes instead of one. Hoke said inspectors have found contraband cigarettes on every island that they have worked on.

"People may think they may be one-upping us and avoid being caught the first, second and third time," Hoke said. "But we are very persistent. Don't do it. I think our enforcement efforts have borne fruit."

As the evasion schemes become more complex, Anzai said he wants to continue enforcement activities and will be expanding the investigations into the areas of counterfeit stamping, smuggling, and the prohibition against the sale or distribution of "gray market" or "import prohibited" cigarettes.

Anyone with information regarding possible violations of the cigarette tax stamping law should contact the attorney general's investigations division at 586-1240, or CrimeStoppers at 955-8300.