By John M. Annese, Staten Island Advance
The pain of rising cigarette prices has meant profit for some entrepreneurs on Staten Island willing to break the law to make a buck.
As a recent police sweep at St. George Ferry Terminal highlighted earlier this month, shady merchants have taken to selling loose cigarettes and cheap packs of smokes — all without the bother and extra cost of a state tax stamp.
New tax laws from last June have spiked the price of cigarettes to anywhere from $11 to $14 a pack, but bootleggers are charging $5 for a pack of Newports and, in some cases, 75 cents for a “loosie” — a single smoke.
They’re operating in a borough that has the highest rate of smokers in the city — a city health department study showed last year that as many as one in four Staten Islanders smoke.
And the police have taken notice: Earlier this month, cops arrested two men and a woman on allegations they were selling untaxed cigarettes at the Ferry terminal.
The suspects were Kristie Gerhold, 32, of the 100 block of Bay Street in St. George, Joseph Calabria, 48, of the 300 block of Seaview Avenue in Dongan Hills, and Donald Alford, 64, of Brooklyn. All three were charged with possession and selling of untaxed cigarettes, a tax code offense that’s considered a class-a misdemeanor.
The arrests came on the heels of a report by state Sen. Diane Savino highlighting quality of life issues at the ferry terminal. Police made five additional arrests over the same weekend, largely for marijuana possession and disorderly conduct. An NYPD source said the sweep was done independently of Ms. Savino’s report.
“This is a real problem for the state of New York. While we’re not going to go bankrupt from the one guy selling a loosie on the ferry, he is one of hundreds of people violating the law of the state of New York,” Ms. Savino said.
The ferry isn’t the only place authorities have made arrests — police and state tax investigators have also run sting operations on local delis thought to be selling packs without tax stamps.
Overall, investigators with the state Department of Taxation and Finance have made 11 arrests on Staten Island for untaxed cigarette offenses over the past two and a half years — three in 2009, six last year, and two so far this year, said Susan Burns, a department spokeswoman.
Those arrests amounted to 58.8 cartons and 2,558 cigars seized, she said.
One such sting, conducted at a deli on Richmond Terrace in October uncoved nearly 400 packs, many with forged tax stamps, and a loaded gun, police said. The deli owner and another man faced a variety of charges, though according to law enforcement sources, the charges connected to the gun were sealed and ultimately dismissed.
“Tax payers are hurt in many different ways through cigarette tax evasion. Merchants that pay the appropriate rate of tax are at a competitive disadvantage as compared to the merchants that evade their tax obligations,” Ms. Burns said. “In addition, municipalities lose funding that could be used to pay for roads, schools and other necessary items. Tax evasion is not a victimless crime.”
Ms. Burns called it “impossible” to determine the amount of tax revenue lost by the sale of untaxed cigarettes, but Ms. Savino offered an estimate: $150 million.
FEEBLE ENFORCEMENT
And Ms. Savino said 11 arrests over two and a half years didn’t amount to nearly enough enforcement.
“They don’t bother,” she Ms. Savino said of the tax department, stating that the agency’s priorities appear to be focused on the sale of untaxed cigarettes at Indian reservations.
Regarding bodegas and individual sellers, she said. “They need to crack down on it. They know where it’s happening. It’s not an isolated thing.”
Nevertheless, Ms. Burns said called combating cigarette tax evasion a “priority.”
We conduct hundreds of investigations each year and we work closely with the NYC Dept. of Finance to fight tax fraud,” she said.
Lawmakers changed the tax code last year to require reservation to charge and collect taxes on cigarettes sold to non-Native Americans, which has resulted in a legal battle between the state and the Oneida and Seneca nations. Most recently, on May 10, a state Supreme Court judge in Erie County issued a temporary restraining order preventing the state from enforcing the new law.
“It’s very simple: Indian reservations, Indian stores, Indian casinos have the right to sell untaxed cigarettes to Native Americans, not to anyone else,” said Ms. Savino.
Still, she said, the reservations aren’t the only source for bootleggers and loosie-sellers: counterfeit cigarettes often make their way from China to New York through smuggling routes.
“Nobody really knows where these cigarettes are coming from,” and that presents a public health risk, she said.
That’s why Cliff Wagner, of Mariners Harbor, said he steers clear of loosies — “I don’t know what I’m getting when I buy a loose cigarette.”
Wagner smoked a Pall Mall as his stood outside the St. George ferry terminal Thursday. “These are $10, and these are considered a discount cigarette,” he said.
He admits that he’s considered buying a $5 pack from shady merchants a the ferry. “Sure, who wouldn’t consider that? What smoker wouldn’t consider that?” he said, but he added he’d rather go through friends who pick up cheap cartons from lower-tax states like Virginia and South Carolina.
“You can get them for $20 a carton online,” said Mark Mcbride, a Hofstra University student from Cleveland, Oh. — which taxes cigarettes at less than a third of New York’s rate –who was on Staten Island visiting his girlfriend.
The bootleggers at the terminal don’t tempt him, he said. “It kind of sketches me out, selling loose cigarettes and stuff.”
Not so for Harry Hoffman of Tottenville, who has no problem going to the Whitehall terminal, where he can find cigarettes for $5 a pack. “As long as they’re closed with the wrapper on it,” he said, “they’re good.”
