Oregon AG nabs tobacco black-marketers dodging high tax rates

Legal News Line Mar. 1, 2007, 10:24am

Hardy Myers

SALEM -- Oregon Attorney General Hardy Myers today announced a swathe of arrests in a crime as old as taxation itself. Myers said four distributors and nine retailers had been nabbed through efforts by the Tobacco Tax Compliance Task Force (TCTF) for smuggling and distributing non-taxed tobacco products. These products, which attract a wholesale tax rate in Oregon of 65 percent, include rolling and chewing tobacco. Cigarettes are subject to a per-pack tax, currently $1.17, although that could jump substantially under a legislative proposal. Four family members, operating as J.K. Wholesale, allegedly bought contraband tobacco and sold it to retail businesses in the Salem and surrounding areas over a four-year period. J.K. Wholesale then "grossly under-reported the tax owed the state," Myers charged. He estimated that at least $200,000 in tobacco taxes had been avoided over the four-year period. The Attorney General added that the nine stores were indicted for "crimes related to knowingly purchasing and reselling contraband tobacco products." Oregon's 65 percent wholesale tax on non-cigarette tobacco, one of the highest in the country, has a history of encouraging smuggling. Two years ago to the week the TCTF announced it had arrested two men in the Portland area after seizing contraband tobacco from several locations. The two co-owners of Sunrise Wholesale were charged with distributing tobacco products without a licence. As well as paying 65 percent on wholesale, under Oregon law tobacco product distributors must be licensed by the Department of Revenue. Retailers must purchase only tax-paid tobacco products and retain sales records for five years. Violations are considered felonies. Myers and the TCTF could be even busier soon. A proposal to increase the Oregon per-pack cigarette a whopping 84.5 cents to a total of $2.02 per pack recently passed a major hurdle by clearing the House Revenue Committee. The proceeds from such a tax rise are slated to fund health coverage for uninsured Oregon children.

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