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Schneiderman settles with roll-your-own shops

By Bryan Cohen | Aug 9, 2012


NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman and New York City Corporation Counsel Michael Cardozo announced a settlement on Thursday with two roll-your-own cigarette shops resolving allegations of tax evasion.

The federal lawsuit that the City and State brought against the Brooklyn-based BB's Corner and the Staten Island-based Nitecap Entertainment alleged that the businesses evaded cigarette taxes by giving customers loose tobacco, cigarette paper tubes and access to machinery to instantly produce on-site finished cigarettes. The businesses claimed that providing the materials and equipment did not subject them to cigarette regulation.

Additionally, the cigarettes produced by the defendants allegedly failed to meet New York fire safety laws.

The defendants allegedly charged as little as $29.99 per carton, a price falling well short of the minimum price per carton permitted by law. The price also allegedly failed to include state cigarette tax.

"No one is above the law when it comes to paying taxes," Schneiderman said. "These cigarette shops thought they could skirt the law by pretending not to sell cigarettes, when in fact that's exactly what they were doing. It is well-established that cheap cigarettes attract young smokers, and that smokers who pick up the habit when they are young have a far more difficult time quitting later on."

Under the terms of the agreement, the defendants agreed to permanently discontinue the RYO businesses and pay a combined monetary penalty of $15,000 to the city and state.

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