If Missouri voters pass a hefty tax increase on cigarettes in November, it probably won’t have much effect on tobacco smuggling into Arkansas, an investigator said.
That’s because cigarette smuggling from Missouri hasn’t been as bad as expected after Arkansas increased its cigarette tax by $5.60 per carton in 2009, said Glenn Redding, supervisory agent with Arkansas Tobacco Control’s criminal investigation division.
Missouri has the lowest cigarette excise tax in the United States — $1.70 per carton. (Map) The tax in Arkansas is $11.50 per carton, in theory making a carton of cigarettes about $10 more expensive in Arkansas than in Missouri.
On Thursday, Marlboro Reds were selling for $56 a carton at Macadoodles, a liquor store in Springdale. The same cigarettes were selling for $41 a carton at the Macadoodles in Pineville, Mo., 28 miles to the north. Those prices don’t include sales tax. A carton usually contains 10 packs of 20 cigarettes.
A bigger problem is “other tobacco products” coming in from Tennessee, where the tax on those products is much less than in Arkansas — 6.6 percent vs. 68 percent, Redding said. Other tobacco products include loose tobacco, cigars, cigarillos, chewing tobacco and “blunt wraps,” a tobacco product used as rolling paper.
The tax on other tobacco products in Missouri is 10 percent. That’s not much different from Tennessee’s 6.6 percent tax, but Redding said there are at least five tobacco wholesalers in Memphis, making it easy for Arkansas retailers to purchase other tobacco products in Memphis and bring them back across the Mississippi River for sale in Arkansas.
Cigarette packages have stamps indicating the state where taxes have been paid on the product. That makes them easy to trace, Redding said. Loose tobacco, however, is much more difficult to monitor, he said.
“The criminal element that continues to evade paying Arkansas taxes by smuggling tobacco products from lower-tax states will simply choose another low-tax state to obtain the illegal product,” Redding said via e-mail, when asked what would happen if the Missouri initiative passes. “The retail tobacco smuggler is a thief that not only steals from the state of Arkansas, but they are stealing from the citizens of their own community, putting the honest retail store owner out of business and putting the illegal profit in their own pockets.”
Missouri voters will consider a question on the Nov. 6 ballot that would increase the cigarette tax by $7.30 per carton, bringing their total excise tax to $9 per carton, according to the Missouri secretary of state’s website at sos. mo.gov/elections/2012ballot.
The Missouri initiative, known as Proposition B, also includes a 25 percent tax on the manufacturer’s price for loose tobacco and 15 percent on other tobacco products.
Whether those percentages would be on top of Missouri’s existing 10 percent tax on those products wasn’t clear from the ballot wording. Lowell Pearson, an attorney who represents Missourians for Health and Education, a group that supports Proposition B, said he believes the 25 and 15 percent increases “will apply in addition to the existing 10 percent tax.”
Proposition B is the result of a petition drive by Show-Me a Brighter Future, a coalition of state organizations and individuals led by the American Cancer Society. About 220,000 signatures were collected in the petition drive.
Money from the tax would be used to create the Health and Education Trust Fund, which would aid elementary, secondary and higher education. The tax would raise between $283 million and $423 million annually, according to the ballot title.
Two other attempts to raise Missouri’s tobacco tax failed by narrow margins in 2002 and 2006. In each case, the initiatives were rejected by 51 percent of the voters, according to numbers from the secretary of state’s office.
In Arkansas, possession of nine cartons of cigarettes that don’t have Arkansas tax stamps qualifies as a felony, according to Arkansas Code Annotated 26-57-245, unless the person who has the cigarettes has paid the appropriate tax to the state of Arkansas.
Sixteen border cities in Arkansas — including Bella Vista, Blue Eye, Garfield and Gateway — have cigarette tax rates only slightly higher than the rate in states they border, under Arkansas Code Annotated 26-57-802 and 26-57-803.
In March 2009, Arkansas Act 180 went into effect, raising the tax on cigarettes by $5.60 a carton. (The changes are detailed in Arkansas Code Annotated 26-57-806 and 26-57-807.)
When that law went into effect, the state Tobacco Control Board heard reports of people buying 20 cartons at a time in the southwest corner of Missouri to take back to Arkansas.
But Redding said at the time that may have been a rush to stock up before new price increases kicked in. The federal government raised its excise tax on cigarettes by $6.17 per carton on April 1, 2009, but some manufacturers passed that price increase on to retailers a month earlier.
Arkansas, Pages 15 on 09/16/2012