Bill takes aim at cigarette smugglers

A new law targeting cigarette smugglers has cleared both houses of the General Assembly and now goes to the governor for his signature.

The House of Delegates on Wednesday joined the Senate in unanimously passing Senate Bill 476, sponsored by Sen. John C. Watkins, R-Midlothian.

The bill would establish additional penalties for "any person who sells, purchases, transports, receives, or possesses unstamped cigarettes" in Virginia.

Cigarettes are stamped in most states to ensure that the tax on them has been paid. If a pack of cigarettes is sold in Virginia without a stamp, that means no tax has been paid to the commonwealth.

In Virginia, the tax on a pack of cigarettes is 30 cents. In South Carolina, the tax per pack is 7 cents, and that state doesn't stamp its cigarettes. Smugglers often purchase cigarettes in states with low tobacco taxes and sell them illegally in states with higher tobacco taxes, pocketing the difference as profit.

If Gov. Bob McDonnell signs SB 476 into law, first-time offenders would be charged $2.50 a pack, up to $500. For a second violation within 36 months, the fine would be $5 per pack, up to $1,000. And for a third violation, the penalty would be $10 per pack, up to $50,000.




If authorities determine that the violator had a willful intent to defraud the commonwealth, the penalty would be $25 a pack, up to $250,000.

On another tobacco-related issue, the House last week also gave final approval to SB 478, which would change the tax on moist snuff tobacco.

Currently, snuff is taxed at 10 percent of the manufacturer's sales price. Under SB 478, which was proposed by Watkins, the tax would be 18 cents an ounce.

The House voted 92-6 for the bill. It passed the Senate last month, 38-2. If McDonnell signs the bill, it would take effect on Jan. 1, 2011.

Bill Phelps, a spokesperson for the U.S. Smokeless Tobacco Co., said the bill would help both tobacco companies and the commonwealth. Phelps said it makes sense to change the tax on snuff to an excise tax, as Virginia taxes gasoline or beer. That way, the tax is based on the amount of the product sold, not the quality.

"We think that taxing moist tobacco by weight ... is a fair way to tax the product," Phelps said.

He said taxing snuff by the ounce will provide a more stable source of revenue for the commonwealth, because the price of snuff has gone down every year for the past six years.