State of Hawaii


State collects
extra $22 million

State's cigarette tax to be sixth highest in '04

By Leila Fujimori

The state collected $22.5 million more in cigarette taxes last year than the year before.

Officials credit the increase to enforcement of the cigarette tax stamp law.

"With our presence on the streets, we hope to keep people in line," said Earl Hoke, deputy attorney general and supervisor of the tobacco enforcement unit.

The state Tax Department collected $62,609,477 in fiscal year 2002, a $22,559,938 jump from 2001.

Since the law went into effect Jan. 1, 2001, cigarette and tobacco wholesalers and dealers have been required to affix small square stamps to individual cigarette packages as proof the 5-cent-per-cigarette or $1-per-pack tax has been paid.

Officials said the tobacco tax stamp makes it easier for investigators to spot untaxed cigarettes on store shelves. They said this makes retailers more leery of buying untaxed cigarettes, forcing them to buy the cigarettes with the tax stamps.

By the end of the fiscal year, June 30, 2001, the state had collected $51,739,469 in cigarette tax revenues, $11,689,930 more than the year before. Hoke attributes much of that increase to enforcement during the final three months of the year.

In addition, state tax revenues are being boosted by thousands of dollars in fines from vendors violating the tax stamp law by selling untaxed or bootleg cigarettes, Hoke said.

"We inspected over 1,095 establishments, made over 112 felony arrests, seized over 2 million cigarettes and collected criminal fines approximately over $80,500 assessed against 26 individuals for violating tax stamping laws," he said.

The state also seized more than 900 cartons of unstamped cigarettes, he said. There are more than 80 cases still pending.

"They run the gamut from mom-and-pop stores, manapua wagons and bars," Hoke said.

The state is enforcing the law statewide with arrests on all major islands, including airport interdictions, in which the state and the U.S. Customs Service have seized 900 cartons of unstamped cigarettes in the past year at the Honolulu and Kona airports.

A tobacco wholesaler says enforcement is working and benefiting his company as well as the state.

Von Petrossian, sales manager for Kamaaina Distribution, said his company has seen an increase in the amount of cigarettes sold to retailers "because (previously) they were bringing in illegal cigarettes from military stores, Indian reservations and God knows where else."

Petrossian said the easily visible stamp has made it easy for enforcement.

When the law went into effect, "we also became state tax collectors," he said.

On Oct. 1 the cigarette tax jumps to $1.20 per pack from $1, which translates to $12 per carton.

Hoke says the tax hike gives cigarette vendors even more reason to evade the tax.

So he wants to increase enforcement, and the Department of the Attorney General will lobby the state Legislature for that next year.

"If we don't, we may take a backslide to prior years' numbers," Hoke said. "If people don't think there's a risk, they'll just keep doing what they've done before."

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