There are many types of tobacco trafficking schemes in effect to avoid the California sales tax, but the most common trick is to smuggle cigarettes between states to take advantage of different taxation levels. According to the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, nearly $10 billion in state and federal tax revenue is lost each year because of cigarette smuggling.
Legally defined, a cigarette is a rolled product of any shape or size that contains tobacco and is intended for smoking. Products wrapped in tobacco are not considered cigarettes if they weigh over 3 lbs. per thousand.
Under a federal law called the Jenkins Act, out-of-state sellers are required to provide the California State Board of Equalization with information about shipments to California buyers. If the seller has not paid the state excise and use tax due, it is the customer’s responsibility to pay. Smuggling is an attempt to avoid these taxes.
Anyone who participates in prohibited cigarette sales and distributions can be fined as following:
● First violation: $1,000-$2,000
● Second violation: $2,500-$3,500 for a second violation
● Third violation within a five-year period: $4,000-$5,000
● Fourth violation within a five-year period: $5,500-$6,500
● Fifth or higher violation within a five-year period: $10,000
The Jenkins Act requires anyone who sells, transfers, or ships cigarettes in interstate commerce to provide monthly reports with the tobacco tax administrator of the state into which the shipment is made. Violators can be fined and / or imprisoned for up to three or five years, depending on the circumstances.
Structuring of financial transactions, Tax Evasion, Possession of a controlled substance
Cigarette smuggling can be prosecuted by the state or U.S. government, depending on the circumstances. Anyone charged with this offense must consult with a California defense attorney immediately to review the evidence against them and determine the most effective course of action. Regardless of a defendant’s role in the conspiracy, they may be prosecuted as a participant in a large-scale crime cartel, as cigarette smuggling is a known source of revenue for organized criminal groups.
Legal defenses to cigarette smuggling charges include (but are not limited to) not knowing that the cigarettes had been smuggled, proof that taxes had been paid on cigarettes bought from an out-of-state seller, discovery of the cigarettes during an illegal search, and police misconduct.
On April 28, 2010, Avedis Djeredjian, 41, of Glendale, California, was sentenced to 87 months in prison followed by three years supervised release. A federal jury sitting in Los Angeles had found the defendant guilty of all counts against him. Certain counts were dismissed following post-trial motions, and Djeredjian was sentenced for conspiring to traffic in contraband cigarettes and structuring financial transactions. The Court also ordered that the defendant pay restitution in the amount of over three million dollars. Forfeiture in the same amount as restitution was also ordered.