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Arizona ranks second for ‘smuggled’ cigarettes

PHOENIX — Arizona ranks second in the nation for smokers who found a way around a state tax on their cigarettes, a study said.

A study by the Michigan-based Mackinac Center for Public Policy said that, as of 2012, 51.5 percent of the cigarettes smoked in Arizona were purchased in ways that avoid paying a state sales tax of $2 per pack, a 19 percent jump from 2006. There are several places where these “smuggled cigarettes” are sold.

“Indian reservations, Mexico and what we think, but have not tagged a number for yet, is bonded warehouses,” said Michael LaFaive, director of Fiscal Policy for the Mackinac Center for Public Policy. “A bonded warehouse is sort of a weigh station for products that come into the country from overseas.”

LaFaive said that one of these warehouses is believed to be located near Phoenix.

“We think that about 19 percent of the smuggling that occurs inbound into Arizona is from your border with Mexico,” LeFaive said. “However, we think that a portion of that, which is captured as international smuggling, might actually be from bonded warehouses.”

Todd Nesbit, LeFaive’s assistant, said a majority of the “smuggled cigarettes” are purchased as a direct result of Arizona’s cigarette sales tax.

LaFaive said there are two ways to reduce the number of cigarettes being “smuggled” into Arizona: Doing away with the sales tax or getting people to quit smoking.

New York topped Arizona in the survey, with nearly 57 percent of the cigarettes being smuggled into that state. New York has a $4.35 per pack tax on cigarettes. New Mexico is right behind Arizona, followed by Washington, Wisconsin and California, respectively.