The US Attorney’s office says black market distributors and wholesalers were importing things like chewing tobacco, loose-leaf tobacco, and cigars without ever paying taxes on them. US Attorney Benjamin Wagner says the three year investigation has uncovered a “culture of cheating” in the non-cigarette tobacco industry.
“And that goes right from the out of state distributor’s right down to the retailers. It doesn’t mean we’re going to prosecute everybody but there’s a lot of law breaking going on and a lot of tax evading going on in this industry among those players.”
Wagner says they got around California’s 45 percent tax on non-cigarette tobacco products in one of two ways. Wholesalers only decared taxes on some of the tobacco products they imported into California. Or they would set up fake businesses in Nevada and Arizona where they didn’t pay taxes since they were exporting. But then they never filed taxes once those products got to California, where they were sold. Wagner says the investigation is ongoing.