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Jeffrey Cohen, associate chief counsel for the Bureau of Alcohol, Tobacco, Firearms and Explosives, estimates the sale of contraband cigarettes costs federal, state and local governments close to $10 billion a year in revenue.
The ATF says the price of a legally purchased pack of cigarettes in the U.S. includes $1.08 in federal excise tax; $0.17 to $4.35 a pack in state excise taxes; local taxes; and typically $0.60 per pack to a settlement fund for tobacco-related health care costs.
Virginia's tax is $3 per 10-pack carton, and the combined local ($15) and state ($43.50) tax in New York City is $58.50 per carton. "So, you've got a $55.50 profit window in there that's capitalized on by organized crime," said Ken Mosley, an ATF special agent in Richmond.
Under federal law, contraband cigarette trafficking carries a maximum sentence of five years in prison and a fine of $250,000.