Lockport Union-Sun & Journal — State Attorney General Eric Schneiderman is taking legal action against two companies his office believes sold contrabrand cigarettes without paying required excise taxes.
Schneiderman announced Monday the filing of a lawsuit in U.S. District Court for the Eastern District of New York against Grand River Enterprises based on Six Nations land in Ohsweken, Ont. and its wholesaler, Native Wholesale Supply, located in Perrysburg.
Schneiderman said the lawsuit was filed following an ongoing investigation into contraband cigarette sales across the state. The legal action charges that Grand River Enterprises avoided state taxes by illegally selling its products to Native Wholesale Supply instead of a New York state licensed stamping agent who would prepay the cigarette excise tax and affix the state tax stamp, as required under the law.
During the eight month period from November 2011 to July 2012, Schneiderman’s office says Native Wholesale Supply paid $85 million to Grand River Enterprises for its cigarettes, which accounts for more than three million cartons of cigarettes and a potential tax loss to the state of more than $13.2 million.
Under federal law, Grand River Enterprises could face a civil penalty of up to two percent of the gross sales of cigarettes for the year. Based on 2011-2012 sales, the company’s civil penalty could be tens of millions of dollars.
“The illegal sale of contraband cigarettes violates both state and federal laws, robs New Yorkers of the funds to pay for essential state services, places legitimate businesses that play by the rules at a competitive disadvantage, and makes it easier for young people to take up a deadly habit,” Schneiderman said.
According to the complaint filed today in federal court, Grand River has sold and distributed its tobacco products in New York without shipping its cigarettes to a New York State licensed stamping agent who would pre-pay the New York State cigarette excise tax and affix the state tax stamp, as required by state tax laws. Licensed stamping agents are the only entities in the State authorized by the New York Department of Taxation and Finance to affix a tax stamp and collect the excise tax due. On-reservation cigarette sales to tribal members can be made tax-free, but those cigarettes must nonetheless have the tax stamp affixed by a licensed stamping agent.
The lawsuit is the result of an ongoing investigation into contraband cigarette sales across the state. The lawsuit charges Grand River Enterprises and Native Wholesale Supply with selling illegal cigarettes in New York and is based on several incidents that establish the companies are selling and trafficking large quantities of illegal, untaxed cigarettes.