Department of Taxation and Finance

Selected Controls Over Cigarette Licensing and Excise Taxes

Cigarettes cannot legally be sold in New York State unless authorized tax stamps are affixed to the packages. The tax stamps are provided to licensed agents by the Department of Taxation and Finance. The agents are to pay the corresponding excise taxes to the Department, affix the stamps to cigarette packages, and sell the packages to licensed wholesalers. The wholesalers are to sell the packages to registered retailers. We examined the Departmentís controls over the licensing, registration and tax collection processes, and found that certain controls needed to be strengthened. For example, we identified unregistered retailers who were selling cigarettes, including one retailer who was making bootleg sales of cigarettes without tax stamps. We also determined that additional excise taxes owed when tax rates were increased may not be fully accounted for. We recommended that various actions be taken by the Department to strengthen its controls.

For a complete copy of Report 2002-S-58 click here.