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City to smoke out retail cigarette tax


The city of Fredericksburg may take steps to better enforce the collection of the cigarette tax from retailers.

Fredericksburg charges a 31-cent tax on every pack of cigarettes bought inside city limits.

That amounts to about $550,000 per year, which goes into the city’s general fund.

Still, the city could be missing out on some of the money it’s owed, which is why it may join the Northern Virginia Cigarette Tax Board.

Today, the City Council will see a presentation from Lois Jacob, commissioner of the revenue, about joining the tax board. The board works with 17 other localities to administer and enforce the tax better than the localities can individually.

“We have contacted them and have worked with them in the past and found out they can be very useful in enforcing this tax,” Jacob said.

“Dealers and retailers are becoming infinitely more sophisticated in devising methods to avoid paying the tax, and enforcement is increasingly difficult given the resources of the Office of the Commissioner of the Revenue,” Jacob wrote in a memo to the council.

That’s where joining the tax board has its advantages.

“We do a much better job with enforcement because we have a staff—that’s our specialty. That’s what we do,” said Deborah Cannon, an administrator with the tax board. She said all the jurisdictions that are members of the board share expenses, which lowers costs.

“What we do is go door-to-door to retailers and inspect to make sure they are getting the proper product from the wholesaler and not going to a lower-tax jurisdiction and bringing the product back,” Cannon said.

Also, instead of the city having to buy its own stickers to put on each cigarette pack, it would use the stickers provided by the board.

“If you buy a tax stamp only for that locality, it’s going to be a lot more than when we buy it for 17 jurisdictions,” Cannon said.

The administrative cost of joining the board would be 3.7 percent of the cigarette taxes collected, or $20,350 per year, according to Jacob’s memo.

“It would look like we are paying more to join the board, but historically, every locality that has joined has found a revenue increase,” Jacob said.

A consequence of lax cigarette tax enforcement is attracting criminals who buy quantities of cigarettes in the city and transport them to other states with higher cigarette taxes for large profits.

Jacob said there isn’t a specific problem with a city vendor or retailer, but the possibility of illegal ciga-rettes traveling through the city—because of Fredericksburg’s location just off Interstate 95—is strong.

In 2008, there were 17 cases of people charged with failing to purchase the tax stamp, one in 2011 and one in 2012, according to the Fredericksburg Police Department.

Also in 2011 and 2012, one person each year was charged with failure to display the tax stamp. The cases involved people, not retailers, in possession of more than six cartons of unstamped ciga-rettes.

This year, one person has been charged with violating the state code for transporting and being in possession of cigarettes with intent to distribute.

“Given the problem in Virginia with cigarette trafficking, this seems to be the prudent thing to do at this time,” Jacob said.

The work session will be held at 5:30 p.m. today in the second floor conference room of City Hall, 715 Princess Anne St.

Robyn Sidersky 540/374-5413