Acting on viewer tip, 7 On Your Side went undercover at a Southeast D.C. gas station convenience store looking for illegal cigarettes.
With a simple over-the-counter purchase, 7 On Your Side was able to buy what appeared to be smuggled cigarettes. The cigarettes were originally purchased in Virginia where the taxes are lower, then re-sold at a higher price in D.C.. The Virginia tax stamp on the bottom of the pack is the giveaway. Customers we spoke with also confirmed that they bought cigarettes with the Virginia stamp.
Cigarette smuggling is big business in the D.C. region because tobacco taxes in Virginia are a fraction of those in states to its north. Maryland authorities have evidence rooms full of cigarettes seized from smugglers.
"You are looking at millions of dollars," said Ashan Benedict, ATF Special Agent. "The more organized they get we are seeing links to human smuggling, links to narcotics, weapons and violence."
Bedell Terry is trying to make it less common. He's the D.C. Tax Office's Director of Compliance and he levies some of the stiffest fines in the nation for businesses caught selling illegal cigarettes. Last year, 40 businesses faced fines starting at $5,000.
"The smuggled cigarettes end up here, in New York City, in Philadelphia, the cities that have the high taxes, the high cigarette taxes," noted Bedell.
7 On your Side told Bedell about the Southeast store where we bought and saw cigarettes with the Virginia stamp.
"You can be assured that we will be visiting this retailer and making sure the cigarettes that are in there are properly stamped," said Bedell. "If they are not they will be fined, the cigarettes will be seized."
The tax difference between D.C. and Virginia is $2.50 a pack. That adds up fast. If people cheat the city enough, the District has to either cut services or raise taxes.