Three Indian smoke shops must pay more than $10 million to New York City for trafficking untaxed cigarettes off a Long Island reservation, a Brooklyn federal judge ruled.
Judge Carol Amon also prohibited the bootleg smoke sellers — which operated on the Poospatuck Reservation in Mastic — from ever selling untaxed cigarettes again.
It’s a major win for Mayor Bloomberg, who sued the cigarette sellers in 2008, claiming they were selling cartons in bulk to people outside the tribe for huge profits.
Bloomberg argued that selling the cheaper-priced, untaxed butts hurt lawful city businesses and deprived city coffers.
“This is yet another major success in the legal battle against untaxed cigarettes,” said top city lawyer Michael Cardozo. “It should be very clear by now to those who sell and deliver untaxed cigarettes that flouting the law and undermining our city’s public health measures will cost them.”
Poospatuck members would have had to smoke 960 packs a day to reach the number of cigarettes that were being sold on the reservation prior to the lawsuit, according to the city.
The shops — Peace Pipe Smoke Shop, TDM Discount Cigarettes, and Red Dot Feather Smoke Shop — were permitted to sell untaxed cigarettes to members of the tribe, but not to nonmembers.
In siding with the city, the court said in its March 28 decision that “unstamped cigarettes sold by these defendants were trafficked in large quantities into the city from the Poospatuck Reservation for many years.
“These cigarettes entered the city without any payment of city cigarette taxes,” the court found.
Authorities stamp cigarettes to show that the sellers have paid state and federal taxes.
In New York City, an extra $5.85 in taxes is added onto the price of every pack of cigarettes.
It’s the highest cigarette tax rate in the nation.
The city had initially sued eight cigarette shops, but five voluntarily agreed to cease operations when the lawsuit began.
The testimony of former cigarette bootleggers and company records helped the city win its case, the judge found.
Peace Pipe was hit with the heftiest fines. The judge ordered it to pay $10,041,075, while TDM Discount must pay $450,000.
Red Dot Feather Smoke will be assessed a penalty at a later date.
Bloomberg — who banned smoking in bars in his first term — said that in addition to depriving the city of tax revenue, the sale of bootleg cigarettes also undermined the city’s efforts to decrease smoking.