Failure to Pay Cigarette Tax
Failure to pay cigarette and use taxes actually increases the price of cigarettes for the consumer, because the consumer is then responsible for paying interest and penalty on all late tax payments.
Interest is calculated daily on unpaid tax. Penalty is calculated at 5 percent of the unpaid tax for every month or portion of a month in which the tax is not paid.
Cigarette tax evasion also puts Pennsylvania businesses at a competitive disadvantage to out-of-state businesses.
In the following example, a Pennsylvania consumer may believe he saves more than $260 by purchasing 15 cartons of cigarettes online from an out-of-state business that does not charge cigarette tax or sales tax.
|
Out-of-State Internet
Cigarette Vendor |
Licensed Pennsylvania
Cigarette Retailer |
| Sales Price ($25 X 15 cartons) |
$500.00 |
$500.00 |
| PA cigarette tax ($16 per carton) |
$0 |
$240 |
| Freight |
$20.00 |
$0 |
| PA sales tax (6 percent) |
$0 |
$42.15 |
| Total Cost |
$520.00 |
$782.15 |
It appears the out-of-state business offers the better deal. However, when Pennsylvania cigarette tax and use tax are added to the purchase made from the out-of-state business, it's clear the Pennsylvania business offered he lower purchase price.
In this example, after the consumer pays PA cigarette and use taxes to the Department of Revenue – plus penalty and interest, assuming that the tax was paid 60 days late – the total cost of the out-of-state purchase becomes nearly $850.