Cigarette smuggling big in N.M.

ALBUQUERQUE (KRQE) - New Mexico is ranked the third highest in the nation for cigarette smuggling, according to a report that notes sellers and buyers can avoid paying the state a lot of money in taxes.

A study done by a national group called the Tax Foundation shows 53 percent of the cigarettes smoked in New Mexico in 2011 were smuggled into the state. It put the state third in the nation for cigarette smuggling just behind Arizona and New York.

The study suggests it's so sellers can skip on out on the $1.66 tax the state imposes on every pack. The less money the sellers dole out the more profit they pocket.

Ken Oueis, owner of Oasis Smoke Shop on Menaul Boulevard is not surprised at all by the study.

He said cigarettes are a tough sell because they're competing with other stores that are not always playing by the rules.

“All around us, there are plenty of shops that do not pay taxes on tobacco,’ Oueis said.

Oueis said he's not one of the guys breaking the rules and it shows.

“We get customers everyday, 'I find this same product up the street half the price off,'” Oueis said. 

Oueis said the problem is much bigger when you add in pouches of tobacco, which are also taxed by the state.

“We have to pay 25 percent of tobacco tax on loose tobacco,” Oueis said.

He said not everybody does.  So for every $1,000 in loose tobacco that is not taxed the state loses $250.

“The state is missing out on a lot of tax for this,” Oueis said.

Do the math and it would seem the state is losing out on millions in tobacco taxes.

The study group said a lot of the cigarettes smuggled in come from Mexico, but they also come from other states that have lower taxes.

The study suggests smuggling goes up with cigarette taxes. Since 2006, New Mexico's cigarette tax has almost doubled.