Up in Smoke: NY Sues UPS Over Cigarette Tax

When there’s smoke, there’s fire.

The latest courtroom battle about cigarettes has nothing to do with damaged lungs, but rather a hole in the wallet. It recently came to light that shipping giant UPS failed to properly adhere to tax laws in New York City and State. This has resulted in 78,500 shipments of untaxed cigarettes being transported in and out of New York for about 4 years. UPS has denied these allegations, citing their past experience in the shipping industry and adherence to any and all state laws. The lawsuit was filed in New York by Attorney General Eric Schneiderman and Counsel Zachary Carter and is seeking about $180M in damages. Outright accusations of lying and cheating have been thrown out by both sides, understandable considering the hefty price tag attached.

The city and state of New York were quick to throw the disregard of federal tax and public health laws on the table, which UPS has denied. Some of UPS’ files directly involved in the shipping of these untaxed cartons had recently be subpoenaed. The lawsuit specifies shipments between 2010-2014, and also mentions a violated agreement from 2005. According to reports, a majority of these shipments originated from Indian Reservations located in New York States. Interestingly enough, Attorney General Schneiderman has also filed a similar lawsuit against FedEx, for a much larger sum of $235M.

If the paperwork has already been reviewed, there is a strong chance that UPS will soon be writing a check to New York City & State. One would assume they would settle out of court for a much smaller amount, though who knows how much the Attorney General can prove? Alcohol and tobacco industries are some of the largest revenue-drivers in America, so it makes sense that the government would want to make sure those outlets were being properly taxed. Reservations aside, if UPS was truly avoiding paying certain taxes, and that it can be proven, then they should be entitled to pay the entire amount of damages.