Wawa May Be Right About Black-Market Cigarettes

New York’s experience shows that the city’s $2-a-pack tax for schools really could turn us all into smokes smugglers.

In southeastern Pennsylvania, it’s an article of faith that Wawa represents all that is good in the world, while all other convenience stores — Sheetz in particular — stand for all that is not.

Last week, though, Wawa’s corporate-citizen bona fides took a bit of a beating when it came to light that the company was circulating a document around the state capital that seemed to argue against implementing a $2-per-pack cigarette tax in Philadelphia to help fund its ailing schools. (State and federal taxes already equal more than $2.50 per pack.) It read, in part:

Black-market cigarettes result in tax revenue loss for the Commonwealth of Pennsylvania and loss of sales revenue and customer traffic for legitimate tobacco retailers … A large tax increase in Philadelphia will result in “border bleed” for tobacco products currently being sold in Philadelphia.

The optics on this sort of advocacy aren’t great: The tax is the only new funding that’s come through for the schools thus far, and even at that, Harrisburg still needs to approve it. When confronted by a Newsworks reporter about the flyer, a Wawa spokesperson quickly went on the defensive, claiming that the company was merely trying to arm lawmakers with all the facts, and that of course the schools should be well funded, even if the source turns out to be a cigarette tax. Nice save.

The episode serves as a reminder that while we feel intense loyalty to Wawa — sometimes even tattooing ourselves with its logo — Wawa feels loyalty mostly to itself. Same goes for Councilman Bill Greenlee’s bill to provide mandatory paid sick leave in Philadelphia, which Wawa lobbyied against and helped defeat. Understandable self-interest aside, however, does Wawa have a point on the black market claim? If taxing cigarettes works, then boo Wawa. But what if it doesn’t, and people are just going to keep killing themselves while cheating the city in the process?

Take a look at New York City. A year ago, a large-scale investigation found that 42 percent of 1,700 licensed retailers surveyed were selling cigarettes illegally, largely by counterfeiting the tax stamps the city puts on legally purchased packs. And just last month, an AP reporter conducted his own little investigation into New York’s illegal cigarette trade:

An Associated Press reporter who took a short stroll up the Grand Concourse in the Bronx recently picking up discarded packs found that 6 out of 10 had a tax stamp from Virginia. Some had no stamps at all. Only 1 in 10 had a stamp indicating that the pack was purchased legally within the city limits.

The reason for so many out-of-state packs is simple: A bootlegger who stuffs a van with 50 cases of cigarettes in Virginia, where the tax is 30 cents a pack, can evade $166,500 in tariffs by selling that load in New York City, where the combined city and state tax is $5.85.

It’s not just the legitimate retailers who are paying less, either. A couple of years ago, the Times profiled Lonnie “Loosey” Warner, a guy who stands on 8th Avenue in Manhattan selling individual cigs for $.75 a pop and packs for $8, well below the New York City average. The latest in a decade-long string of cigarette tax hikes put Lonnie’s business over the edge:

“The tax went up, and we started selling 10 times as much,” Warner said. “Bloomberg thinks he’s stopping people from smoking. He’s just turning them onto loosies.”

Zing. While research is mixed on the the effect of cigarette taxes on cigarette consumption (works; doesn’t work), one thing seems clear: As anachronistic as it sounds, the “black market” is a very real thing when it comes to cigs — to the tune of nearly $5 billion in lost revenue annually, according to a 2009 report from the Bureau of Alcohol, Tobacco and Firearms.

So, is Wawa a little more evil than you’d like to imagine? Yes. But they also have a point.

  • amberlynnyoffee@gmail.com

    As an aside, I come from the land of Sheetz and that little jib at the beginning hurt a little bit.