Cigarette and Tobacco Products Tax Evasion

What is Cigarette and Tobacco Products Tax Evasion?

Any person who intentionally evades the reporting, assessment or payment of cigarette or tobacco products taxes that would otherwise be due is guilty of cigarette or tobacco products tax evasion. And as of 2004, any retailer, wholesaler, or distributor of cigarettes and tobacco products and any manufacturer or importer of cigarettes that does not comply with the licensing requirements of the Cigarette and Tobacco Products Licensing Act (CTPLA) of 2003 may receive fines up to $5,000 per offense, imprisonment up to one year in county jail, or both fines and imprisonment.

See the Special Taxes and Fee Rates webpage for current cigarette or tobacco tax and licensing fee rates and other excise tax and fee rates.

Examples of Cigarette or Tobacco Products Tax Evasion:

  • Sale of unstamped cigarettes or untaxed tobacco products.
  • Intentionally importing tobacco products from outside the state without remitting the appropriate California State tobacco products taxes.
  • Sale of cigarettes with counterfeit or reused tax stamps.
  • Possessing, owning, storing or selling untaxed cigarettes or tobacco products (unless licensed as a distributor, manufacturer or importer)

Examples of violations of the Cigarette and Tobacco Products Licensing Act of 2003:

  • Sale or distribution of cigarettes or tobacco products without a license.
  • Not obtaining and maintaining a valid license for each location selling cigarettes or tobacco products.
  • Not displaying your license in public view.
  • Not maintaining purchase or sales records, as required.
  • Refusing access of purchase or sales records to authorized inspectors or enforcement staff.
  • Selling cigarettes or tobacco products to individuals under 21 years of age (STAKE Act).
  • Selling cigarettes or roll-your-own (RYO) tobacco in California that are not listed in the California Tobacco Directory.

Why is Cigarette or Tobacco Products Tax Evasion harmful?

  • Tax evasion hurts all of us by reducing the amount of revenue available for essential state and local services. Nearly 90% of the taxes collected on cigarettes and tobacco products are earmarked to fund important programs such as breast cancer research, health education, hospital and physician services, research, public resources, and county-run projects for child health and development.
  • Cigarette and tobacco products tax evasion hurts the honest business owner. Unscrupulous sellers of untaxed cigarettes and tobacco products can undercut the prices charged by the legitimate businessperson.
  • Cigarette and tobacco products tax evasion is accompanied by an increase in thefts, hijackings, cross-border smuggling, and other organized crimes.

Report Cigarette and Tobacco Tax Evasion

Public awareness and involvement are essential in eliminating tobacco tax evasion. To report suspected cigarette and tobacco tax evasion, contact the Board of Equalization, Investigations Division, at 1-916-324-0105 or the Tax Evasion Hotline at 1-888-334-3300. You can also submit a complaint online. By law, all complaints are kept confidential unless a court orders otherwise.