Companies and Brands

UPS Fined $247 Million for Shipping Illegal Cigarettes to NY

Douglas A. McIntyre

Published: May 26, 2017 4:51 am

Last Updated: January 12, 2020 11:38 am

United Parcel Service Inc. (NYSE: UPS) was fined $247 million by a court for shipping cigarettes to New York City and the state without the payment of appropriate taxes, according to Reuters. District Judge Katherine Forrest of Manhattan ruled that UPS needed to pay a large fine because of the gravity of the infraction.

New York State was awarded $165.8 million. New York City was awarded $81.2 million. UPS had been charged with shipping more than 683,000 cartons since 2010.

In an emailed statement obtained by Reuters, UPS wrote:

The court’s monetary award is excessive and far out of the bounds of constitutional limits, particularly given that the shipments at issue generated around $1 million in revenue.

Cigarette taxes, part of a series of “sin taxes” collected by states and municipalities, are a major source of revenue. Alcohol is also taxed at high levels. According to the Tax Foundation, the federal tax on a pack of 20 cigarettes is $1.0066. New York has the highest tax of any state at $4.35.

According to the foundation:

Cigarettes are taxed the highest in New York, at $4.35 per pack. New England states round out the remaining top four, with Rhode Island charging $3.75 per pack, followed by Connecticut ($3.65) and Massachusetts ($3.51). On the other end of the spectrum, Missouri levies the lowest tax on cigarettes at 17 cents per pack – trailed closely by Virginia ($0.30), Georgia ($0.37), and North Dakota ($0.44).

Not shown here are local cigarette taxes, which can be substantial. In Chicago, Illinois, the combined state, county, and municipal taxes total to $6.16, while in New York City, smokers pay $5.85 per pack.