Tobacco Crime:
How It Hurts Texas

In fiscal 2012, Texas cigarette and tobacco tax collections totaled $1.4 billion. These funds support vital services, including:

public education,
property tax relief fund, and
general revenue for state operations

Case News Release

June 28, 2012: After a Travis County Jury found him guilty on all 7 counts of cigarette and tobacco tax fraud, Muslim Al-Musawi, 55, of Arlington, was sentenced by a court to 4 years imprisonment probated for 6 years. Al-Musawi was accused in two indictments of failing to maintain books and records relating cigarette and tobacco purchases, possessing unstamped cigarettes and possessing tobacco products with more than $50 in tax due, and failing to produce records to the Comptroller as required by the Chapter 154 of the Tax Code. As conditions of probation, Al-Musawi will perform 100 hours of community service on each count, pay a fine of $5,000, and pay $1,800 combined restitution to the Comptroller of Public Accounts.

Texas Tax Code, Chapter 154, Subchapter I

Tax Code Chapter 155, Subchapter G

Cigarette and Tobacco Tax Investigations

Tax Crimes

cigarettes Cigarette and tobacco taxes are set by the Legislature and collected by the Comptroller of Public Accounts. Cigarette tax crimes are described in Texas Tax Code Chapter 154, Subchapter I. These statutes define prohibited conduct for individuals and businesses participating in the cigarette industry, and apply to those with state permits as well as illegal participants.

cigars Cigar and tobacco tax crimes are described in Tax Code Chapter 155, Subchapter G and, again, apply both to those with permits and those operating illegally.

Texas law defines both felony and misdemeanor crimes relating to these products. Felony crimes range up to second-degree felonies (punishable by two to 20 years in prison and a fine of up to $10,000). These offenses include:

Counterfeiting Tax Stamps (§154.520), a second-degree felony. Because the vast majority of Texas cigarette tax revenue is derived from the sale of cigarette tax stamps, which are affixed to cigarette packs to show the tax has been paid, counterfeit stamps pose a significant threat to this tax;
Refusing to Permit Inspection by the Comptroller (§154.512 and §155.210), a third-degree felony. The Comptroller has administrative search authority under Chapters 154 and 155 to inspect the premises and records of locations listed in this statute;
Offenses Related to Books and Records (§154.516 and §155.212), a third-degree felony. These crimes include knowingly making false returns, destroying records or failing to keep records for the required period of time; and
Possession when Tax Due is over $50 (§155.211), a third-degree felony. This penalizes the possession of a taxable product on which tax amounting to more than $50 has not been paid.

Other Consequences in Addition to Criminal Punishment

A person can be required to reimburse the state for the costs of the criminal investigation as an additional penalty (see §154.301 and §155.181).
A person who sold unstamped cigarettes may be ordered to pay double the amount of stamp tax due (see §154.302).
A person who sold tobacco products untaxed may be ordered to pay double the amount of tax due (see §155.182).
The Comptroller may deny, suspend or revoke permits relating to cigarette and tobacco products (those issued under Chapter 154 or 155) if the applicant or permit holder has violated a provision of the chapter relating to the permit. Under some circumstances, this may occur without a prior hearing (see §154.1141 and §155.0591).

Venue of Case Prosecutions

Although criminal cases normally are prosecuted in the county where the offense occurred, some special rules pertain to tobacco products crimes.

Counterfeit tax stamp cases are prosecuted in Travis County (see §154.520[c]). Other cigarette tax cases are prosecuted either in the county in which the offense occurred or in Travis County (see §154.519).