Cook County Board President Toni Preckwinkle’s administration has failed to collect up to $20 million in fines from storeowners accused of illegally selling cigarettes – either loose smokes, or packs without tax stamps that are required by law.
The revelation comes as county officials in recent years have made it pricier to shop, sleep in a hotel or even file a lawsuit through a combination of tax and fee hikes to help shore up budget gaps and a struggling government pension system.
Under Preckwinkle, the county has conducted roughly 31,000 inspections in Chicago and the suburbs and issued 9,400 tobacco citations since 2011, according to records obtained by the Better Government Association and CBS2, and interviews.
Those citations have resulted in fines totaling $26.3 million. But just $6.35 million has been collected as many owners refuse to pay, often with little or no repercussions, according to records and interviews.
Unstamped packs of cigarettes seized by county inspectors. Photo courtesy of Cook County
The BGA and CBS2 identified numerous examples of storeowners who owe the county thousands of dollars but continue to operate. In some cases, the owners are still selling loose or untaxed packs of cigarettes, in violation of a county ordinance and depriving taxpayers of precious revenues.
The county bans the sales of individual cigarettes and levies a $3 tax on every pack of cigarettes sold locally. It collects that tax through the sale of stamps to licensed wholesalers, which affix the stamps to the bottoms of cigarette packs. Storeowners are supposed to buy stamped packs from wholesalers but that doesn’t always happen. To avoid paying taxes, some storeowners buy stolen cigarettes, or packs that were bought in other counties or states with lower taxes.
Cook County government collected $137.4 million in tobacco taxes last year, up from $131.7 million in 2014. The revenues were based on last year’s sale of 45.8 million tax stamps, up from 43.9 million stamps in 2014, according to interviews and records.
County officials say they’ve improved oversight but acknowledge that collecting fines is tricky, as many storeowners refuse to pay, reject settlement offers, or dissolve their business and reconstitute under a different name. The county has sought help from a debt collector but that doesn’t guarantee payment.
Meanwhile, the sale of black market cigarettes appears to be thriving.
Unstamped packs of cigarettes purchased by the BGA/CBS2
The BGA/CBS2 recently paid $7 for a pack of Maverick cigarettes from Burbank Food, Liquor & Deli, a southwest suburban store that owes $146,000 in tobacco-related fines, records show. The pack had a Missouri tax stamp on the bottom, and not ones from the state of Illinois and Cook County governments as required.
Carlos Jackson, owner of Burbank Food, acknowledges he bought black market cigarettes to avoid paying local taxes, which rank among the highest in the country. His message: Everyone’s doing it.
“You’ve raised taxes so high, you’ve created a black market,” Jackson says, adding he has no immediate plans to pay his tobacco-related fines. “People, even if they wanted to, can’t pay these off. The penalties far exceed what you can make selling cigarettes in a year.”
Cook County Board President Toni Preckwinkle
Told of Jackson’s comments, Preckwinkle said “that’s like saying my neighbor isn’t paying her income taxes so I’m not going to pay mine. I’m sorry, that’s no excuse. The law is the law.”
Jackson and 12 other tobacco sellers owe the county at least $100,000, and another 135 owe $20,000 or more, according to county records obtained under the Illinois Freedom of Information Act.
The Tobacco Outlet in Morton Grove ranks among the highest with unpaid fines of $167,000, as does Alsip Food Mart with $164,000. At the food mart, county inspectors seized 835 packs of unstamped cigarettes during five site visits last year, and have issued a total of 32 citations from 2013 to 2015.
Both businesses continue to sell tobacco.
The county doesn’t issue business licenses, so unlike Chicago’s municipal government it can’t shutter a store if fines go unpaid. Aside from hiring an outside debt collector, the county in some cases is filing legal claims to place liens against a business, garnish wages or intercept tax payments from the State of Illinois, officials say.
There are $14.3 million in unpaid tobacco fines now in collection, and Preckwinkle says the county and the City of Chicago are working to finalize a pilot program that would allow the city to suspend business licenses of stores that owe the county fines.
“I think it’s important for the playing field to be level,” Preckwinkle says. “We want people who comply to know that we’re going to go after people who don’t comply.”
The county completed more than 10,000 inspections last year, issuing 1,000 citations and seizing 34,383 packs of unstamped cigarettes and 26,592 loose cigarettes, officials say. Officials say they’ve found packs hidden behind walls, under floors, in cars and even the cushions of a purple sofa.
In Cook County, a pack of brand name cigarettes typically sells for over $10 and storeowners earn profits of less than $1.
But if a retailer buys a pack on the black market, local shop owners can turn around and sell it for less than market rate and still “make a couple of extra bucks a pack,” according to a shop owner who said he doesn’t engage in the practice but understands why shops sell illegally.
“Business is bad,” he says. “I’m hurting.”