Alcohol

Holiday Cheer Means Reasonably Priced, Smuggled Booze

If government officials didn't want us to smuggle goods, they'd lower taxes to make the business less profitable.

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Keeping the old punch bowl filled can get spendy at this time of year, so you can't blame Juncheng Chen for making an epic party run to try to keep costs down. Unfortunately, officials in his home state of New York don't like it when their captive subjects drive across the border to stock up in jurisdictions where the booze prices are cheaper. They arrested him earlier this month and issued a press release about law enforcement's great blow against frugal scofflawry.

"Juncheng Chen, 45, of 136-18 64th Road, Flushing, Queens, was arrested by investigators with the Tax Department's Criminal Investigations Division after his vehicle was stopped by New York State Police in Rye, NY. The vehicle was packed with 757 liters of liquor, which Chen allegedly purchased at five different liquor outlets in New Hampshire."

"Alcohol-related tax evasion, as this case clearly shows, is on our radar," tutted Acting Commissioner Nonie Manion of the New York State Department of Taxation and Finance. Officials estimated they lost out on about $1,288 in liquor taxes because of Chen's shopping trip—money, that is, that the man had planned on saving himself, his friends, and his customers by making purchases in a jurisdiction where the government was less sticky-fingered.

New York, as it turns out, taxes booze at $6.44 per gallon. Hefty as that sounds, that's only somewhere around the middle of the pack, as U.S. states go. But people are natural comparison shoppers, and bargains abound. "Spirits are taxed the least in Wyoming and New Hampshire, where government-run stores have set prices low enough that they are comparable to having no taxes on spirits," notes the Tax Foundation. With such a price differential at hand, why not make a long-distance party run and split the savings with some lucky customers?

Well, except that state officials get pissy if they catch you.

In fact, smuggling booze from lower-taxed states is quite the cottage industry in New York. "Anytime you order a cocktail or buy a bottle of liquor in New York, there's a one in four chance that the booze has been smuggled in from out of state," Crain's New York Business estimated last year.

The state's claimed loss from smuggling—or, more accurately, the revenue officials anticipated but that never materialized because people went shopping across the state line—is estimated at $1.6 billion.

Oddly enough, state officials do actually seem to have a clue as to why people would drive all the way from Queens to New Hampshire to purchase their seasonal cheer.

"The New York State tax on liquor is relatively high compared to other forms of alcohol and to other states," the New York State Division of the Budget acknowledged in its 2011-2012 Executive Report. "The State continues to suffer tax avoidance and evasion due to the bootlegging of liquor from other states." The report raised hopes about higher fines and enforcement provisions "moderating year-over-year declines in State alcoholic beverage tax receipts."

Yet here we are half a decade later, and enough people see the same potential profit that Jungchen Chen saw in making a party run to New Hampshire or elsewhere (Maryland, Delaware…) that a quarter of the booze in the Empire State is smuggled in.

You'd think that New York officials might learn that lowering taxes so that prices in the state aren't so dramatically higher than elsewhere would be the best way to deter smuggling, but there's really no evidence that officials are capable of learning. After all, New York is the state that prides itself on having the highest cigarette taxes in the country ($4.35 per pack statewide, and $5.85 in New York City), but has never seemed to understand why the inevitable end result, despite rather draconian enforcement efforts, is "an estimated 56.8 percent of cigarettes consumed in the state deriving from smuggled sources in 2015," according to the Tax Foundation.

With only a quarter of the booze in the state smuggled relative to more than half of cigarettes, there's obviously massive room for growth in the illicit trafficking of liquor from lower-taxed states. To keep that underground market booming, New York officials just have to continue being their crazy, obstinate selves.

But New York is far from the worst offender in this category. The biggest thief is Washington, where the government was forced by voters in 2011 to surrender its monopoly on liquor sales. Officials responded by adding taxes to what was already the highest rate in the nation—currently $31.48 per gallon.

Unsurprisingly, lower-taxed neighboring states are doing bang-up cross-border business. At a retailer in Idaho, "Almost every license plate KXLY saw at the liquor store this afternoon was from Washington," according to one news report. That store opened just months after Washington privatized liquor and the state government hiked taxes—apparently in anticipation of a new stream of customers.

Oregon, too, despite its high $22.78 per gallon tax, is benefiting from a surge in booze-shopping by Washingtonians seeking to escape an even worse mugging. "The closest Oregon liquor stores to the WA-OR border experienced an additional 20 percent increase in sales relative to interior stores," an economic analysis found last year.

Huh. It's almost as if burdening popular products with excessively high taxes inevitably causes people to seek to avoid paying them through any and all means, legal or illegal, no matter what enforcement methods are imposed. Who would have guessed? Except for anybody paying attention, that is.

So, this season, don't be afraid to fill the punch bowl, or to stock the liquor cabinet for the year to come. There will always be somebody willing to make a buck, and to save you money, by smuggling the goods from more reasonable jurisdictions. It may even be a good business opportunity for you.

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  1. Hey, New York. We’ll trade you cigarettes for liquor.
    – Virginia

    1. Done. Let’s swap vans somewhere in Pennsylvania.

      1. Amish country of course.

        1. I can see the headline now: “LIBERTARIANS SWAP THEIR GOODIES IN INTERCOURSE”

          1. I picked up a T-shirt in that town and didn’t notice that it only said “I LOVE INTERCOURSE” without the “Pennsylvania” at the end like the other shirts in the store. I stopped wearing it in public after I got weird creepy comments while wearing it in San Francisco buses.

            1. you must look MIGHT WIERD to get stares on a bus in Flim Flam Frisk’em. The most sexually deviant population in North America, I’m sure.

              1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

                This is what I do… http://www.onlinecareer10.com

        2. Amish country is an excellent rendezvous option – not only do they mind their own business where English are concerned, but while you’re there you can also pick up some delicious pastries, well-built wooden furniture, and meth.

          1. But all the cops are English so you still need to watch out.

          2. And scrapple. Can’t get that out here.

  2. They could just make their own. A little methanol never… wait.

    1. “They could just make their own.”

      Only if they plan on using it for fuel. Distilling spirits without a license is illegal at the Federal level and in all states but MO. However, purchasing the equipment to do so is perfectly legal.

      1. there is a limit below which a man can ‘shine his own with impunity. Not sure what that is. BUT don’t EVER sell it. Sharesies is fine but no money to change hands.

  3. “…but there’s really no evidence that officials are capable of learning…” anything, any time or any where…lucky they have an autonomous nervous system, cause they’d never learn to breath and keep their hearts beating…

  4. It is the duty of every red blooded American to engage in smuggling, especially booze and cigarettes.

  5. You’d think that New York officials might learn that lowering taxes so that prices in the state aren’t so dramatically higher than elsewhere would be the best way to deter smuggling, but there’s really no evidence that officials are capable of learning

    Somewhat related: I encourage all of you to sit in on our “minimum wage impact” meetings – they’re the knees, bros.

  6. I liked this story better the first time I saw it, when it was the pilot episode of The Dukes of Hazzard.

    1. You would prefer the Good Or Boys in the Generar Ree, lacist.

    2. I liked this story better the first time I saw it, when it was the pilot episode of The Dukes of Hazzard. Smokey and the Bandit.

      FTFY

      1. I liked this story better the first time I saw it, when it was the pilot episode of The Dukes of Hazzard. Smokey and the Bandit Thunder Road.
        https://www.youtube.com/watch?v=tdwUpxkfSJw

  7. There will always be somebody willing to make a buck, and to save you money, by smuggling the goods from more reasonable jurisdictions. It may even be a good business opportunity for you.

    I THOUGHT LIBERTARIANS CARED ABOUT THE RULE OF LAW!!!!!!

    1. Nobody wants your goods anyway

      1. Salt in the masturbatory wound.

      2. Those who do intend to pursue Crusty sexually should keep in mind that, while the odds are good, the goods are odd.

        1. Time to update the tinder profile!

          1. That kind of self denigration could actually work, if your target demographic is mope-ass hipster chicks. I knew a girl who once hooked up with a guy specifically because his Tinder profile described him as “the indoorsy type.”

  8. If government officials didn’t want us to smuggle goods, they’d lower taxes to make the business less profitable

    If lowering the tax led to increased revenue, why wouldn’t they do so? Seems to me they’re doing exactly what they need to do in order to maximize revenue. And they don’t care about the smuggling at all.

    1. They specificalky care about hiw mych revenue tgey theoretically are supposed to get from these taxes. Lowering the rates would lower the theoretical revenue. Besides they also get the thrill of punishing peons who try to find a workaround.

      New York is not a state with a government fit for a free people.

      1. They specificalky care about hiw mych revenue tgey theoretically are supposed to get from these taxes.

        Sure. But they know that is a fantasy. They know how much smuggling is happening so they jack up the tax to maximize profit.

  9. I remember the good old days when you could avoid tax by buying online. Sigh

    1. Look into package forwarding services based in a state with no sales tax.

  10. Of course in NH, they’re state stores. Unless I lost track of their privatiz’n.

    But in NY is he actually in violation yet, or do they have to wait until he files taxes & fails to include a use tax for those items?

  11. The biggest thief is Washington, where the government was forced by voters in 2011 to surrender its monopoly on liquor sales. Officials responded by adding taxes to what was already the highest rate in the nation?currently $31.48 per gallon.

    How do you figure the “tax rate” on liquor sold in state stores? It’s mind-boggling to even think the state was taxing itself. They could’ve computed it any way they wanted, couldn’t they? They could even have raised the price & claimed to be giving a tax rebate w each sale!

    1. You know, like, “Here’s your liquor & here’s your cash back.”

      I’m having a little trouble typing this, as I’m consuming my dead co-tenant Steve’s Jack Daniels. I really dislike the taste of bourbon, or of “Tennessee whiskey”, or of GBL, but they’re not bad mixed w Coke. Sad story about Steve, I’m afraid his daughter pulled the plug on him prematurely based on her thinking about him. He had Wernicke’s aphasia from his stroke (which his daughter unfairly characterized as “massive”), so I’m afraid he was unable to make his true wishes clear, and/or he wasn’t allowed the choice he wanted, which was to come home. So now he’s “home”.

      1. That’s how you Reason comment, kids.

      2. Look at Flannery O’Connor over here!

      3. That is shitty. You have to wonder about someone who defaults to pulling the plug when it isn’t clear what the loved one would want.

      4. I don’t want to make light of this. But I will say your first problem is drinking anything with fermented corn, wheat or rye.

        There is only 1 grain that the gods made to be fermented, and that is BARLEY!

    2. when the liquor was ONLY sold in state monopoly retail outlets, the taxes were high, higher than Oregon but not so high as to drive a “relocation” habit. Once WE THE FOLKS booted the state out of rhte booze biz, they had to do solmething to get back at us. All those otherwise useless sales clerks and lazy stockers had to go find REAL work. And the state level hooh hahs had to find some reason to justify their continued existence. So, in retribution they emplaced the highest booze taxes in North America….. there is a litre tax, an item tax, then the sales tax on top of the product and all THOSE taxes. (yes, a tax on the tax….) The identical item number 1.75 litre bottle of Costco’s Kirkland Vodka, quite a decent beverage, costs right at $16 out the door in California. Same item number in Washington is $38. Haven’t bought one since they did that.. at least, not within Washington. I simply quit buying hard stuff here. Oregon, which is high, is reasonable, compared. But whenever I happen to be in California I stock up for a while…. my dollah goes three times as far for the same thing.

  12. They make the same kind of example of some liquor smuggler in Penna. every Christmas too. Their agents take license plate numbers in Delaware and radio the cops at the border to BOLO for you. I usually use a back road to re-cross or stash the goods at a Delaware residence for a few days. I often wonder what “probable cause”the cops would have to stop you and demand you open your trunk for inspection.

    1. I’ll bet the authorities are notified by someone in one of the stores – how else would they know the purchase was large enough to make it a good PR move.
      P.S. the characterization of Mr, Chen’s sojourn as a “party run” is a bit of an understatement, when the haul was 757 liters (200 gallons).

  13. It seems that the control freaks who vote for these tax increases on booze and tobacco must know that they will lose some revenue to lower tax states and perhaps that is why they make the taxes so high in the first place, to cover their losses and still make a profit?

  14. “If government officials didn’t want us to smuggle goods, they’d lower taxes to make the business less profitable”

    Wouldn’t it be spectacular if this was a legitimate legal defense – “We the Jury find the defendant not guilty … if not for anything else, because the state can’t grasp simple economics”

  15. Nothing new about this. When I lived in Minnesota in the 1970s, their state-run ABC liquor prices were much higher than adjoining Wisconsin’s free-market, low-tax liquor. Liquor runs were common but around Christmas time the Minnesota Highway Patrol would station their unmarked cars in the parking lots of the La Crosse, Wisconsin liquor stores. The officers would radio the Minnesota license plate numbers back to officers at the Minnesota end of the Mississippi river bridges where the drivers were pulled over and cited.

  16. Seriously? We can’t buy things in other States now? I mean, I live in Ohio near the Michigan border. Gas taxes are slightly higher in MI, and people come through here to fill up from time to time. Wonder how many gallons it takes before that is considered tax evasion? This is ridiculous. We do not pay duties and customs for interstate travel and purchases.

  17. The saga of the bootlegger as The New Galahad was published by HL Mencken in 1924: … Think of him creeping in in his motorboat on Christmas Eve, risking his life that the greatest of Christian festivals may be celebrated in a Christian and respectable manner! Think of him soaked and freezing, facing his exile and its hardships uncomplainingly, saving his money that his old mother may escape the poor-farm, that his wife may have her operation for gall-stones, that his little children may be decently fed and clad, and go to school regularly, and learn the principles of Americanism!

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