The State of New York has commenced an action against United Parcel Service seeking penalties and damages based on the carrier’s delivery of millions of dollars in untaxed cigarettes to unauthorized recipients. In 2005, UPS entered into a consent decree with the State of New York by which it agreed not to deliver untaxed cigarettes to unlicensed dealers and individuals. In this suit, the state has alleged that since 2010, UPS has continued to deliver more than 700,000 cartons of untaxed cigarettes from American Indian reservations in New York to unauthorized recipients. While vendors of cigarettes on American Indian reservations are not subject to state cigarette taxes, licensed vendors in New York must pay $4.35 in tax on each pack. According to a report issued by the Tax Foundation, more than half of all cigarettes sold in New York are smuggled. The state is seeking recovery of more than $180 million in unpaid taxes. UPS has denied the allegations, stating that it was not aware of any violations and terminates services when it becomes aware of shipments in violation of its policies.

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