NEW YORK - The New York Post reported last week that millions of dollars in taxes for New York City are going up in smoke.

City officials conducted a sweep of 1,700 licensed tobacco retailers and found that 42% are either selling untaxed cigarettes or using counterfeit stamps to avoid the combined $5.85 city-state excise tax per pack. Once taxes are factored into the cost, a pack of cigarettes in New York City costs more than $10 a pack.

Noting that there is no excuse for tax evasion, Jim Calvin, president of the New York Association of Convenience Stores, told the newspaper that the number of retailers who are circumventing the law is alarming, and that "it??s a reflection of the desperation of some store owners" who are trying to make ends meet in a jurisdiction with the highest cigarette tax in the United States.

Finance Commissioner David Frankel said that the pursuit of cigarette tax evaders is as much about fairness as revenues. "At a recent outreach event in The Bronx, I had a guy who came up to me desperate for help because his family??s delicatessen is going out of business because their competitors are selling illegal cigarettes and they refuse to do it," he told the newspaper.

Most store owners caught in the recent citywide sweep had a few cartons of illegal cigarettes in their stores, but in one case, agents seized 1,700 cartons of untaxed cigarettes and thousands of counterfeit tax stamps.

In some instances, the cigarettes are black market products. "They??re mostly cigarettes made in foreign countries," Frankel told the newspaper, adding, "They??re brought in here and they??re mislabeled and they??re sold that way."

Currently, the penalties for selling a few cartons of untaxed cigarettes are minimal. However, Frankel said the city is drafting legislation that would increase those penalties on retailers who skirt the law because the impact "is devastating" to honest small business owners.