AG: FedEx Pay Up $35 Million For Shipping Untaxed Cigs

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FedEx was found to have shipped hundreds of thousands of untaxed cigarettes into New York over a ten-year span, costing the state millions in potential revenue. AP Photo/Gerry Broome, File.

FedEx was found to have shipped hundreds of thousands of untaxed cigarettes into New York over a ten-year span, costing the state millions in potential revenue. AP Photo/Gerry Broome, File.

By Victoria Merlino

FedEx will be taking a permanent smoke break.

Attorney General Letitia James announced a $35.5 million settlement with the shipping giant on Monday after a 2018 ruling found that FedEx had illegally shipped hundreds of thousands of untaxed cigarettes into New York across a ten-year span.

“For years, FedEx knowingly engaged in illegal and harmful behavior at the expense of New Yorkers’ health,” said James in a statement. “Let this serve as a message that we will never allow companies — however large or small — to cheat or harm New Yorkers.”

The settlement comes as the resolution to three lawsuits that alleged FedEx partnered with cigarette trafficking businesses to ship untaxed cigarettes, knowingly dealing with customers with names such as “Cigarettes Direct To You.” A Manhattan federal court judge found that FedEx had violated a 2006 Assurance of Compliance with the attorney general’s office in which FedEx agreed to stop cigarette deliveries to residential addresses to avoid prosecution.

The high tax rate on cigarettes in New York — currently at $5.85 per package of 20 cigarettes in New York City — has led to a decline in the number of smokers in New York and greater revenue for the state. The $35.5 million settlement reflects the lost tax revenue as well as a penalty for a longstanding issue that caused a public health concern.

“For the worst of reasons – profit – FedEx shipped millions of untaxed cigarettes to residents throughout the State, cheating the City out of millions of dollars in tax revenue and with apparent indifference to the impact on public health,” said Zachary W. Carter, City Corporation Counsel in a statement.

Going forward, FedEx plans to cease most domestic shipments of tobacco products and implement company-wide training and an independent compliance consultant.