United Parcel Service has been fined for shipping over 683,000 cartons of untaxed cigarettes into New York American Indian reservations. Fortune reports that the shipping company owes New York City and State almost $247 million, according to a ruling by a federal judge.
UPS, as with any postal and shipping organization, adds fees and taxes to their shipping options as per policy. Many consumers, for example, choose to add 50% or more to their bill by opting for 2-day shipping. This illegal transaction went around shipping standards by avoiding taxes, raising flags for the district court. According to USA Today the court ruling finalized a 2015 lawsuit in which officials argued that UPS acted in violation of tax and public health laws. This is because cigarettes are taxed-exempt when sold to tribal members on reservations for personal. Otherwise, they should be taxed.
“We are pleased that the award of nearly $247 million to the city and state reflects the serious nature of the offenses at issue,” New York City Corporation Counsel Zachary Carter said in a statement to Fortune. “Cigarette smoking is a leading cause of preventable death and the city and the state will continue in their efforts to protect the public health.”
Ranging from steel shipping containers, that last an average of 25 years with minimal maintenance, to ground trucks, modern shipping methods are adapted to an evolving global economy. All shipping methods are subject to specific regulations. If companies break these, heavy fines are put in place. USA Today reports that UPS plans to fight the court ruling, claiming that the court-ordered fine does not match their actions.
“The court’s monetary award is excessive and far out of the bounds of constitutional limits, particularly given that the shipments at issue generated around $1 million in revenue,” the shipping giant said in a statement to Fortune.
USA Today reports that UPS also said that the ruling suggests that the company should “serve in a quasi-law enforcement role which involved monitoring, inspecting and reporting package contents, which is not appropriate for a common carrier.”