Lowell Wholesaler Pleads Guilty to Tobacco Tax Fraud

BOSTON – A Lowell man pleaded guilty today in federal court in Boston in connection with defrauding the Commonwealth of Massachusetts of tobacco excise taxes between 2012 and 2014.

Neetal Shah, 41, pleaded guilty to one count of wire fraud.  U.S. District Court Judge Allison D. Burroughs scheduled sentencing for July 21, 2017. 

Between approximately April 2012 and November 2014, Shah operated a wholesale business in Lowell that sold tobacco products, including cigars, smoking tobacco and smokeless tobacco (such as snuff and chewing tobacco), as well as other non-tobacco items, to convenience stores, gas stations and other retail businesses.

Under state law, smokeless tobacco wholesalers must file an excise tax form monthly and pay a 210% excise tax on smokeless tobacco brought into Massachusetts.  Cigar wholesalers must file an excise tax form quarterly and must pay a 40% excise tax on cigars brought into Massachusetts.

In order to evade tobacco taxes, Shah made regular purchases of loose smoking tobacco and smokeless tobacco for his business from two distributors in Pennsylvania, where these tobacco products are not taxed.  Knowing the products were subject to Massachusetts state excise taxes, Shah either drove the tobacco products or had them shipped to Massachusetts, where he resold them through his wholesale business without paying the requisite taxes.

The charging statute provides for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000.  Actual sentences for federal crimes are typically less than the maximum penalties.  Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Acting United States Attorney William D. Weinreb and Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston, made the announcement today.  Valuable assistance was also provided by the Massachusetts Department of Revenue. Assistant U.S. Attorney Stephen Heymann of Weinreb’s Economic Crimes Unit is prosecuting the case.