N.D.Ill.: Tobacco sales are highly regulated under Burger

Tobacco sales are highly regulated under Burger. By undertaking to sell tobacco products, the business is subject to regulatory searches over whether the cigarettes are taxed. United States v. Hamad, 2013 U.S. Dist. LEXIS 178720 (N.D. Ill. December 20, 2013):

Hamad argues that for the government to rely on the sale of cigarettes without an affixed Cook County tax stamp as authority to search a place of business is “blatantly sophomoric — and rather bizarre.” (R. 66, Reply at 3.) As a small grocery store that engaged in the retail sale of cigarettes, however, the Ordinance applied to H & Y. Pursuant to the Burger standard, the Department of Revenue’s search of H & Y under the Ordinance was reasonable.

First, the County has a substantial interest in regulating the tobacco industry. See Austin v. Tennessee, 179 U.S. 343, 348-49, 21 S. Ct. 132, 45 L.Ed. 224 (1900) (finding that the state had a legitimate interest in regulating the sale of tobacco); Townsend v. Yeomans, 301 U.S. 441, 57 S. Ct. 842, 81 L. Ed. 1210 (1937) (upholding a state statute regulating fees charged by tobacco warehousemen for selling and handling farmers’ tobacco and finding “such regulation goes back to an early day”). Given that there is a federal Bureau of Alcohol, Tobacco, Firearms and Explosives whose stated mission includes as a goal to “reduce alcohol smuggling and contraband cigarette trafficking activity … and significantly reduce tax revenue losses to the States,” there is no doubt that the County has a substantial interest in regulating the tobacco industry. http://www.atf.gov/content/alcohol-and-tobacco (last visited December 17, 2013). Second, warrantless inspections pursuant to § 74-440 are necessary to further the regulatory scheme. United Taxidermists, 436 Fed. Appx. at 695 (“abundant case law extols the necessity of surprise in these searches”) (citing Burger, 482 U.S. at 710; United States v. Gonsalves 435 F. 3d 64, 68 (1st Cir. 2006); Lesser v. Espy, 34 F.3d 1301, 1308 (7th Cir. 1994)). Third, the inspection program provides a constitutionally adequate substitute for a warrant. The statute informs a retail seller of tobacco products that it shall permit representatives of the Department of Revenue to inspect or audit cigarette inventory on its premises. § 74-440. Thus, Hamad knew that the Department of Revenue’s inspection of his store did not constitute discretionary acts by a government official but were conducted pursuant to a statute. See Burger, 482 U.S. at 711. In addition, the statute limits the “time, place, and scope” of the inspection to “regular business hours” at “any place where cigarette inventory is possessed, stored, or sold” and the inspectors may examine only the books, records, and cigarette inventory of the retail merchant. §§ 74-435, 74-440.

Here, the Department of Revenue agents searched H & Y with the purpose of inspecting the store’s cigarette inventory pursuant to § 74-435 of the Ordinance. Further, the inspection occurred not only pursuant to the Ordinance, but after the Department of Revenue agents learned that H & Y was selling cigarettes that lacked the required county tax stamp — a violation of the Ordinance. See § 74-435(c) (“the sale, resale or possession by a … retail tobacco dealer of … unstamped cigarettes … shall give rise to the prima facie presumption that the … retail tobacco dealer … is in violation of the provisions of this article”). Thus, the Court finds that Agent Srain and Agent Glasper did not need a search warrant to conduct the search of H & Y on October 15, 2010.