ALBANY - Twenty-seven people have been indicted on charges of trafficking in millions of dollars in untaxed cigarettes taken from Virginia for resale in Michigan and New York, where the nation's highest cigarette taxes are fueling a booming black market.

Officials say 21 of the suspects are from New York City or Yonkers. The charges include conspiracy, trafficking in contraband cigarettes, money laundering and felony possession of firearms and ammunition. Nineteen suspects are in custody.

In the fall of 2006, a phony storefront designated as KG Wholesale was established in King George, Va. It was operated by undercover agents from the New York tax department and was wired for video and audio surveillance.

On Tuesday, New York raised its cigarette tax $1.25, bringing the total tax to $2.75 per pack. Cigarettes cost an average of $5.82 per pack statewide, and about $8 a pack in New York City, which adds its own tax.

Michigan has a $2 tax per pack. Virginia has a tax of 30 cents per pack, ranking 47th in the nation, according to the Federation of Tax Administrators.

In April, undercover agents in New York seized more than 2 million counterfeit tax stamps from a Jordanian bootlegger. Brooklyn prosecutors said that might be the biggest haul in the state's history.

Investigators said they also seized more than 100 cartons of counterfeit Marlboro cigarettes made in China.

While legitimate tax stamps, which must be affixed by distributors to packs of legal cigarettes, cost more than $2.50 each in New York and New Jersey, investigators said the suspects were selling them at 4.5 cents apiece. Prosecutors said they also found stamps from Pennsylvania, Virginia and Kentucky.

Health surveys have found that more than a third of New York state smokers regularly buy cigarettes from untaxed sources, including Indian reservation smoke shops.