Vendors selling untaxed tobacco or vapes could face increased penalties and licensing requirements to sell in Australia's most populous state amid moves to crack down on a booming underground industry.
The NSW bill, introduced to parliament on Thursday afternoon, will attempt to align the state with others, doubling the maximum penalties for illicit tobacco sales to $220,000 for corporations and $44,000 for individuals.
Vendors must also be licensed to sell tobacco and pay an annual fee.
Health Minister Ryan Park said it was about time.
"NSW is somewhat playing catch-up but it is an area that (chief health officer Kerry Chant) and I are determined to fix," Mr Park told reporters.
"We're increasing our enforcement, we are increasing the fines, and we are making sure that there is a clear, dedicated licensing scheme that to be frank, should have been in place for some time."
Enforcement officers will be doubled, with 14 more inspectors focused on dismantling underground sales.
Inspectors have conducted 565 targeted retail inspections since July, seizing more than 3.2 million cigarettes and more than 600kg of other illicit tobacco products with an estimated value of over $3.7 million.
Dr Chant said the licensing scheme would show where the products were sold.
She acknowledged quitting was hard but encouraged smokers to give up, including by calling Quitline or talking to a pharmacist or GP.
Taxes on tobacco were put in place to discourage consumption, she said.
"This illicit tobacco which undercuts the market really undermines that important public health initiative," Dr Chant said.
However, there were questions about how high prices could go before people would seek alternatives.
"We are seeing the growth in illicit supplies and people are actually seeking out illicit tobacco," Dr Chant said.
Victoria adopted recommendations earlier in the year for a tobacco licensing scheme set to begin within months.
It followed a spate of arson attacks on tobacconists and public-place shootings believed to be linked to organised crime.
Australian Association of Convenience Stores chief executive Theo Foukkare suggested a fit-and-proper-person test for people seeking a NSW tobacco licence, which should cost less than half the mooted annual fee of about $1100 and carry heavier fines for non-compliance.
"Unless we see significantly increased enforcement, prosecutions and the closing down of these illegal stores, the licence fee will only be another tax on business," he told AAP.
"The announced fines are a step forward but they're simply not strong enough."
Mr Foukkare pointed to $1 million penalties in South Australia, which also had stricter enforcement.
Mr Park said licensing revenue would fund a crackdown on sellers doing the wrong thing.
"People have a right to sell cigarettes but they need to do it in a regulated market," he said.
Wagga Wagga MP Joe McGirr notified parliament of a bill to license tobacco sales in August.
The independent said the government proposal reflected his bill and he looked forward to supporting it.
"It will provide a valuable structure that will help to reduce the damaging effects of this rapidly growing problem," Mr McGirr said.
Opposition health spokeswoman Kellie Sloane said heavier penalties and a licensing scheme would be welcomed but the opposition was also pushing for a parliamentary inquiry to examine the issue more broadly, with concerns about money laundering through tobacconists and the efficacy of enforcement.
"Illegal trade in tobacco is lining the pockets of criminal gangs and while tougher penalties are a start, we must look at this in a comprehensive way," she told AAP.
