Retailers are being urged to put their consciences before cash flow this Christmas, in the face of an expected rise in offers of cheap illicit stock.
The Tobacco Retailers Alliance (TRA) said retailers who bought from the black market in order to gain a competitive advantage undermined all the efforts that responsible retailers made to show good trading practices.
Illegal sales of alcohol and tobacco also had a devastating impact on the local economy and other responsible retailers, HMRC spokesman Dave Gostelow added.
A TRA survey found that a quarter of retailers had been offered illicit tobacco products in the past year, and 34% had considered closing their stores as a direct result of competition from smuggling and cross-border shopping.
The call comes as tens of thousands of pounds worth of smuggled and counterfeit goods were seized from a convenience store and house in Huddersfield.
Cigarettes, alcohol and DVDs worth an estimated £75,000 were recovered from the Nawroz store in what Trading Standards said was the largest sting in an intensive campaign over the past three months.
Similar activity in the West Midlands led to the seizure of more than 70,000 cans of non-duty-paid beer and wine from cash and carries, off-licences and convenience stores.
The issue of non-duty-paid alcohol, which is seen by some as a victimless crime, tends to increase during the festive period.
James Bielby, chief executive of the Federation of Wholesale Distributors, urged retailers not to be fooled by the impression of a short-term gain. "Buying and selling illegal products will backfire. A loss in revenue to the treasury will just lead to more red tape and burdens for the industry, and greater hardships for retailers," he said.