The c-store retailer in the West Midlands, whose identity is being kept secret, said his business was suffering as a result of the other store, which he knew was selling 'cheap white' cigarettes' those cigarettes which are manufactured cheaply outside of the EU and smuggled into the UK.
His information was then used in a sting by HMRC and Trading Standards. Officers also caught staff at another store in the act of selling cheap whites.
Brandon Cook, lead officer for tobacco and age-restricted sales at the Trading Standards Institute, said the prosecution was "a great result for other local retailers, trading standards and the community".
"We need the intelligence from people who are close to the problem so that we can channel our resources more efficiently," he said. "I would urge anybody who has any information to contact the local trading standards service and pass it on in as much detail as possible.
"You can be sure that any information will be treated confidentially," he added.
The news was also welcomed by the Tobacco Retailers Alliance (TRA). National spokesman Ken Patel said: "This shows why it is so helpful for HM Revenue and Customs and also Trading Standards to hear from retailers when we know about illicit sales taking place in our area. It is also reassuring for us retailers to know that our complaints are taken seriously and acted on where possible."