The retailers are also calling on each of the parties in the federal election campaign to commit to making youth possession of tobacco illegal, a call they've made before to provincial leaders.
"We don't allow underage youth to possess alcohol, so why should tobacco be different?" association president Dave Bryans said in a release.
The group says the rise in contraband use comes at a time when youth smoking rates are at an all-time low.
"This study makes it clear that kids, who shouldn't be smoking at all, are having no trouble getting their hands on illegal cigarettes that cost pennies a piece," Bryans said.
The study was conducted between April and June by independent research company, Arcus Group.
The cigarette butts were collected, examined and classified in three categories; legal, illegal or unknown.
In Ontario, the highest incidences of contraband smokes were found in Newmarket and Aurora for the second straight year, at 47 and 45 per cent respectively. The lowest, also for the second straight year, were in Burlington and Oakville, at eight and seven per cent.
Forty eight per cent of the municipalities or regions surveyed exceeded a 30 per cent share of illegal cigarette butts, down slightly from 50 per cent in 2007.
"We're committed to being responsible community retailers and, when you see a highly regulated product like tobacco being sold without any checks or balances in your community, you've got to stand up and play a role in solving the problem," Bryans said.
"But government can start by telling kids it's not acceptable to possess cigarettes and that's the law."
The association says contraband cigarettes are often made in illegal, unregulated factories, and are imported from places like the United States and China, or are illegally manufactured and sold here in Canada.
The group points out illegal smokes are often sold for as little as $1 for a pack of 20 compared to $8 for government-taxed cigarettes.
Last week, Prime Minister Stephen Harper promised tough new measures aimed at discouraging tobacco access and marketing to children. One in four young people are smoking and the Conservative leader blamed that partly on targeted marketing by tobacco companies.
