Posted on 02/12/2005 2:20:01 PM PST by SheLion
Concerned about the booming trade in online cigarette sales, New York state officials have begun using a variety of techniques to clamp down on the trade, saying New York City alone is losing more than $75 million a year in uncollected tax revenues because of the sales.
In recent weeks, Attorney General Eliot Spitzer has been pushing local postal officials and private carriers to stop delivering cigarettes bought online. His office has also recently begun negotiations with credit card companies to block transactions of online cigarettes.
These efforts were given added push recently as local officials from the federal Bureau of Alcohol, Tobacco, Firearms and Explosives met with credit card executives to alert them to the various ways in which these transactions are illegal.
"The tone was very cordial and unthreatening," said a city official who participated in the presentation three weeks ago at the bureau's office in Brooklyn. "But in the end they made it crystal clear that now that the credit card companies understood the law, they would be held accountable for processing these transactions."
Mr. Spitzer emphasized that the effort has as much to do with health as money. "These sales present a significant threat to public health because they provide easy access to cheap cigarettes, which increases smoking rates, particularly among children," he said. "These illegal sales also evade state tax requirements."
Whatever their motivation, city and state officials are broadening their efforts to eradicate the business.
Two weeks ago, a judge ruled in one of the city's four lawsuits against online sellers that the city can file a revised racketeering lawsuit against Internet cigarette sellers. The ruling was the first time a federal judge has indicated that Internet sellers can be charged under federal racketeering law, said Eric Proshansky, the city's chief lawyer on the case.
After gleaning the names and the addresses from a Virginia lawsuit against one online cigarette company, the city began sending letters last month to more than 2,600 New Yorkers who officials say bought tax-free cigarettes. The letters, sent to those who bought cigarettes online from July 2002 to April 2004, give the alleged violators 30 days to pay or face interest and penalties of up to $200 a carton.
In November, local law enforcement seized 300,000 cartons of illegal cigarettes at Kennedy International Airport. Joseph G. Green, a spokesman for the A.T.F., said that the seizure was the culmination of a yearlong investigation jointly conducted by the Queens district attorney's office; federal Bureau of Alcohol, Tobacco, Firearms and Explosives; postal inspectors; and city and state tax and finance officials.
Sam Miller, a spokesman for the city's Department of Finance, said that the city loses more than $75 million a year as people duck local taxes by purchasing online. But the crackdown has drawn some criticism.
"New York is simply trying to engage in economic protectionism by limiting cigarette sales to brick-and-mortar sellers," said James L. Bikoff, a lawyer who represents several Internet tobacco sellers. "Most of the folks who are in the online cigarette business are small outfits and they typically advise the consumer to check with their own city and state's laws regarding tax rules."
New York City smokers pay the highest cigarette taxes in the country, as the state charges a $1.50 tax per pack and the city adds an additional $1.50 tax per pack. A carton of cigarettes in the city costs about $70, including $33.30 in excise and sales taxes. Online, cigarettes cost as little as $15 a carton.
Thus far, the city and the state have met with mixed results in their efforts to control the online traffic in cigarettes.
Some banks that process MasterCard transactions have begun blocking sales from certain Internet tobacco sites to customers, said Joshua Peirez, a senior vice president at MasterCard. But other banks do not. American Express currently has no policy that blocks Internet cigarette sales, said Christine Elliott, a spokeswoman for the company.
After sending a letter to credit card executives in August, Mr. Spitzer joined several other state attorneys general to send another letter pressing credit card companies to stop the transactions.
Both letters cited several reasons for the failure of Internet tobacco sellers to comply with applicable laws, including that they make no effort to verify the age of their customers and fail to report shipment of cigarettes to the tobacco tax administrator of the state into which shipments are made.
While the United Parcel Service and other private carriers have been more open to the idea of blocking the delivery of these packages, postal officials have balked at pressure from Mr. Spitzer's office, claiming that they do not have the legal authority to stop the shipments, according to city officials who have been part of the discussions. But Mr. Spitzer's office contends that the postal service indeed has the authority under federal laws that prohibit mail fraud schemes, according to a letter sent by the office.
New York State passed a law that took effect in 2003 prohibiting online and mail-order sales of cigarettes to its residents. The law was largely intended to curb tax evasion and under-age smoking, since many online cigarette sites do virtually nothing to verify the age of customers.
Efforts to stop online sales are complicated, since Internet sites are sometimes based abroad and are therefore difficult to prosecute. City officials estimate that about 80 percent of the online cigarette sales come from sites that claim Indian affiliation, which for sovereignty reasons claim immunity from laws like the Jenkins Act.
Well said SheLion, after all the American way is a way of freedom of choice.
Highly doubtful.
If you are a rational consumer, would you rather pay $70 for a carton of cigarettes, including $35 to the greedy (overreaching for-your-own-good) government? or would you rather buy a carton or two online for $15. Heck, I don't even smoke and I know the answer to that one.
It's just typical economics 101. If I lived up in NY, I'd be filling up my tank of gas in NJ too any chance I could get to avoid the obscene taxes that NY imposes.
You reap what you sow NY. Try LOWERING taxes and see the revenue come back to you. Oh wait, you can't do that because it's for the children politicians.
Afraid to buy over the Internet?
How about rolling your own? I have rolled my own for over 4 years. A premium carton in my state runs from $45-$50 for 10 packs. By rolling my own, I can roll a beautiful carton for under $8.00!! The savings has been mind boggling and I am no longer paying into the state coffers. The lawmakers here can pick the money from where the sun don't shine!
That's virtual Liberal blasphemy.
You can read the desperation in the articles.
And how do they think they can get Master Card involved in this? If Master Card goes along with this, then they will have to stop payment on Internet porn and I don't know what else.
Anything the lawmakers don't like, and Master Card is going to stop payment on everything? I don't THINK so.
Sounds like another scare tactic to me.
And from living up there, I know that there are even liberals dressed as RINOs in the NY State Senate who probably would flunk a basic economics course when it comes to tax policy.
SHHH!
NOW the phones of "Skip Humphrey" Attorneys are ringing off the hook!
Well, I don't have the need for any major credit cards. I use a debit card. But if I did have a major credit card and they stopped any payment on me for something I purchased, I would be going to the Better Business Bureau, writing them a nasty letter and paying them off and tearing the card up. They can then kiss my arze!
(gasp)...Time to go American Express! ; )
Oh boy! What happened???!!!!
Something I wound never have to contemplate while residing in Minnesota.....
It got much worse! ; )
What's next? Will you be outlawing coupons used at the grocery stores?
WOw I never thought of that!! Great come back!!!!!!
Once those idiots elected Hitlery (aka the Wicked *itch of the East), I had to leave that state. To have that many like-minded liberal idiots in one place was grating on me.
I also know New Yorkers. By the way, what is your opinion of what the buyers may be doing with all these cigarettes?
Why is it not my money? We are already up to $9 for everyone in the five boroughs. If they don't pay it, we do.
So where did you go?
San Fransisco? LoL!
I have the law on my side. Therefore they are the thieves, not me.
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