Posted on 02/21/2005 6:46:21 AM PST by Zon
Hundreds of Michigan residents are getting a big surprise this tax season--hefty tax bills for cigarettes they bought online over the past four years.
The state sent the bills to 553 residents last week after subpoenaing 13 online tobacco shops for names of Michigan customers and their order histories, a Michigan Treasury Department spokesman Caleb Buhs said on Friday. The tax bills are based on information from just one store, and the state expects to collect more names from the others.
Collectively, the people receiving this first round of bills owe the state $1.4 million, an average of $2,500 per person, Buhs said. They have until March 14 to pay.
"At its most fundamental level, this is an issue of tax fairness," State Treasurer Jay B. Rising said in a statement. "It is only right that out-of-state vendors, who conduct business only online and at arms length, follow the letter of the law. These taxes are collected by brick-and-mortar businesses in Michigan, and Internet vendors should not be allowed to skirt their responsibility."
Michigan, which levies a $2 tax on every pack of cigarettes, collected $993 million in tobacco taxes last year, Buhs said.
eSmokes, one of the top tobacco sellers on the Web, cancelled thousands of orders to Michigan customers after hearing about the tax crackdown, an eSmokes representative said. The representative would not discuss whether the store has been subpoenaed by Michigan or any other state.
Michigan did not disclose which companies it has subpoenaed.
Other states, including California, Washington and Wisconsin, have launched efforts to collect tobacco taxes from residents who dodged them online. A 2002 report (click for .pdf) from the U.S. General Accounting Office said most states tax the sale of cigarettes, and that online sales have cost them millions of dollars in lost revenue.
Internet shops that don't tell states about tobacco purchases by people other than licensed distributors are flouting a federal law known as the Jenkins Act. Laws that exempt online retailers from collecting sales taxes do not apply to tobacco excise taxes, the GAO report said.
I was wondering when the Jenkins Act would begin rearing its ugly head.
PING!
Just did our taxes here in NY and our CPA said the State of New York now wants to know, on the State income tax return, how much money you have spent purchasing things online (NOT just cigarettes - think Amazon.Com, E-Bay,etc.)for which sales tax wasn't collected.
I told her to tell the State of New York to go to hell but I think she just wrote "none" on the form. It's only a matter of time before these leeches get online businesses to collect sales taxes from every purchase.
I hate to tell them - but they can not lose that which they don't have. This so-called lost revenue were just predictions of how much they might collect, not what they actually collected.
Thanks, RF.
Obvious answer: they found a partial escape from the continuing "rape" by the politicians and bureaucrats.
I hope Seneca goes to selling RYO. It'd be a good way for them to supplement their sales and open up a wider variety.
BTW, I still have three cartons of Senecas I haven't touched since rolling my own.
Exactly.
If these politicians would just open their eyes - they would see that they would reap more tax dollars by lowering the exorbitant taxes and the problem of "bootleg" smokes would take a drastic decline.
The theft is from the tax cheats. We either have laws we follow or we have anarchy.
Use tax are as old as the sales tax and have always been payable by residents purchasing out of state. The only new thing is smokers thinking they are above the laws just because they cannot resist smoking.
Apparently you irrationally think there are no bogus laws.
Sure, according to the Indians. The BATF thinks otherwise. Given the track record of the respective entities involved, my money's on the Feds prevailing.
And thank you Sheriff of Nottingham!
Tax on cigarettes are not exactly new. In fact excise taxes were the main revenue source for cited by the constitution and tobbaco played a big part.
A couple of states are contesting this, by saying you are not allowed to bulk transport cigs across their jurisdictions. What they do is stop the delivery truck, unload the cigs and ticket the driver. It's happened once in Wisconsin as a test case, and I'm told Michigan is doing this to their tribes.
I'm a Native American too. When do I get to stop paying these infernal taxes?
Don't know what kind of tubes you use, but my local tobacco shop started carrying a brand called Zen, made with rice paper instead of pulp paper, and supposedly they use a more natural glue. I highly recommend them.
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