Posted on 05/29/2005 6:22:32 AM PDT by John W
INDIANAPOLIS – Hundreds of Hoosiers around the state who have been purchasing cheap smokes via the Internet are getting a belated message from the state – a bill for unpaid cigarette taxes.
The Indiana Department of Revenue initiated a quasi-pilot project in April and has sent out 160 bills seeking $54,000 in cigarette taxes.
So far about $3,000 has been paid, according to Department of Revenue spokeswoman Cathy Henninger.
“I think because a few states started showing there are tax dollars being lost we decided it warranted us looking into it,” she said.
The department subpoenaed the customer and mailing lists of three major online cigarette vendors and began sending tax bills based on those purchases, which go back to July 2003.
A sample bill given to The Journal Gazette shows one person being charged $233 in cigarette taxes plus penalties and interest. The state’s cigarette tax rate is 55.5 cents per pack and the bill equates to about 420 packs.
“They’re out to get everything they can get,” said 67-year-old Darryll Monroe, a Fort Wayne business owner who bought cigarettes online four or five times but stopped months ago because he disliked the time it took to deliver the product – sometimes three or more weeks.
Monroe didn’t appear concerned about the new state strategy.
“If they come after me, I might care,” he said.
Henninger said the revenue department’s audit staff is trying to calculate how much tax money the state is losing every year through such transactions but doesn’t yet have an estimate.
In 2004, the state took in more than $338 million in cigarette taxes, down slightly from the year before.
Indiana is joining other states in trying to recoup lost tax dollars after a U.S. Court of Appeals decision cleared the way for such action.
According to Stateline.org – a national public interest Web site – Michigan is leading the effort.
State officials there have sent more than 1,500 bills for both cigarette and sales tax customers avoided through online retailers. So far, the state has garnered more than $2 million.
Other states involved, according to Stateline.org, include:
•Alaska has already collected about $100,000 – about one-fourth of the money owed – after 1,000 letters were sent to cigarette customers.
•Illinois has sent 1,300 letters and expects to collect about $100,000.
•In Connecticut, 141 people recently were mailed tax bills totaling $165,000.
•Pennsylvania revenue officials estimate that the 63 people they notified by mail collectively owe the state $26,000.
•New York City – where smokers pay an extra $3 a pack in taxes – recently billed 2,600 residents and said online cigarette purchases contributed to $75million in revenue loss.
Some states – but not Indiana – ban online cigarette sales. Recently, the nation’s major credit card companies said they would no longer accept payments for tobacco products bought online.
In other areas, members of the public have complained that the cigarette billings might also lead to similar activity to collect basic sales tax on clothing or other items bought via the Internet.
But national law enforcement associations insist that cigarette sales are different, especially because they often violate state age verification laws.
Henninger said so far people in Indiana are paying the bills.
One man called the office this week to complain that he was billed for cigarettes that his brother bought online and sent to his address as a gift. The brother – who lives in Kentucky – had paid that state’s 3-cent cigarette tax, so the Indiana man has to pay the difference between the Kentucky rate and the Indiana rate.
Hoosiers who receive a proposed assessment have 60 days to pay the bill or protest. If they do neither, they then receive a 10-day demand notice. If they again refuse to pay, a tax warrant is filed at the local county clerk’s office.
Those warrants, according to Henninger, can affect credit ratings.
So far, Indiana’s bills have just been for cigarette taxes and not applicable-use or sales taxes.
Henninger said those who buy online should just keep track of their purchases throughout the year and use a special form to declare and pay the taxes with their annual tax returns.
For answers to questions on paying such taxes, call 317-232-3376.
Calls to four major online cigarette vendors – including some Indiana subpoenaed – were not returned.
One of them is www.dirtcheapcig.com – “the last refuge of the persecuted smoker.”
A message on its Web site said it had been forced to terminate all Internet sales and shipping, perhaps because of stepped-up tax enforcement.
Tony Sams of The Journal Gazette contributed to this story.
The affected parties could simply make collecting the taxes such a pain in the posterior that the state wouldn't bother going to the trouble. It doesn't look as if there's that much money it in anyhow.
Or grow and roll your own.
I already roll my own, but am seriesly considering growing as well.
Ban online cigarette sales??? Excuse me????
(please don't beat me mom for buying online!)
Can't stand the high taxes?
Afraid to order off of the Internet?
Then start rolling your own!!!
I roll out a beautiful carton for a little under $8 dollars. Premiums in my state are now up to $45-$50 a carton. Can you imagine the money I have saved over the past 4 years since I now roll my own? It's mind boggling.
under $50.00
$5.75 a bag
$1.99 for 200 filtered tubes
and
The ones who successfully adapt to change survive. Certainly blind box addresses, money orders, personal checks, not using credit cards, etc, etc. will hamper the all powerful states lust for your money.
Many of these shops won't ship to PO boxes. Money orders sound like a good idea, though.
What is that tobacco?
Thanks.
Blind boxes are not to be confused with PO boxes. They are regular street addresses. ;)
DANG! All THREE of us use the same machine?! Wow!
I haven't broken mine yet. Had it since Christmas Eve of '04.
Never!
And what about all the online porn and wine from California being mailed to people's homes? I guess it's ok as long as the "kiddies" don't order cigarettes.
What a crock!
The tobacco is what the Smoke Shop in town sells. It sells for $5.75 per bag, which includes the 25 cents surcharge.
It's called Hi-Val and green is for menthol, and red bags are regular.
It's the best machine ever! The only one you can find in town is the little plastic hand held. I don't like it.
It's refreshing to see smokers avoid 100% of the taxes because the state's blood lust to try and push off higher taxes to pay for things that use to be a shared responsibility e.g. education. I realize that its popular to kick smokers in the ass, but wouldn't states be smarter to lower cigarette taxes to encourage sales/tax revenue! After all, they (states) really don't want smokers to quit do they? I didn't think so.
Cigarettes have turned lawmakers into gluttons!
They tax a legal commodity out of site then they scream when we go elsewhere.
They also scream they want "smoke free everything," but they can't live without our taxes. They can't have both!
LOL
I am on the third machine. The first two were satisfactory to a point. They wore out the lever bushing about a year and a half and the little rubber piece that hold the tube firmly against being pushed off wore out also.
This latest machine is phenomenal in that it seems indestructable.
I hope my saying that wasn't the kiss of death. ;)
I heard that!
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