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.
State legislators need a basic course in economics. If you raise the price of a good, the market will either buy less or seek cheaper substitutes. Imagine what this enforcement of these cigarette taxes is costing these states..probably outweighing the added revenue from the higher taxes. Perhaps these legislators also need to read the old story about the goose that laid the golden egg.
Some friends of mine drive 40 miles to Indian Res.and buy their smokes,Pay cash-no record.
I'm a little worse than you are. Not only am I smoking myself to death, I retired when I was 46. I read a real snotty column once by some tax-loving SOB that claimed people like me were removing ourselves from the workforce and thereby depriving our fellow citizens of much need tax dollars.
Screw 'em! :)
Oh boy, me too. It's a wonder my monitor doesn't melt sometimes with what I call them!
chewing tobacco, like cigars, pipe tobacco and loose tobacco are all lumped into a category egnerally known as OTP (other tobacco products) and taxed in an entirely different manner than cigarettes.
As to the booze, drinkers of alcoholic beverages, be it beer, wine or whiskey have not been demonized int he manner that smokers have and thus are willing to speak up and loudly as one voice against such onerous taxes.
Heck, just my earlier example of alcohol sponsors of stock car racing pretty much says it all.
As you know, I'm a beer drinker, and have a tendency of enjoying putting away more than a few at a time, particularly in the summer. However, I would no more get behind the weheel of a car after drinking a 6 pack or so than fly. Yet I can get behind the wheel of said car without a problem after having smoked a half pack, or even a whole pack of cigarettes.
Remember my old tag line? Ted Kennedy's car has killed more people than my cigarettes.
No matter how many times we have tried to explain that simple concept, we are ignored totally.
The website I order from says they will still accept Discover and American Express cards which is odd because I've read that those card companies aren't accepting tobacco charges from online vendors anymore.
What worries me is that the place I order from has switched carriers from USPS to UPS and UPS will turn over their records if they're subpoenaed. I also read that Fed Ex will no longer deliver tobacco products to residences.
It's past time for me to start using my Stuff Your Own machine.
Exactly.
What if the cigaretts are bough on an indian reservation?
They have no taxes?
It seems if I buy ONLINE FROM A RESERVATION, the taxman is still screwed.
At times there are advantages to having a 6 year old int he house who charges a quarter everytime a "bad" word is uttered!!!!
Yes it is!!!!!!
Ick!
I'd be wondering about tobacco growing laws in California, if I were you.
What some states are doing is issuing subpoenas to credit card companies and carriers (like UPS) and getting the information that way.
Same as anywhere else in the US...........you are permitted to grow up to 1/10th of an acre of tobacco for personal use.
Even in California? I'd think that they'd have something worse than the rest of the country as far as growing laws are concerned.
So, after my crappy math, it's about 4,356 square feet?
How did your tobacco crop do last year? Are you growing it again this year?
I may be wrong, but for some reason I believe the tobacco growing laws are federal and can not be superceded by the states.
I have absolutely no clue how much square footage is in an acre, let alone 1/10th of one :(
I had no tobacco crop at all last year, due in part to the weather and in large part to my own ineptness.
I am going to try again this year, but that is not going to be my main focus. My primary focus is going to be on an income generating crop of veggies and herbs.
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